nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒04‒23
33 papers chosen by
Roger Fouquet
London School of Economics

  1. Relative Effectiveness of Energy Efficiency Programs versus Market Based Climate Policies in the Chemical Industry By Gale A. Boyd; Jonathan M. Lee
  2. A comparison of public preferences for different low-carbon energy technologies: Support for CCS, nuclear and wind energy in the United Kingdom By Yu, H.; Reiner, D.; Chen, H.; Mi, Z.
  3. The Changing Role of Natural Gas in Nigeria By Giovanni Occhiali; Giacomo Falchetta
  4. State-Owned Enterprises and the Low-Carbon Transition By Andrew Prag; Dirk Röttgers; Ivo Scherrer
  5. Threshold Policy Effects and Directed Technical Change in Energy Innovation By Lionel Nesta; Elena Verdolini; Francesco Vona
  6. The renewable energy consumption and growth in the G-7 countries: Evidence from historical decomposition method By Balcilar, Mehmet; Ozdemir, Zeynel Abidin; Ozdemir, Huseyin; Shahbaz, Muhammad
  7. A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms By Bublitz, Andreas; Keles, Dogan; Zimmermann, Florian; Fraunholz, Christoph; Fichtner, Wolf
  8. Vehicle choices and urban transport externalities. Are Norwegian policy makers getting it right? By Wangsness, Paal Brevik; Proost, Stef; Rødseth, Kenneth Løvold
  9. The Response of European Energy Prices to ECB Monetary Policy By Hipòlit Torró
  10. Optimal Expansion of a Hydrogen Storage System for Wind Power: A Real Options Analysis By Franzen, Stefan; Madlener, Reinhard
  11. Monetary Policy Peculiarities in Countries with Natural Resources, with Significant Changes in Terms of Trade By Dobronravova, Elizaveta
  12. Developing a municipality typology for modelling decentralised energy systems By Weinand, Jann; McKenna, Russell; Fichtner, Wolf
  13. Behavioral Responses of Green Builders to Discontinuous Certification Schemes By Atasoy, Ayse Tugba
  14. Interpreting the Oil Risk Premium: do Oil Price Shocks Matter? By Daniele Valenti; Matteo Manera; Alessandro Sbuelz
  15. Addressing Europe’s failure to clean up the transport sector By Simone Tagliapietra; Georg Zachmann
  16. Oil Shocks and Volatility Jumps By Konstantinos Gkillas; Rangan Gupta; Mark E. Wohar
  17. Energy efficiency, green technology and the pain of paying By Dayana Zhappassova; Ben Gilbert; Linda Thunstrom
  18. Internal and External Barriers to Energy Efficiency: Made-to-Measure Policy Interventions By Cristina Cattaneo
  19. The Incidence of Carbon Taxes in U.S. Manufacturing: Lessons from Energy Cost Pass-through By Sharat Ganapati; Joseph S. Shapiro; Reed Walker
  20. Learning to Live with Cheaper Oil; Policy Adjustment in MENA and CCA Oil-Exporting Countries By Martin Sommer; Allan G Auclair; Armand Fouejieu; Inutu Lukonga; Saad N Quayyum; Amir Sadeghi; Gazi H Shbaikat; Andrew J Tiffin; Bruno Versailles
  21. Modelling the Global Price of Oil: Is there any Role for the Oil Futures-spot Spread? By Daniele Valenti
  22. Institutions and Performance of Regulated Firms: Evidence from Electric Utilities in the Indian States By Jamasb, Tooraj; Llorca, Manuel; Khetrapal, Pavan; Thakur, Tripta
  23. It’s So Hot in Here: Information Avoidance, Moral Wiggle Room, and High Air Conditioning Usage By Giovanna d’Adda; Yu Gao; Russell Golman; Massimo Tavoni
  24. Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon? By Nguyen-Ones, Mai; Steen, Frode
  25. 국제 에너지시장 구조변화의 거시경제효과 분석(Changes in International Energy Market and Their Impact on the Korean Economy) By An, Sungbae; Kim, Kihwan; Kim, Subin; Lee, Jinhee; Han, Minsoo
  26. Did the London Congestion Charge Reduce Pollution? By Colin Green; John Spencer Heywood; Maria Navarro Paniagua
  27. Transition from a Linear Economy toward a Circular Economy in the Ramsey Model By Kiyoka Akimoto; Koichi Futagami
  28. Things have changed (or Have they?) Tariff protection and environmental concerns in the WTO By Petros C. Mavroidis; Damien Neven;
  29. Simulation Methods for Stochastic Storage Problems: A Statistical Learning Perspective By Michael Ludkovski; Aditya Maheshwari
  30. Die "Diesel-Debatte": Ökonomische Handlungsempfehlungen an die Politik By Achtnicht, Martin; Kesternich, Martin; Sturm, Bodo
  31. Optimal coverage of an emission tax in the presence of monitoring, reporting, and verification costs By Stéphane De Cara; Loïc Henry; Pierre-Alain Jayet
  32. Mitigation vs. adaptation: a critical overview of EU climate change policies and their impact on agriculture By Boiangiu, Marius Cosmin
  33. The Macroeconomics of the Circular Economy Transition: A Critical Review of Modelling Approaches By Andrew McCarthy; Rob Dellink; Ruben Bibas

  1. By: Gale A. Boyd; Jonathan M. Lee
    Abstract: This paper addresses the relative effectiveness of market vs program based climate policies. We compute the carbon price resulting in an equivalent reduction in energy from programs that eliminate the efficiency gap. A reduced-form stochastic frontier energy demand analysis of plant level electricity and fuel data, from energy-intensive chemical sectors, jointly estimates the distribution of energy efficiency and underlying price elasticities. The analysis controls for plant level price endogeneity and heterogeneity to obtain a decomposition of efficiency into persistent (PE) and time-varying (TVE) components. Total inefficiency is relatively small and price elasticities are relatively high. If all plants performed at the 90th percentile of their efficiency distribution, the reduction in energy is between 4% and 13%. A modest carbon price of between $9.48/ton and $14.01/ton CO2 would achieve reductions in energy use equivalent to all manufacturing plants making improvements to close the efficiency gap.
