nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒07‒16
23 papers chosen by
Roger Fouquet
London School of Economics

  1. Latent Volatility Granger Causality and Spillovers in Renewable Energy and Crude Oil ETFs By Chang, C-L.; McAleer, M.J.; Wang, Y-A.
  2. Volatility Spillovers and Causality of Carbon Emissions, Oil and Coal Spot and Futures for the EU and USA By Chang, C-L.; McAleer, M.J.; Zuo, G.
  3. Market peculiarities of natural gass: case of the Pacific Region By Larisa Shakhovskaya; Elena Petrenko; Alexandr Dzhindzholia; Victoria Timonina
  4. Alternatives to Bank Finance: Role of Carbon Tax and Hometown Investment Trust Funds in Developing Green Energy Projects in Asia By Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad
  5. Oil Prices and GCC Stock Markets: New Evidence from Smooth Transition Models By Nidhaleddine Ben Cheikh; Sami Ben Naceur; Oussama Kanaan; Christophe Rault
  6. CO2 emission thresholds for inclusive human development in Sub-Saharan Africa By Simplice Asongu
  7. Aggregate Emission Intensity Targets: Applications to the Paris Agreement By Zhao, Jinhua
  8. Globalisation, Economic Growth and Energy Consumption in the BRICS Region: The Importance of Asymmetries By Shahbaz, Muhammad; Shahzad, Syed Jawad Hussain; Alam, Shaista; Apergis, Nicholas
  9. Formation of Market Beliefs in the Oil Market By Stanislav Anatolyev; Sergei Seleznev; Veronika Selezneva
  10. International Environmental Agreements and Trading Blocks - Can Issue Linkage Enhance Cooperation? By Effrosyni Diamantoudi; Eftichios Sartzetakis; Stefania Strantza
  11. On the evidence of rebound effects in the lighting sector: Implications for promoting LED lighting By Blum, Bianca; Hübner, Julian; Milde, Adrian; Neumärker, Karl Justus Bernhard
  12. Fostering Green Finance for Sustainable Development in Asia By Volz, Ulrich
  13. The E ect of Forest Access on the Market for Fuelwood in India By Branko Boskovic; Ujjayant Chakravorty; Martino Pelli; Anna Risch
  14. Unintended technology-bias in corporate income taxation: The case of electricity generation in the low-carbon transition By Luisa Dressler; Tibor Hanappi; Kurt van Dender
  15. Challenges for sustainable environmental policy: Influencing factors of the rebound effect in energy efficiency improvements By Blum, Bianca; Hübner, Julian; Müller, Sarah; Neumärker, Karl Justus Bernhard
  16. Libertarian paternalistic instruments fostering sustainable energy consumption: An analysis based on energy-efficient LED technology By Blum, Bianca; Hübner, Julian; Berger, Harald; Neumärker, Karl Justus Bernhard
  17. Natural Gas and the US Economy: Some Preliminary Rules of Thumb By Arora, Vipin
  18. Fake News and Indifference to Scientific Fact By Allen, D.E.; McAleer, M.J.
  19. Two Different Methods for Modelling the Likely Upper Economic Limit of the Future United Kingdom Wind Fleet By Anthony D Stephens; David R Walwyn
  20. Trade Linkages and Transmission of Oil Price Fluctuations in a Model Incorporating Monetary Variables By Taghizadeh-Hesary, Farhad; Rasoulinezhad, Ehsan; Yoshino, Naoyuki
  21. Food for fuel: The effect of the US biofuel mandate on poverty in India By Ujjayant Chakravorty; Marie-Helene Hubert; Beyza Ural Marchand
  22. Scheduling electric vehicles making milk-runs for just-in-time delivery By Emde, Simon; Abedinnia, Hamid; Glock, C. H.
  23. The effect of air quality on welfare accounting By Almut Balleer; Morten Endrikat

