nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒10‒08
forty papers chosen by
Roger Fouquet
London School of Economics

  1. Do Foreign Capital and Financial Development affect Clean Energy Consumption and Carbon Emissions? Evidence from BRICS and Next-11 Countries By Shahbaz, Muhammad; Destek, Mehmet; Polemis, Michael
  2. The second French nuclear bet By Quentin Perrier
  3. Development for Domestic Wind-turbine Industry: Which way for Vietnam? By Hoai Son Nguyen; Minh Ha-Duong
  4. Frugals, Militants and the Oil Market By Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
  5. Market Timing with Moving Averages for Fossil Fuel and Renewable Energy Stocks By Chia-Lin Chang; Jukka Ilomäki; Hannu Laurila; Michael McAleer
  6. Effects of EPC home energy audits on investment: A quasi-natural experiment approach By Broberg, Thomas; Egüez, Alejandro; Kažukauskas, Andrius
  7. Multivariate Analysis of Carbon Price with Energy Market, Climate Change, and Political Issues By Yoo, Do-il; Kim, Hyeon-woong; Kwon, Ji-soo; Kim, So-Jin
  8. Photovoltaic self-consumption after the support period: Will it pay off in a cross-sector perspective? By Klamka, Jonas; Wolf, André; Ehrlich, Lars G.
  9. How do travellers respond to health and environmental policies to reduce air pollution? By Caroline Orset
  10. Geopolitical Risks and the Predictability of Regional Oil Returns and Volatility By Riza Demirer; Rangan Gupta; Qiang Ji; Aviral Kumar Tiwari
  11. CO2 emission thresholds for inclusive human development in Sub-Saharan Africa By Asongu, Simplice
  12. Market diffusion of residential PV and battery systems driven by self-consumption: A comparison of Sweden and Germany By Klingler, Anna-Lena; Luthander, Rasmus
  13. Is gasoline price elasticity in the United States increasing? Evidence from the 2009 and 2017 national household travel surveys By Goetzke, Frank; Vance, Colin
  14. Extended opportunity cost model to find near equilibrium electricity prices under non-convexities By Hassan Shavandi; Mehrdad Pirnia; J. David Fuller
  15. On the efficient growth rate of carbon price under a carbon budget By Gollier, Christian
  16. Quantifying the Impacts of Biomass Co-Firing on GHG Emissions from Coal-Powered Electricity Generation By Sun, Shanxia; Johnson, David R.; Hertel, Thomas W.
  17. Energy intensity, growth and technical change By Akshay Shanker; David Stern
  18. Importance of Demand and Supply Shocks for Oil Price Variations By Ma, Lin
  19. On the comparative advantage of U.S. manufacturing: evidence from the shale gas revolution By Arezki, Rabah; Fetzer, Thiemo; Pisch, Frank
  20. Fiscal Federalism, Interjurisdictional Externalities and Overlapping Policies By Coria, Jessica; Hennlock, Magnus; Sterner, Thomas
  21. Green industrial path development in different types of regions By Grillitsch, Markus; Hansen, Teis
  22. "London fog: A century of pollution and mortality, 1866-1965" By Walker Hanlon
  23. Mergers in Nonrenewable Resource Oligopolies and Environmental Policies By Ray Chaudhuri, A.; Benchekroun, H.; Breton, Michele
  24. Ownership of Oil and Gas Rights and Farm Sector Income and Wealth By Hitaj, Claudia; Weber, Jeremy G.; Hopkins, Jeffrey W.; Erickson, Kenneth W.
  25. The Effect of Income Shocks on the Oil Price By Irarrazabal, Alfonso A.; Ma, Lin
  26. A new price test in geographic market definition – an application to german retail gasoline market By Bantle, Melissa; Muijs, Matthias
  27. Transition of Electricity System towards Decarbonization: The Role of Biomass By Kim, Haein; Du, Xiaodong; Johnston, Craig
  28. Welfare impacts of optimal virtual bidding in a multi-settlement electricity market with transmission line congestion By Kim, Hyungkwan; Preckel, Paul; Gotham, Douglas; Liu, Andrew
  29. Does Consumer Climate Change Knowledge and Risk Perception Influence Willingness to Pay for Climate Mitigation in Beverage Crop Production? By Kitchel, Hannah; Boehm, Rebecca L.; Cash, Sean B.