    Keywords: Energy efficiency, price elasticities, manufacturing, stochastic frontier, plant-level data
    Date: 2018–04
  2. By: Yu, H.; Reiner, D.; Chen, H.; Mi, Z.
    Abstract: Using a representative national survey in the United Kingdom, we investigated public attitudes towards different low-carbon technologies (carbon capture and storage (CCS), wind and nuclear power) and the factors influencing public support. Overall, we found that respondents were far more likely to support wind energy as their preferred means of mitigating climate change. Older people and those of a higher social grade are more supportive of nuclear power, while age and social grade do not significantly affect support for wind energy. Supporters of the Conservative Party were more likely to oppose wind power. Neither attitudes towards climate change nor environmental attitudes were found to influence public support for wind power or nuclear. Trust in information from environmental groups was associated with greater support for wind energy but lower support for nuclear power. Perceived cost and objective knowledge significantly influenced public support for all three technology types, that is, higher perceived costs and the poorer objective knowledge lead to lower public support. However, self-assessed knowledge did not influence public support. Many factors, including most of the tested demographic factors, did not affect support for any of the three technologies.
    Keywords: Public preferences, Low carbon, Energy technologies, CCS, Wind, Nuclear
    JEL: C54 Q42 Q54
    Date: 2018–04–10
  3. By: Giovanni Occhiali (Fondazione Eni Enrico Mattei); Giacomo Falchetta (Fondazione Eni Enrico Mattei and Università Cattolica del Sacro Cuore)
    Abstract: Nigeria is richly endowed with energy resources, and the Government has been making large profits from their export. However, windfall revenues have also been affecting the Government’s responsiveness and accountability towards the people and they have brought it into collusive relationship with international oil and gas companies operating in the country. A skewed distribution of petroleum resources costs and benefits, as well as the dependence on exports exposing the public finances to volatility in the international markets have represented further major issues. As a result, energy access and power generation still represent urgent issues for action in the country. Solid biomass accounts for 74% of the primary energy consumption, while the electrification rate stands at 34% in rural areas. Active power plants are mainly gas-fired, but they face capacity, maintenance, and financial constraints. While historically natural gas has been disregarded or flared into the atmosphere because it was considered a by-product of oil due to lacking market conditions and processing capacity, today the development of a domestic market for natural gas is seen as a key priority to guarantee energy security and boost industrial development in Nigeria. A more efficient and equitable governance of the sector and management of export revenues can play a major role in this sense. In this context, this paper highlights the main current issues and underpins key policy conditions for this transition to take place in Nigeria.
    Keywords: Nigeria, Natural Gas, Domestic Energy Development, Government Policy, Resource Governance
    JEL: Q32 Q41 Q48
    Date: 2018–03
  4. By: Andrew Prag (International Energy Agency); Dirk Röttgers (OECD); Ivo Scherrer (OECD)
    Abstract: This paper explores the role of state-owned enterprises (SOEs) in the low-carbon transition in OECD and G20 countries. It tracks GHG emissions and energy investments by SOEs and analyses the impact of SOEs on investments in renewable electricity. A descriptive analysis of SOEs’ role in the electricity sector shows the continued importance of SOEs, including prominent investments in both renewables and fossil-fuel-based electricity generation..
    Keywords: China, climate change, climate finance, decarbonisation, estimation, investment, low-carbon transition, market power, public intervention, regression, renewable energy, SOEs, state-owned enterprises
    JEL: F30 H23 L41 L94 Q42 Q48 Q54 Q58
    Date: 2018–04–18
  5. By: Lionel Nesta (Université Côte d'Azur, CNRS, Gredeg, OFCE SciencesPo and SKEMA Business School); Elena Verdolini (FEEM and CMCC); Francesco Vona (OFCE SciencesPo, SKEMA Business School and Université Côte d'Azur (GREDEG))
    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: 2018–02
  6. By: Balcilar, Mehmet; Ozdemir, Zeynel Abidin; Ozdemir, Huseyin; Shahbaz, Muhammad
    Abstract: This paper aims to analyze the time-varying effects of renewable energy consumption on economic growth and vice versa for the G-7 countries. To this end, the historical decomposition method with bootstrap is utilized. The findings show that the effect of economic growth on renewable energy consumption is highly time-varying and strongly positive during the whole analysis period for Germany, Italy and the United States. Although the result is usually analogous in most periods for Canada, France, Japan and the United Kingdom, the contribution of economic growth on renewable energy consumption is reversed in some periods. Additionally, the effect of renewable energy consumption on economic growth shows remarkable time-variations for all the G-7 countries, but does not produce a consistent direction of effect over the entire analysis period. For Germany, Italy and the United Kingdom, renewable energy consumption appears to be a driving force for economic growth during nearly in the whole time period after early 1990s.