  1. By: Chang, C-L.; McAleer, M.J.; Wang, Y-A.
    Abstract: The purpose of the paper is to examine latent volatility Granger causality for four renewable energy Exchange Traded Funds (ETFs) and crude oil ETF (USO), namely solar (TAN), wind (FAN), water (PIO), and nuclear (NLR). Data on the renewable energy and crude oil ETFs are from 18 June 2008 to 20 March 2017. From the underlying stochastic process of a vector random coefficient autoregressive (VRCAR) process for the shocks of returns, we derive Latent Volatility Granger causality from the Diagonal BEKK multivariate conditional volatility model. We follow Chang et al. (2015)’s definition of the co-volatility spillovers of shocks, which calculate the delayed effect of a returns shock in one asset on the subsequent volatility or co-volatility in another asset, and extend the effects of the co-volatility spillovers of shocks to the effects of the co-volatility spillovers of squared shocks. The empirical results show there are significant positive latent volatility Granger causality relationships between solar (TAN), wind (FAN), nuclear (NLR), and crude oil (USO) ETFs, specifically significant volatility spillovers of shocks from solar ETF on the subsequent wind ETF co-volatility with solar ETF, and wind ETF on the subsequent solar ETF co-volatility with wind ETF. Interestingly, there are significant volatility spillovers of squared shocks for the renewable energy ETFs, but not with crude oil ETFs
    Keywords: Renewable Energy, Latent Volatility, Granger Causality, Co-volatility, Spillovers, Solar, Wind, Water, Nuclear Power
    JEL: C32 C58 G12 G15 Q42
    Date: 2018–05–01
  2. By: Chang, C-L.; McAleer, M.J.; Zuo, G.
    Abstract: Recent research shows that efforts to limit climate change should focus on reducing emissions of carbon dioxide over other greenhouse gases or air pollutants. Many countries are paying substantial attention to carbon emissions to improve air quality and public health. The largest source of carbon emissions from human activities in some countries in Europe and elsewhere is from burning fossil fuels for electricity, heat, and transportation. The price of fuel influences carbon emissions, but the price of carbon emissions can also influence the price of fuel. Owing to the importance of carbon emissions and their connection to fossil fuels, and the possibility of Granger (1980) causality in spot and futures prices, returns and volatility of carbon emissions, it is not surprising that crude oil and coal have recently become a very important research topic. For the USA, daily spot and futures prices are available for crude oil and coal, but there are no daily spot or futures prices for carbon emissions. For the EU, there are no daily spot prices for coal or carbon emissions, but there are daily futures prices for crude oil, coal and carbon emissions. For this reason, daily prices will be used to analyse Granger causality and volatility spillovers in spot and futures prices of carbon emissions, crude oil, and coal. A likelihood ratio test is developed to test the multivariate conditional volatility Diagonal BEKK model, which has valid regularity conditions and asymptotic properties, against the alternative Full BEKK model, which has valid regularity conditions and asymptotic properties under the null hypothesis of zero off-diagonal elements. Dynamic hedging strategies using optimal hedge ratios will be suggested to analyse market fluctuations in the spot and futures returns and volatility of carbon emissions, crude oil and coal prices.
    Keywords: Carbon emissions, Fossil fuels, Crude oil, Coal, Low carbon targets, Green energy, Spot and futures prices, Granger causality and volatility spillovers, Likelihood ration test, Diagonal BEKK, Full BEKK, Dynamic hedging
    JEL: C58 L71 O13 P28 Q42
    Date: 2017–05–01
  3. By: Larisa Shakhovskaya (Volgograd State Technical University); Elena Petrenko (PRUE - Plekhanov Russian University of Economics [Moscow]); Alexandr Dzhindzholia (Volgograd State Technical University); Victoria Timonina (Volgograd State Technical University)
    Abstract: In this article are considered by authors the technological, resource and economic capacity of the Far East, the first stages of a cooperation between Russia and the largest gas importers in the Pacific Rim are described, the main projects and fields contributing to the development of a cooperation between the countries are also considered. Statistical methods of the analysis act as methodological base of a research. In modern conditions in relation to the energy sector of Russia (imposition of sanctions by the western countries) there is a reorientation of export deliveries to the EU to Asia-Pacific countries. In these conditions the Far East of Russia acts as a large oil and gas source which has advantages and opportunities to compete in the Asian market, using not only the favorable investment climate, but also the infrastructure developed for today's time. The carried-out analysis showed that Russia is the largest suppliers in the market of Asia-Pacific countries. Constantly interest in the Russian energy resources in the Asian market grows. It is connected with a geographical location of Russia, with high inventories of hydrocarbons in the Far East, safety of deliveries, low policy risks, etc.