  30. Beef Consumption Reduction and Climate Change Mitigation By Darbandi, Elham; Saghaian, Sayed
  31. Can Wood Pellets Save Coal? By Weiland, Brandon; Sesmero, Juan Pablo; Preckel, Paul; Wetzstein, Michael E.
  32. Adam Smith revisited: coal and the location of the woollen manufacture in England before mechanization, c. 1500-1820 By Keith Sugden; Sebastian A.J. Keibek; Leigh Shaw-Taylor
  33. Solar bait: How states attract solar investments from large corporations By Cohen, Jed J.; Elbakidze, Levan; Jackson, Randall
  34. Transparency in Long-Term Electric Demand Forecast: A Perspective on Regional Load Forecasting By Eryilmaz, Derya; Sun, Bixuan; Konidena, Rao
  35. An Investigation of the Impacts of Rail Accidents on Property Values in the Era of Unconventional Oil By Tang, Chuan; Czajkowski, Jeffrey; Heintzelman, Martin D.; Montgomery, Marilyn; Li, Minghao
  36. A novel Optimization Plan for Multiple-Area Economic Dispatch : An Electro Search Optimization Approach By Kapoor, Advik; Kaur, Vijay
  37. Examining the Productivity Growth of U.S. Electric Generation Plants using the Biennial Malmquist Index Approach By Pokharel, Krishna; Lynes, Melissa; Featherstone, Allen M.; Archer, David W.
  38. Comparing Consumers’ Willingness to Pay for Organic, Local, Fair Trade, Low Carbon Footprint Tomatoes Across Three Different Marketing Outlets By Ratliff, English L.; Vassalos, Michael; Motallebi, Marzieh
  39. Analyzing the Economics of Renewable Jet Fuels Using a Game-theoretic Approach By Sharma, Bijay P.; Yu, Tun-Hsiang Edward; English, Burton C.; Boyer, Christopher M.
  40. Silence of Falling Trees: Hidden Forest Loss from Shale Gas Development By Dong, Xiao; Klaiber, Allen; Gopalakrishnan, Sathya; Wrenn, Douglas H.

  1. By: Shahbaz, Muhammad; Destek, Mehmet; Polemis, Michael
    Abstract: This study investigates the main interrelations generated by the impact of foreign capital along with financial development on clean energy consumption and environmental degradation proxied by the inclusion of CO2 emissions. In doing so, we used panel data techniques targeted at BRICS and Next-11 countries spanning the period 1992-2016. Our paper strongly accounts for the existence of cross-sectional dependence and non-stationarity usually ignored by the other empirical studies. In case of BRICS, the empirical findings reveal that economic growth increases clean energy consumption while financial development reduces it. On the contrary, foreign capital inflows do not appear to have a statistically significant effect on clean energy. We argue that, economic growth, foreign capital inflows and financial development increase CO2 emissions, while clean energy consumption reduces environmental degradation by mitigating carbon emissions in BRICS countries. In case of Next-11 countries, empirical findings indicate that economic growth and foreign capital have positive effect on clean energy consumption. However, economic growth and financial development increases CO2 emissions in N-11 countries.
    Keywords: Foreign Capital, Financial Development, Clean Energy, CO2 emissions, Panel Data
    JEL: G1 Q4 Q5
    Date: 2018–07–31
  2. By: Quentin Perrier (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement)
    Abstract: Following the first oil crisis, France launched the world's largest ever nuclear energy program, commissioning 58 new reactors. These reactors are now reaching 40 years of age, the end of their technological lifetime. This places France at an energy policy crossroads: should the reactors be retrofitted or should they be decommissioned? The cost-optimal decision depends on several factors going forward, in particular the expected costs of nuclear energy production, electricity demand levels and carbon prices, all of which are subject to significant uncertainty. To deal with these uncertainties, we apply the Robust Decision Making framework to determine which reactors should be retrofitted. We build an investment and dispatch optimization model, calibrated for France. Then we use it to study 27 retrofit strategies for all combinations of uncertain parameters, with nearly 8000 runs. Our analysis indicates that robust strategies involve the early closure of 10 to 20 reactors, while extending the life of all other reactors. These strategies provide a hedge against the risks of unexpected increases in retrofit costs, low demand and low carbon prices. Our work also highlights the vulnerabilities of the official French government scenarios, and complements them by suggesting new robust strategies. These results provide a timely contribution to the current debate on the lifetime extension of nuclear plants in France.