    Keywords: Renewable Energy, Growth, G7
    JEL: A1
    Date: 2018–03–19
  7. By: Bublitz, Andreas; Keles, Dogan; Zimmermann, Florian; Fraunholz, Christoph; Fichtner, Wolf
    Abstract: Electricity markets are currently going through a phase of agitating transition, which is mainly characterized by an increasing share of fluctuating renewable energies. Among policy makers, this has led to growing concerns about generation adequacy and often to the introduction of different capacity remuneration mechanisms to generate less volatile sources of income for investors and, thereby, guaranteeing generation adequacy. However, these mechanisms entail new challenges regarding the best design to avoid any adverse effects. At the same time, it is disputed whether capacity remuneration mechanisms are indeed needed or whether an energy-only market is sufficient. Therefore, after discussing the peculiarities of the electricity markets, which are the starting point of the unique regulatory framework, an up-to-date overview of the debate on the need for capacity remuneration mechanisms is provided. In addition, the current status of capacity remuneration mechanisms in Europe is shown, and initial experience is presented. Furthermore, this article reflects the current state of research about capacity remuneration mechanisms in regards to, for example, cross-border effects, investment cycles or market power. In a conclusive summary, shortcomings of the existing research works and open questions that need to be addressed in future works are discussed.
    Date: 2018
  8. By: Wangsness, Paal Brevik (Institute of Transport Economics – Norwegian Centre for Transport Research); Proost, Stef (Department of Economics-KULeuven); Rødseth, Kenneth Løvold (Norwegian University of Life Sciences)
    Abstract: Norway has the world’s highest share of electric vehicles in its vehicle stock – in particular battery electric vehicles (BEVs). BEVs have reached a 20% share of the new car sales in Norway, thanks to a set of policies that include high purchase taxes for fossil fueled cars, and for BEVs, free parking, no tolls, and the right to drive on the bus lanes. This paper uses a stylized model of the transport market in the greater Oslo area (1.2 million inhabitants) to analyze transport policies. First, we explore the medium-term effects of the current BEV friendly policies. Second, the model is used to explore the potential of better pricing of car and public transport use, and of better car purchase taxes. We find that the current policies lead to massive penetration of BEVs and therefore to a strong reduction of CO2 emissions. However, they also lead to much more congestion and a decrease in the use of public transport. Better policies require efficient pricing of road congestion, a better use of public transport, and provide incentives for consumers to choose the most efficient combinations of cars. Such policies lead to a less extreme penetration of BEVs, and lower CO2 emissions reductions than the current transport policies. However, they do achieve a better transport equilibrium and substantial resource cost savings, leading to higher welfare levels.
    Keywords: electric vehicles; climate policy; urban transport policy; transport modeling
    JEL: H23 H71 Q54 Q58 R41 R48
    Date: 2018–04–13
  9. By: Hipòlit Torró (University of Valencia, Department of Financial and Actuarial Economics)
    Abstract: To our knowledge, this paper is the first to discuss the response of European energy commodity prices to unexpected monetary policy surprises from the European Central Bank. Using the Rigobon (2003) identification through heteroscedasticity method, we find a significant and positive response during the crisis period for Brent and coal. Similar results are obtained by other authors for European financial assets in this period. This result reinforces the idea that during this period, financial assets and some commodities positively responded to conventional and unconventional expansionary monetary policy measures, increasing confidence about the survival of the European monetary union. The remaining European energy commodities (electricity, EUAs, and natural gas prices) seem to be unaffected by monetary policy actions. We think these results are of interest to those economic agents and institutions involved in European energy markets and are especially important for the European Central Bank in order to predict the consequences of its monetary policy on the inflation objective.
    Keywords: Brent, Monetary Policy, European Central Bank, Energy Commodities
    JEL: C26 E58 G13 Q41
    Date: 2018–03
  10. By: Franzen, Stefan (RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: This paper presents a real options-based techno-economic analysis of a hydrogen-based wind energy storage system (H2-WESS) deployed adjacent to a nearshore wind farm in northern Germany. The H2-WESS can be used to produce and store hydrogen when feed-in management takes place, in order to avoid the shutdown of wind turbines during times of excess electricity supply, or when the spot market electricity price falls below the estimated (efficiency-adjusted) market price of hydrogen. Moreover, an H2-WESS can provide negative minute reserve capacity. The modular design of the H2-WESS gives an investor the option to expand the capacity and gradually adapt to changing market conditions. The comprehensive and novel simulation model considers all relevant volatile inputs, such as stochastic wind conditions, feed-in management events, prices, and minute reserve calls. By means of a Monte Carlo simulation, annual revenues and their volatility are computed with a view on projected technology improvements until 2030. Based on the simulation results, a binomial real options pricing model is used to design four interdependent binominal trees and to evaluate a Bermuda-type compound expansion option. The decision trees, in which the investor can choose the maximum of the option to either upgrade the H2-WESS to the next expansion stage or to keep the real option alive, feature 390 time steps and 76,050 decision nodes each. Each compound decision takes the option of a smaller expansion stage explicitly into account. The compound expansion option to invest in a 5, 10, 15, or 20 MW H2-WESS has a 15-year expiration time and is found to have a value of about €2 million, compared to the net present value of a 5 MW H-WESS of about €-2.45 million. We conclude from the real options analysis that for a realistic valuation of modular energy projects subject to various uncertainties it is crucial to incorporate the value of managerial flexibility that is influenced. Due to the modular design, and in contrast to conventional power plants, the flexibility of the H2-WESS comprises many specific options.