    Keywords: consumption,import,competition,natural gass,market,Asia-Pacific countries,Russia,projects
    Date: 2018–03–30
  4. By: Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute)
    Abstract: The main obstacle to developing green energy projects is lack of access to finance. For larger energy projects (e.g., large hydropower projects), insurance and pensions are sustainable financing alternatives. Large energy projects are long-term investment projects; banks are not able to provide long-term loans because their resources (deposits) are short- to medium-term. Pension funds and insurance companies hold long-term savings, so these institutions could be a proper alternative for financing mega-size energy projects. On the other hand, because electricity tariffs are often regulated by the government, to increase the investment incentives the spillover effects originally created by energy supplies need to be used, and tax revenues refunded to the investors in energy projects. For smaller-size green projects, the paper provides a theoretical model for combining utilisation of carbon tax and a new way of financing risky capital, i.e., hometown investment trust funds (HITs). Because of the Basel capital requirement, and because most green energy projects from the point of view of financers are considered risky projects, many financers are reluctant to lend to them or they lend at high interest rates. We show that by taxing carbon dioxide (CO2), sulphur dioxide (SO2), and nitrogen oxides (NOx) and allocating those tax revenues to HITs, green projects will become more feasible and more interesting for hometown investors; hence the supply of investment money to these funds will increase.
    Keywords: carbon tax; green energy; renewable energy; hometown investment trust funds; HITs
    JEL: E62 G21 Q21
    Date: 2017–07–11
  5. By: Nidhaleddine Ben Cheikh; Sami Ben Naceur; Oussama Kanaan; Christophe Rault
    Abstract: Our paper examines the effect of oil price changes on Gulf Cooperation Council (GCC) stock markets using nonlinear smooth transition regression (STR) models. Contrary to conventional wisdom, our empirical results reveal that GCC stock markets do not have similar sensitivities to oil price changes. We document the presence of stock market returns’ asymmetric reactions in some GCC countries, but not for others. In Kuwait’s case, negative oil price changes exert larger impacts on stock returns than positive oil price changes. When considering the asymmetry with respect to the magnitude of oil price variation, we find that Oman’s and Qatar’s stock markets are more sensitive to large oil price changes than to small ones. Our results highlight the importance of economic stabilization and reform policies that can potentially reduce the sensitivity of stock returns to oil price changes, especially with regard to the existence of asymmetric behavior.
    Keywords: GCC stock markets, oil prices, smooth transition regression models
    JEL: G12 F30 Q43
    Date: 2018
  6. By: Simplice Asongu (Yaoundé/Cameroun)
    Abstract: We provide policy-relevant critical masses beyond which, increasing CO2 emissions negatively affects inclusive human development. This study examines how increasing CO2 emissions affects inclusive human development in 44 Sub-Saharan African countries for the period 2000-2012. The empirical evidence is based on Fixed Effects and Tobit regressions. In order to increase the policy relevance of this study, the dataset is decomposed into fundamental characteristics of inclusive development and environmental degradation based on income levels (Low income versus (vs.) Middle income); legal origins (English Common law vs. French Civil law); religious domination (Christianity vs. Islam); openness to sea (Landlocked vs. Coastal); resource-wealth (Oil-rich vs. Oil-poor) and political stability (Stable vs. Unstable). All computed thresholds are within policy range. Hence, above these thresholds, CO2 emissions negatively affect inclusive human development.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2018–01
  7. By: Zhao, Jinhua (Asian Development Bank Institute)
    Abstract: We compare aggregate emission intensity, quantity, and price targets adopted at the national level but implemented cost effectively at the firm level. We obtain simple ranking conditions that depend on the slope ratio of marginal emission damage and marginal abatement cost curves, and threshold parameters determined by the variance and covariance of GDP and business-as-usual emission. We apply the ranking conditions to the top 12 carbon dioxide emitters with specific greenhouse gas targets in the Paris Agreement, and obtain a robust result that intensity targets dominate quantity targets for most of these nations.
    Keywords: aggregate intensity target; quantity target; price target; climate change; INDC; Paris Agreement
    JEL: Q58
    Date: 2018–03–01
  8. By: Shahbaz, Muhammad; Shahzad, Syed Jawad Hussain; Alam, Shaista; Apergis, Nicholas
    Abstract: This paper examines the asymmetric impact of globalisation and economic growth on energy consumption in BRICS countries, applying the NARDL bounds approach to explore the presence of asymmetric cointegration across variables. The empirical results reveals that energy consumption is positively and negatively affected by the positive and negative globalisation shocks, respectively. A positive shock in economic growth promotes energy consumption, while a negative shock reduces energy consumption.