    Keywords: Wind power; Hydrogen; Storage system; Compound expansion option; Monte Carlo simulation; Germany
    JEL: Q40
    Date: 2016–06
  11. By: Dobronravova, Elizaveta (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: This paper assesses the reaction of the aggregate output, the real exchange rate and inflation in response to the shock of the terms of trade, both in the Russian economy and in the panel of countries specializing in oil exports. We divide shocks of world oil prices into positive and negative ones using Mork and Hamilton approaches. This could help us to show that changes in macroeconomic indicators in response to the positive and negative shocks in the terms of trade are asymmetric. The sharp negative dynamics of oil prices has a greater impact on the economy of the oil-exporting country in comparison with the unexpected increase in energy prices. It is shown that in the group of countries using the inflation targeting regime, output reacts to the shock of oil prices to a lesser extent than in the group of countries adhering to the fixed exchange rate regime.
    Date: 2018–03
  12. By: Weinand, Jann; McKenna, Russell; Fichtner, Wolf
    Abstract: The recent rapid expansion of renewable energy capacities in Germany has been dominated by decentralised wind, photovoltaic (PV) and bioenergy plants. The spatially disperse and partly unpredictable nature of these resources necessitates an increasing exploitation of integration measures such as curtailment, supply and demand side flexibilities, network strengthening and storage capacities. Indeed, one solution to the large-scale integration of renewable energies could be decentralised autonomous municipal energy systems. The achievement of grid parity for some renewable energy technologies has strengthened the desire of some communities to become independent from central markets. Whilst many communities in Germany already strive for socalled energy autonomy, the vast majority do so only on an annual basis. Several studies have already analysed the technical and economic implications of the mainly decentralised future energy system, but most are restricted in their insights by limited temporal and spatial resolution. The large number (11,131) of German municipalities means that a national analysis at this resolution is not feasible. Hence, this study employs a cluster analysis to develop a municipality typology in order to analyse the techno-economic suitability of these municipalities for autonomous energy systems. A total of 34 socio-technical indicators are employed at the municipal level, with a particular focus on the sectors of Private Households and Transport, and the potentials for decentralised renewable energies. The first step is to scale the indicator values and reduce their number by using a factor analysis. Several alternative methods are weighed against each other, and the most suitable methods for the factor analysis are chosen. Secondly, selected quantitative cluster validation methods are employed alongside qualitative criteria to determine the optimal number of clusters. This results in a total of ten clusters, which show a large variation as well as some overlap with respect to specific indicators. For example, one cluster contains all major German cities and has a low potential for renewable energies. Another cluster, on the other hand, contains the municipalities with a higher potential for renewable energies due to their high hydrothermal potential for geothermal power. An analysis of the municipalities from three German renewable energy projects “Energy Municipalities”, ”Bioenergy Villages” and “100% Renewable Energy Regions” shows that in eight of the ten clusters municipalities are aiming for energy autonomy (in varying degrees). It is challenging to differentiate between the clusters regarding readiness for energy autonomy projects, however, especially if the degree of social acceptance and engagement for such projects is to be considered. To answer the more techno-economical part of this question, future work will employ the developed clusters in the context of an energy system optimisation. Insights gained at the municipal level will then be qualitatively transferred to the national context to assess the implications for the whole energy system.
    Date: 2018
  13. By: Atasoy, Ayse Tugba (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: I study behavioral responses to the green building certification system by the Leadership in Energy and Environmental Design program (LEED). LEED provides four different certification levels (‘Certified’, ‘Silver’, ‘Gold’, and ‘Platinum’) that are all defined by a threshold. Using micro data on LEED-certified buildings, I document intense bunching of buildings at or slightly above the different cutoffs. This finding is robust to different specifications, observed for different versions of LEED as well as for a comparable building certification system from the UK (the Building Research Establishment Environmental Assessment Method). Using the methods from the public finance literature, which studies bunching responses to ‘kinks’ and ‘notches’ in tax systems (e.g., Chetty et al., 2011; Kleven and Waseem, 2013), I quantify the bunching mass at the threshold. Using cross-sectional variation in bunching across different states of the US, I find a significant negative relationship between the bunching estimators and energy prices.
    Keywords: Labels; Green Buildings; Energy Efficiency; Notches; Bunching
    JEL: D62 H23 Q48
    Date: 2016–12
  14. By: Daniele Valenti (University of Milan, Department of Economics, Management and Quantitative Methods); Matteo Manera (FEEM and University of Milan-Bicocca, Department of Economics, Management and Statistics); Alessandro Sbuelz (Catholic University of Milan, Department of Mathematical Sciences, Mathematical Finance and Econometrics)
    Abstract: This paper provides an analysis of the link between the global market for crude oil and oil futures risk premium at the aggregate level. It offers empirical evidence on whether the compensation for risk required by the speculators depends on the type of the structural shock of interest. Understanding the response of the risk premium to unexpected changes in the price of oil can be useful to address some research questions, among which: what is the relationship between crude oil risk premium and unexpected rise in the price of oil? On average, what should speculators expect to receive as a compensation for the risk they are taking on? This work is based on a Structural Vector Autoregressive (SVAR) model of the crude oil market. Two main results emerge. First, the impulse response analysis provides evidence of a negative relationship between the risk premium and the changes in the price of oil triggered by shocks to economic fundamentals. Second, this analysis shows that the historical decline of the risk premium can be modelled as a part of endogenous effect of the oil market driven shocks.
    Keywords: Crude Oil Risk Premium, Bayesian SVAR Model, Oil Price Speculation
    JEL: Q40 Q41 Q43 E32
    Date: 2018–02
  15. By: Simone Tagliapietra; Georg Zachmann
    Abstract: The issue Under the Paris Agreement, the European Union has committed to cut its greenhouse gas emissions to 40 percent below 1990 levels by 2030. Between 1990 and 2015, emissions decreased significantly in all sectors with the exception of transport, which has seen a 20 percent increase. Transport is thus becoming a key obstacle to EU decarbonisation and more aggressive policies are needed to decarbonise this sector. A particular focus should be decarbonisation of road transport because it is responsible for more than 70 percent of overall transport emissions. Decarbonising road transport would also improve air quality in cities, which remains a fundamental challenge for better public health in Europe. Policy challenge So far, national and EU policies have failed to foster road transport decarbonisation. However, this trend can be reversed by adopting a new EU post-2020 strategy with three main components. First, the EU should foster political momentum and encourage countries and cities to adopt plans to ban all diesel and petrol vehicles by 2030-2040. This would be a strong signal to the automotive industry to invest more strongly in clean vehicles, and to citizens to adopt more sustainable transport modes. The EU should provide support to countries and cities that take this route though a new EU Clean Transport Fund. Second, the EU should promote a Europe-wide discussion about the future of transport taxation. Third, the EU should focus its transport-related research and innovation funding on supporting new clean technologies that are not yet viable, but are potentially key to ensure deep decarbonisation of road transport in the longer term.
    Date: 2018–04
  16. By: Konstantinos Gkillas (Department of Business Administration , University of Patras, Patras, Greece); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Mark E. Wohar (College of Business Administration, University of Nebraska at Omaha, Omaha, USA and School of Business and Economics, Loughborough University, Leicestershire, UK)
    Abstract: In this paper, we analyse the role of oil price shocks, derived from expectations of consumers, economists, financial market, and policymakers, in predicting volatility jumps in the S&P500 over the monthly period of 1988:01 to 2015:02, with the jumps having been computed based on daily data over the same period. Standard linear Granger causality test fail to detect any evidence of oil shocks causing volatility jumps. But given strong evidence of nonlinearity and structural breaks between jumps and oil shocks, we next used a nonparametric causality-in-quantiles test, since the linear model is misspecified. Using this data-driven robust approach, we were able to detect overwhelming evidence of oil shocks predicting volatility jumps of the S&P500 over its entire conditional distribution, with the strongest effect observed at the lowest considered conditional quantile. Interestingly, the predictive ability of the four oil shocks on volatility jumps are found to be both qualitatively and quantitatively similar.
    Keywords: S&P500, Volatility Jumps, Oil Shocks
    JEL: C22 G10 Q02
    Date: 2018–04
  17. By: Dayana Zhappassova (Department of Economics, University of Wyoming); Ben Gilbert (Division of Economics and Business, Colorado School of Mines); Linda Thunstrom (Department of Economics, University of Wyoming)
    Abstract: It is well-known from the mental accounting literature that consumers would rather pay up-front for a luxury good like a vacation, but pay later for a durable good like a dishwasher. This occurs because the hedonic benefits and monetary costs enter differently in the mental accounts. But how does the mental accounting process change if the durable good saves money over time, as with an energy efficiency upgrade, or signals wealth and ``green status'', like a rooftop solar panel or an electric car? In this paper, we derive a mental accounting model of energy efficient and green durable investment that incorporates the consumer heterogeneity in the psychological ``pain of paying''. The model predicts that pain of paying attenuates the willingness to pay for status signaling and environmental protection, but increases the willingness to pay more up front in order to reduce long run energy bills. Consumers with a high pain of paying may therefore act as if they have a low discount rate when they are more accurately described as being conflicted about their intertemporal preferences. We test these predictions using a survey-based discrete choice experiment with solar and energy efficient homes, in which we measured individual subjects' susceptibility to pain of paying.