    Keywords: Globalisation, Growth, Energy
    JEL: A1
    Date: 2018–05–02
  9. By: Stanislav Anatolyev; Sergei Seleznev; Veronika Selezneva
    Abstract: We characterize formation of market beliefs in the oil market by providing a complete characterization of the market reaction to oil inventory surprises. We utilize the unique sequential nature of inventory announcements to identify inventory shocks. We estimate an AR-ARCH-MEM model of the joint dynamics of returns, return volatilities and trading volumes around the announcements using high frequency data on oil futures contracts. Our model (i) handles illiquidity of long maturity contracts by accounting for trading inactivity, (ii) captures time varying trading intensity, and (iii) allows for structural changes in the dynamics and responses to news over time. We show (i) uniform formation of expectations across oil futures contracts with different maturities, (ii) a strong negative relation between inventories surprises and returns, (iii) no effect on the term premium, which suggests that inventory shocks are always considered to be permanent, and (iv) differentiation in the reaction of volume by maturity. We demonstrate how our results can be used to test theories of oil price determination and contribute to the debate on the recent oil glut.
    Keywords: oil market; ultra high frequency data; trading intensity; futures returns; return volatility; inventory surprises; expectation formation;
    JEL: C22 C32 C58 G12 G13
    Date: 2018–06
  10. By: Effrosyni Diamantoudi (Concordia University); Eftichios Sartzetakis (University of Macedonia); Stefania Strantza (Concordia University)
    Abstract: This paper examines the stability of International Environmental Agreements (IEAs) in an economy with trade. We extent the basic model of the IEAs by letting countries choose emission taxes and import tariffs as their policy instruments in order to manage climate change and control trade. We define the equilibrium of a three-stage emission game. In the first stage, each country decides whether or not to join the agreement. In the second stage, countries choose simultaneously - cooperatively or non-cooperatively - tariff and tax levels. In the third stage, taking countries’ decisions as given, firms compete a la Cournot in the product markets. Numerical analysis illustrates that the interaction between trade and environment policies is essential in enhancing cooperation. Contrary to the IEA model, stable agreements are larger and more efficient in reducing aggregate emissions and improving welfare. Moreover, the analysis shows that the size of a stable agreement increases in the number of countries affected by the externalities.
    Keywords: Environmental Agreements
    JEL: D6 Q5 C7
    Date: 2018–07
  11. By: Blum, Bianca; Hübner, Julian; Milde, Adrian; Neumärker, Karl Justus Bernhard
    Abstract: [Introduction ...] The aim of this paper is to assess the evidence of rebound effects in the lighting sector through empirical studies and derive policy implications for promoting LED lighting. In the first section energy consumption for lighting in Germany is considered to estimate the relevance of possible rebound effects. Following on from a brief definition of the term rebound, empirical studies on rebound effects in the lighting sector will be considered and analyzed. This will provide insight into the potential relevance of rebound effects in the sector under consideration and provide the opportunity to derive policy implications for promoting energy efficient LED.
    Date: 2018
  12. By: Volz, Ulrich (Asian Development Bank Institute)
    Abstract: Placing the Asian economies onto a sustainable development pathway requires an unprecedented shift in investment away from greenhouse gas, fossil fuel, and natural resource intensive industries towards more resource efficient technologies and business models. The financial sector will have to play a central role in this ‘green transformation’. This study discusses the need for greening the financial system and the role of financial governance. It reviews the state of green lending and investment in Asia and provides an overview of green financial governance initiatives across Asia. It also identifies market innovations to increase green finance in Asia, barriers to green investments, and financial policy and highlights priority areas for policy makers.
    Keywords: green investments; green finance; sustainable development; green transformation; Asia
    JEL: G01 G02 G30 Q01 Q50
    Date: 2018–03–02
  13. By: Branko Boskovic; Ujjayant Chakravorty; Martino Pelli; Anna Risch
    Abstract: Fuelwood collection is often cited as the most important cause of deforestation in devel- oping countries. Use of fuelwood in cooking is a leading cause of indoor air pollution. Using household data from India, we show that households located farther away from the forest spend more time collecting. Distant households are likely to sell more fuel- wood and buy less. That is, lower access to forests increases fuelwood collection and sale. This counter-intuitive behavior is triggered by two factors: lower access to forests (a) increases the xed costs of collecting, which in turn leads to more collection; and (b) drives up local fuelwood prices, which makes collection and sale more pro table. We quantify both these e ects. Using our estimates we show that a fth of the fuelwood collected is consumed outside of rural areas, in nearby towns and cities. Our results imply that at the margin, fuelwood scarcity may lead to increased collection and sale, and exacerbate forest degradation.