    Keywords: mental accounting, pain of paying, solar, energy efficiency, green durables
    JEL: Q40 Q42 D91
    Date: 2018–04
  18. By: Cristina Cattaneo (Fondazione Eni Enrico Mattei)
    Abstract: This paper has two objectives. First it provides a correlation between internal and external barriers to energy efficiency and consumer behaviour related to two domains. It evaluates behaviour related to energy curtailment, which represents routine, repetitive effort to decrease consumption on a day-to-day basis. It also considers behaviour related to investments, which are one time actions such as purchasing new energy efficiency technologies.. Second, it assesses the effectiveness of the different interventions and programs in addressing the two types of barriers (internal and external) with the aim of informing the policy debate. By assessing the value of a large number of interventions, this paper is one of the first that combines in a unified framework the main findings of different disciplines, from economics to psychology.
    Keywords: Energy Efficiency, Energy Policy, Behavioural Economics
    JEL: D9 Q4 Q48
    Date: 2018–03
  19. By: Sharat Ganapati (Dept. of Economics, Yale University); Joseph S. Shapiro (Cowles Foundation, Yale University); Reed Walker (University of California, Berkeley, IZA, & NBER)
    Abstract: This paper studies how changes in energy input costs for U.S. manufacturers a?ect the relative welfare of manufacturing producers and consumers (i.e., incidence). In doing so, we develop a novel partial equilibrium methodology designed to estimate the incidence of input taxes. This method simultaneously accounts for three determinants of incidence that are typically studied in isolation: incomplete pass-through of input costs, di?erences in industry competitiveness, and substitution amongst inputs used for production. We apply this methodology to a set of U.S. manufacturing industries for which we observe plant-level unit prices and input choices. We ?nd that about 70 percent of energy price-driven changes in input costs are passed through to consumers. We combine industry-speci?c pass-through rates with estimates of industry competitiveness to show that the share of welfare cost borne by consumers is 25-75 percent smaller (and the share borne by producers is correspondingly larger) than models featuring complete pass-through and perfect competition would suggest.
    Keywords: Pass-through, incidence, energy prices, productivity, climate change
    JEL: H22 H23 Q40 Q54
    Date: 2016–05
  20. By: Martin Sommer; Allan G Auclair; Armand Fouejieu; Inutu Lukonga; Saad N Quayyum; Amir Sadeghi; Gazi H Shbaikat; Andrew J Tiffin; Bruno Versailles
    Abstract: This paper discusses the challenges posed by low oil prices in the MENA and CCA regions, the adjustment policies adopted so far, and remaining adjustment needs and future risks.
    Keywords: Oil;Oil exporting countries;Oil exports;Oil prices;Oil producing countries;Oil product prices;Oil revenues;exporters, exchange rate, liquidity, deficits
    Date: 2016–06–08
  21. By: Daniele Valenti (University of Milan, Department of Economics, Management and Quantitative Methods)
    Abstract: In this work, we propose an analysis of the global market for crude oil based on a revised version of the Structural Vector Autoregressive (SVAR) model introduced by Kilian and Murphy (2014). On this respect, we replace the global proxy for above-ground crude oil inventories with the oil futures-spot spread. The latter is defined as the percent deviation of the oil futures price from the spot price of oil and it represents a measure of the convenience yield but expressed with an opposite sign. The following model provides an economic interpretation of the residual structural shock, namely the financial market shock. This new shock is designed to capture an unanticipated change in the benefit of holding crude oil inventories that is driven by financial incentives. We find evidence that financial market shocks have played an important role in explaining the rises in the price of oil during the period 2003-2008.
    Keywords: Global Market for Crude Oil, Bayesian SVAR Model, Oil Futures-spot Spread, Oil
    JEL: Q40 Q41 Q43 E32
    Date: 2018–03
  22. By: Jamasb, Tooraj; Llorca, Manuel; Khetrapal, Pavan; Thakur, Tripta
    Abstract: It is commonly accepted that institutions influence economic development of countries. But, can we also trace the effect of institutional endowment to specific sectors and regions of a country? There is a significant gap in knowledge and evidence of this issue in the literature. This paper examines this effect in the Indian electricity distribution sector and explores the influence of state-level institutional quality and economic factors on the performance of network utilities in India. Since the 1990s, India has adopted reform steps to improve the efficiency of its electricity sector. However, there remain performance differences among the utilities. We examine the performance of 52 electricity distribution utilities in 24 Indian states for the period from 2006-07 to 2011-12. The findings confirm that the quality of institutions and state-wide economic development affect the performance of the electricity distribution utilities in different states. Additionally, we simulate the cost savings from utilities’ performance improvements linked with institutional enhancements. The results indicate the need to strengthen the institutions, for example through regulatory agencies reform to improve the performance of the sector.
    Date: 2018
  23. By: Giovanna d’Adda (University of Milano, Department of Economics); Yu Gao (Politecnico di Milano, Department of Management and Economics); Russell Golman (Carnegie Mellon University, Department of Social and Decision Sciences); Massimo Tavoni (Politecnico di Milano, Department of Management and Economics and FEEM)
    Abstract: Environmental policies based on information provision are widespread, but have often proven ineffective. One possible explanation for information’s low effectiveness is that people actively avoid it. We conduct an online field experiment on air conditioning usage to test the theory of moral wiggle room, according to which people avoid information that would compel them to act morally, against the standard theory of information acquisition, and identify conditions under which each theory applies. In the experiment, we observe how exogenously imposing a feeling of moral obligation to reduce air conditioning usage and exploiting natural variation in the cost of doing so, given by outside temperature, influences subjects’ avoidance of information about their energy use impacts on the environment. Moral obligation increases information avoidance when it is hot outside, consistent with the moral wiggle room theory, but decreases it when outside temperature is low. Avoiding information positively correlates with air conditioning usage. These findings provide guidance about tailoring the use of nudges and informational tools to the decision environment.
    Keywords: Information Avoidance, Energy Efficiency, Moral Wiggle Room
    JEL: D4 Q4
    Date: 2018–03
  24. By: Nguyen-Ones, Mai (Dept. of Economics, Norwegian School of Economics and Business Administration); Steen, Frode (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Applying detailed consecutive daily micro data at the gasoline station level from Sweden we estimate a structural model to uncover the degree of competition in the gasoline retail market. We find that retailers do exercise market power, but despite the high upstream concentration, the market power is very limited on the downstream level. The degree of market power varies with both the distance to the nearest station and the local density of gasoline stations. A higher level of service tends to raise a seller’s market power; self-service stations have close to no market power. Contractual form and brand identity also seem to matter. We find a clear result: local station characteristics significantly affect the degree of market power. Our results indicate that local differences in station characteristics can more than offset the average market Power found for the whole market.
    Keywords: Gasoline markets; market Power; markup estimation; local market competition
    JEL: D22 L13 L25 L81
    Date: 2018–04–13
  25. By: An, Sungbae (Korea Institute for International Economic Policy); Kim, Kihwan (Korea Energy Economics Institute); Kim, Subin (Korea Institute for International Economic Policy); Lee, Jinhee (Korea Institute for International Economic Policy); Han, Minsoo (Korea Institute for International Economic Policy)
    Abstract: 본 연구에서는 석유시장과 신재생에너지 시장의 동향을 파악하고 주요국의 에너지정책 변화에 대하여 살펴봄으로써, 국제 에너지시장의 변화 양상이 우리 경제의 에너지 수급에 영향을 미칠 수 있는 경로에 대해 알아본다. 통계적 분석을 통하여 유가 변동에 영향을 미치는 요인들을 식별하고 이들의 거시경제적 영향을 파악하는 한편, 에너지부문을 고려한 경제모형을 구축하여 각 요인의 전달 경로를 확인한다. 또한, 현재 우리나라에서 추진하고 있는 신재생에너지 공급의무화 제도와 이에 따른 정책 비용을 도출하며, 연구결과에 따른 정책적 시사점을 제시한다. This research aims to grasp the changes in international energy market and their impact on the Korean economy, especially on external secters inclucing exports and imports.
    Keywords: International Energy Market; Korean Economy
    Date: 2017–12–27
  26. By: Colin Green; John Spencer Heywood; Maria Navarro Paniagua
    Abstract: We examine the London congestion charge introduced in 2003 and demonstrate significant reductions in a number of pollutants relative to controls. We even find evidence of reductions per mile driven suggesting amelioration of a congestion externality. Yet, we find a robust countervailing increase in harmful NO2 likely reflecting the disproportionate share of diesel vehicles exempt from the congestion charge. This unintended consequence informs on-going concern about pollution from diesel based vehicles and provides a cautionary note regarding substitution effects implicit in congestion charging schemes.
    Keywords: Pollution, Traffic, Congestion Charging
    JEL: I18 R48 H27
    Date: 2018
  27. By: Kiyoka Akimoto (Graduate School of Economics, Osaka University); Koichi Futagami (Graduate School of Economics, Osaka University)
    Abstract: We construct a Ramsey-type model where households recycle waste generated by con- sumption and the non-recycled waste has negative externality. The aim of this paper is the following two points. Firstly, we examine a structural change process from \a linear economy" based on consumption-disposal toward \a sound material-cycle economy" or \a circular economy" based on consumption-recycling. Secondly, we examine dynamics of op- timal consumption tax and recycling subsidy. Additionally, we discuss the Environmental Kuznets Curve (EKC). Previous theoretical literature explains the mechanism of the EKC through changes in production sectors such as an introduction of abatement technology or technological change. In contrast, this paper tries to explain the EKC through the aforementioned structural change process.
    Keywords: Economic growth; Environmental Kuznets Curve; Environmental policies; House- hold waste recycling; Ramsey Model
    JEL: O44 Q53 Q58
    Date: 2018–04
  28. By: Petros C. Mavroidis (Columbia Law School and University of Neuchâtel); Damien Neven (Graduate Institute of International and Development Studies);
    Abstract: This paper considers the APEC and proposed EGA agreements which grant tariff concession in favor of "green" goods. We ?find that the practical signi?cance of the APEC agreement should not be overestimated as it involves modest tariff concessions over a subset of goods which are not heavily traded. Still, these agreements involve a paradigm shift to the extent that they use tariffs concessions negotiated on a purilateral basis as a policy instrument to meet public policy concern, instead of making market access conditional on meeting national regulations. We model the mechanism through which these tariff preferences provide incentives to change production in favor of green goods in exporting countries and highlight the challenges that the implementation of these agreements involve.