    Keywords: energy access, cooking fuels, deforestation, forest cover, fuelwood collection
    JEL: D10 O13 Q42
    Date: 2018
  14. By: Luisa Dressler; Tibor Hanappi; Kurt van Dender
    Abstract: This paper shows that corporate tax provisions can lead to different effective tax rates (ETRs) if there is a capital cost-intensive and a variable cost-intensive way of producing the same output. It develops a framework for analysing sources of the difference in ETRs and adapts existing models to compare forward-looking ETRs for low-carbon and high-carbon electricity generation technologies, considering tax provisions for cost recovery in 36 countries. It finds that standard tax systems are technology neutral when investments are debt-financed because the deductibility of interest payments compensates for the fact that capital allowances are based on nominal (rather than real) capital costs. Under equity finance, ETRs are higher for investments in capital-cost-intensive technologies as the cost of equity finance is often not deductible. Since low-carbon electricity generation tends to be relatively capital-intensive, this result represents a form of unintentional misalignment of the corporate tax system with decarbonisation objectives,.
    Keywords: corporate taxation, cost structure, electricity generation, low-carbon transition, technology choice
    JEL: G11 H25 O14 Q48
    Date: 2018–07–19
  15. By: Blum, Bianca; Hübner, Julian; Müller, Sarah; Neumärker, Karl Justus Bernhard
    Abstract: [Introduction ...] This paper explores the factors that influence the emergence and extent of rebound effects and the challenges that arise for a sustainable environmental policy. The focus here is on increasing energy efficiency and the energy consumption decisions on the consumer side. The starting point of this investigation is the concept of the rebound effect, whose definition is based on the most common classification in the much-cited works by Greening et. al. (2000) and Berkhout et. al. (2000). Based on this, the main part of this paper is dedicated to the different factors influencing the rebound effect. The last section addresses the challenges arising for an environmental policy to promote energy efficiency.
    Date: 2018
  16. By: Blum, Bianca; Hübner, Julian; Berger, Harald; Neumärker, Karl Justus Bernhard
    Abstract: [Introduction ...] The focus of this paper is the analysis of the extent to which the "energy efficiency gap" can be closed with the help of this new behavioral economic approach. The light-emitting diode (LED) will be the main subject of the investigation, as it is extremely energy efficient, relatively cheap, and the change to LED bulbs is technically very easy to implement for any household. In the next section, we will state the theory behind the libertarian paternalism and its justification. Afterwards, several libertarian paternalistic instruments will be introduced. Since the literature already contains a broad variety of such instruments, this paper will focus on those, who delivered robust results in experiments and can be linked with energy consumption. We conclude this paper in the final section with a summary of the main findings and a lookout for what is to come.
    Date: 2018
  17. By: Arora, Vipin
    Abstract: I estimate the response of real US GDP to changes in the natural gas price. A 10% increase in the natural gas price due to an unexpected fall in supply leads to a 0.15% decrease in GDP when using data after 2005. I also find that price increases driven by export demand became a net positive for GDP between 2006 and 2017—an interesting result that requires further research. Finally, the response of GDP to an increase in natural gas production is small and positive since 2005.
    Keywords: economic activity; natural gas; shale; rules of thumb
    JEL: C11 C32 E37 Q43
    Date: 2018–06–11
  18. By: Allen, D.E.; McAleer, M.J.
    Abstract: A set of 115 tweets on climate change by President Trump, from 2011 to 2015, are analysed by means of the data mining technique, sentiment analysis. The intention is to explore the contents and sentiments of the messages contained, the degree to which they differ, and their implications about his understanding of climate change. The results suggest a predominantly negative emotion in relation to tweets on climate change, but they appear to lack a clear logical framework, and confuse short term variations in localised weather with long term global average climate change.
    Keywords: Sentiment Analysis, Polarity, Climate Change, Scientific Verification, Weather
    JEL: A1 C88 C44 Z0
    Date: 2018–05–30
  19. By: Anthony D Stephens; David R Walwyn
    Abstract: Methods for predicting the likely upper economic limit for the wind fleet in the United Kingdom should be simple to use whilst being able to cope with evolving technologies, costs and grid management strategies. This paper present two such models, both of which use data on historical wind patterns but apply different approaches to estimating the extent of wind shedding as a function of the size of the wind fleet. It is clear from the models that as the wind fleet increases in size, wind shedding will progressively increase, and as a result the overall economic efficiency of the wind fleet will be reduced. The models provide almost identical predictions of the efficiency loss and suggest that the future upper economic limit of the wind fleet will be mainly determined by the wind fleet Headroom, a concept described in some detail in the paper. The results, which should have general applicability, are presented in graphical form, and should obviate the need for further modelling using the primary data. The paper also discusses the effectiveness of the wind fleet in decarbonising the grid, and the growing competition between wind and solar fleets as sources of electrical energy for the United Kingdom.