    Keywords: WTO, APEC, EGA, Tari¤s, Terms of Trade, ex outs
    JEL: K40
    Date: 2018–01
  29. By: Michael Ludkovski; Aditya Maheshwari
    Abstract: We consider solution of stochastic storage problems through regression Monte Carlo (RMC) methods. Taking a statistical learning perspective, we develop the dynamic emulation algorithm (DEA) that unifies the different existing approaches in a single modular template. We then investigate the two central aspects of regression architecture and experimental design that constitute DEA. For the regression piece, we discuss various non-parametric approaches, in particular introducing the use of Gaussian process regression in the context of stochastic storage. For simulation design, we compare the performance of traditional design (grid discretization), against space-filling, and several adaptive alternatives. The overall DEA template is illustrated with multiple examples drawing from natural gas storage valuation and optimal control of back-up generator in a microgrid.
    Date: 2018–03
  30. By: Achtnicht, Martin; Kesternich, Martin; Sturm, Bodo
    Abstract: Die Diesel-Technologie und die mit ihrer Nutzung verbundenen Belastungen durch lokale und globale Schadstoffemissionen stehen seit längerem im Fokus der umweltpolitischen Diskussion. Mittlerweile sind sogar Fahrverbote für Diesel-Pkw nicht mehr ausgeschlossen. Allerdings sind in der Diesel-Debatte ökonomische Argumente bislang leider nur selten zu hören. Grundsätzlich geht es auch in der Diesel-Debatte darum, wie in Zukunft Wünsche nach Mobilität, Gesundheit und intakter Umwelt bestmöglich erfüllt und miteinander in Einklang gebracht werden können. Die Kernforderung der Ökonomen hierbei ist, dass die Politik negative externe Effekte adressiert und die entsprechenden Aktivitäten - technologieoffen - mit einem Preis versieht. Damit ist aus ökonomischer Perspektive sichergestellt, dass gesellschaftliche Ziele zu geringstmöglichen Kosten für Verbraucher und Industrie erreicht werden. Der vorliegende ZEW Policy Brief betrachtet unterschiedliche negative externe Effekte aus der Nutzung von Verbrennungsmotoren und schlägt für eine Langfriststrategie ökonomische Instrumente vor, um eine Reduktion dieser Effekte zu erreichen.
    Date: 2018
  31. By: Stéphane De Cara (SAE2 - Département Sciences Sociales, Agriculture et Alimentation, Espace et Environnement - INRA - Institut National de la Recherche Agronomique, ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech); Loïc Henry (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech); Pierre-Alain Jayet (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: Environmental policies often include exemptions for some firms, e.g. the small emitters. This paper explores the implications of such exemptions in the case of an emission tax, and in the presence of monitoring, reporting, and verification (MRV) costs. We develop an analytical framework capturing the trade-off between the cost-effectiveness of a broader tax base, and the savings on MRV costs enabled by a partial coverage. Second-best partial coverage is defined by a threshold value of some characteristic of the firms below which firms are exempted. We characterize the optimal threshold and discuss its welfare implications. Since determining this threshold is demanding in terms of information regarding firm-level MRV and abatement costs, we show how limited knowledge about these costs at the aggregate level can be used in practice to approximate the optimal threshold. We apply this framework to assess the welfare implications of such an instrument in the case of greenhouse gas emissions from European agriculture. The findings indicate that exempting the small emitters may provide significant savings on MRV costs compared to the full coverage, while still incentivizing cost-effective reductions in emissions.
    Keywords: Climate policy, Emission tax, Partial coverage, Greenhouse gas emissions,Agriculture
    Date: 2018–05
  32. By: Boiangiu, Marius Cosmin
    Abstract: The paper does a qualitative assessment of the current European Union policies for dealing with climate change. In the EU mitigation policies are derived from the international agreements for reducing and limiting greenhouse gases emissions. Mitigation policies have a strict compliance regime using both positive and negative reinforcement. On the other side, adaptation measures, meant to increase nature’s and society’s resilience to climate change negative impact, are designed more as recommendations complementing sectoral policies. Agriculture has a relatively low potential of curbing GHG emissions but are some of the most vulnerable sectors to climate change. By examining the relative projected efficiency of EU’s mitigation efforts compared to the overall goal of stopping global warming, the paper finds that there is clear imbalance between mitigation policies and adaptation policies. It concludes that in the absence of matching binding commitments from other large emitters of GHG, the climate objective will not be met. This requires at European level a medium and long-term strategy for the societal and economic adaptation to the new climate conditions and, on short-term, more focus on adaptation policies in vulnerable sectors such as agriculture.
    Keywords: Climate change policies, European Union, mitigation, adaptation, agriculture
    JEL: O38 Q01
    Date: 2017–11–16
  33. By: Andrew McCarthy (OECD); Rob Dellink (OECD); Ruben Bibas (OECD)
    Abstract: This paper reviews the existing literature on modelling the macroeconomic consequences of the transition to a circular economy. It provides insights into the current state of the art on modelling policies to improve resource efficiency and the transition to a circular economy by examining 24 modelling-based assessments of a circular economy transition.
    Keywords: Circular economy, general equilibrium model, natural resources, raw materials, resource efficiency
    JEL: C68 O13 Q53
    Date: 2018–04–18

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