    Date: 2018–06
  20. By: Taghizadeh-Hesary, Farhad (Asian Development Bank Institute); Rasoulinezhad, Ehsan (Asian Development Bank Institute); Yoshino, Naoyuki (Asian Development Bank Institute)
    Abstract: We attempt to ascertain how sharp oil price changes can affect oil-exporting and oil-importing economies. To this end, we applied a simultaneous equation model (SEM) through a weighted two-stage least squares estimation method to different countries with business relations from Q1 2000 to Q4 2015. In the case of oil-exporting countries—Iran, the Russian Federation, United Arab Emirates, Indonesia, and Kazakhstan—our findings revealed that they totally benefit from oil price increases. In the case of oil-importing countries, the effects are more diverse. To derive a better interpretation, we divided them into four groups: European Union (EU) members (Germany, Italy, the Netherlands, and Poland); East Asian economies (Japan; the People’s Republic of China; the Republic of Korea; Viet Nam; Taipei,China; Singapore; and Hong Kong, China); Commonwealth of Independent States (Ukraine and Belarus); and others (United States, India, and Turkey). Our results showed that all these countries importing oil face a negative supply shock, except Turkey, which benefits directly from an oil price shock. Furthermore, the indirect effect coefficient received through trade for all these countries was positive.
    Keywords: crude oil price; trade linkage; direct and indirect effect of oil shocks
    JEL: C30 E32 Q43
    Date: 2017–09–07
  21. By: Ujjayant Chakravorty; Marie-Helene Hubert; Beyza Ural Marchand
    Abstract: More than 40% of US grain is used for energy due to the Renewable Fuels Mandate (RFS). There are no studies of the global distributional consequences of this purely domestic policy. Using micro-level survey data, we trace the e ect of the RFS on world food prices and their impact on household level consumption and wage incomes in In- dia. We rst develop a partial equilibrium model to estimate the e ect of the RFS on the price of selected food commodities - rice, wheat, corn, sugar and meat and dairy, which together provide almost 70% of Indian food calories. Our model predicts that world prices for these commodities rise by 8-16% due to the RFS. We estimate the price pass-through to domestic Indian prices and the e ect of the price shock on household welfare through consumption and wage incomes. Poor rural households suffer signif- icant welfare losses due to higher prices of consumption goods, which are regressive. However they bene t from a rise in wage incomes, mainly because most of them are employed in agriculture. Urban households also bear the higher cost of food, but do not see a concomitant rise in wages because only a small fraction of them work in food- related industries. Welfare losses are greater among urban households. However, more poor people in India live in villages, so rural poverty impacts are larger in magnitude. We estimate that the mandate leads to about 26 million new poor: 21 million in rural and five million in the urban population.
    Keywords: Biofuels, Distributional effects, Household welfare, Renewable Fuel Stan- dards, Poverty
    JEL: D31 O12 Q24 Q42
    Date: 2018
  22. By: Emde, Simon; Abedinnia, Hamid; Glock, C. H.
    Date: 2018
  23. By: Almut Balleer (RWTH Aachen University, School of Business and Economics); Morten Endrikat (RWTH Aachen University, School of Business and Economics)
    Abstract: For several decades, there has been a discussion in economics on how to appropriately measure economic welfare. Although it is common perception that a simple GDP evaluation bears several shortcomings, GDP per capita is still the most prominent measure of countries’ welfare and of its development over time. In a recent paper, Jones and Klenow (2016) extend the huge existing literature on alternative welfare measures by a concept that is based on a utility framework and that incorporates, besides consumption, also life expectancy, inequality, and leisure. In this paper, we add a component of environmental quality, in particular air pollution, to this framework and show that for some country groups accounting for air quality remarkably changes their relative welfare position, both in terms of levels and growth rates over time. Especially for some emerging countries we find strong welfare reductions due to high levels of air pollution. Nevertheless, on average, our welfare measure is still highly correlated with GDP per capita. Our results highlight the importance of environmental aspects in welfare accounting.
    Keywords: Economic Welfare, Economic Development, Air Pollution, Environmental Economics
    JEL: D63 I12 O54 O57 Q53 Q56
    Date: 2018

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