    Keywords: Investment,Nuclear costs,Robust Decision Making,Investment optimization,Uncertainty,Power system,Nuclear power
    Date: 2018–08
  3. By: Hoai Son Nguyen (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement, NEU - National Economics University (Ha Noi, Vietnam), CleanED - Clean Energy and Sustainable Development Lab - USTH - University of sciences and technologies of hanoi); Minh Ha-Duong (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement, CleanED - Clean Energy and Sustainable Development Lab - USTH - University of sciences and technologies of hanoi)
    Abstract: The target of 800 MW of wind power by 2020 is almost impossible to complete. Although there are many registered projects, there are only 4 projects with the total capacity of 160 MW coming into operation. Investors claimed that the current price of wind power is too low to have profit. However, it should be noted that raising the price of wind power is not easy since it adds pressure on the price of electricity which is already claimed too high for residential usage. In that context, localizing the production of wind turbines can provide solutions since it can improve financial efficiency without putting pressure on the price of wind power. However, what is the right path for Vietnam to develop its own wind turbine industry?
    Abstract: Mục tiêu 800 MW điện gió vào năm 2020 đến nay gần như không thể hoàn thành. Mặc dù có rất nhiều dự án đăng ký nhưng mới có 4 dự án với tổng công suất 160 MW đi vào hoạt động. Nguyên nhân theo các nhà đầu tư là do giá của điện gió hiện nay quá thấp nên không có hiệu quả về tài chính. Tuy nhiên cũng cần nhận thấy việc tăng giá mua điện gió trong bối cảnh hiện nay là không hề dễ dàng khi nó tạo thêm áp lực lên giá bán điện vốn đã là vấn đề bức xúc của đại đa số người dân. Trong bối cảnh đó, nếu có thể nội địa hóa quá trình sản xuất tua-bin gió thì có thể nâng cao hiệu quả tài chính mà không gây áp lực lên giá mua điện gió. Tuy nhiên, đâu là con đường phù hợp cho Việt Nam để phát triển được nền công nghiệp tua-bin gió của chính mình?
    Keywords: Production fragmentation networks,Wind turbine industry
    Date: 2018–06–01
  4. By: Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
    Abstract: The oil market has often been modelled as an oligopoly where the strategic players are producers. With climate change, a new sort of game appeared, where environmental militants play a significant role by opposing some projects, to contain oil production. At the same time, consumers continue to use increasing amounts of oil, independently of oil price fluctuations. Should we oppose oil project, reduce demand or both? We investigate in this paper the double prisoner's dilemma in which individuals find themselves, with respect to oil consumption and their environmental stance towards the oil industry. We find that the collective outcome of such game is clearly better when a frugal behaviour is adopted, without being militant. The Nash equilibrium, resulting from the individual strategies, leads by contrast to the worst possible outcome: high prices, high consumption and high environmental impact. An effective environmental action should avoid opposing oil supply sources (a costly militant act) and help consumers becoming more frugal.
    Keywords: Oil Market, Militants, Frugality
    JEL: D01 D7 Q41
    Date: 2018–08–01
  5. By: Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University, Taiwan.); Jukka Ilomäki (Faculty of Management University of Tampere, Finland.); Hannu Laurila (Faculty of Management University of Tampere, Finland.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.)
    Abstract: The paper examines whether the moving average (MA) technique can beat random market timing in traditional and newer branches of an industrial sector. The sector considered is the energy sector, divided into balanced stock portfolios of fossil and renewable energy companies. Eight representative firms are selected for both portfolios. The paper finds that MA timing outperforms random timing with the portfolio of renewable energy companies, whereas the result is less clear with the portfolio of fossil energy companies. Thus, there seems to be more forecastable stochastic trends in sunrise branches than in sunset branches.
    Keywords: Moving averages; Market timing; Industrial sector; Energy sector; Fossil fuels; Renewable energy; Random timing; Sunrise branches; Sunset branches.
    JEL: C22 C32 L71 L72 Q16 Q42 Q47
    Date: 2018–09
  6. By: Broberg, Thomas (CERE - the Center for Environmental and Resource Economics); Egüez, Alejandro (CERE - the Center for Environmental and Resource Economics); Kažukauskas, Andrius (CERE - the Center for Environmental and Resource Economics)
    Abstract: Incomplete information may be one reason why some households do not invest in energy efficiency even though it would benefit them to do so. Energy performance certificates (EPCs) have been promoted to overcome such information shortages. In this paper, we investigate whether EPCs together with mandatory home energy audits make households more likely to invest in energy efficiency. Our study takes advantage of the mandatory nature of the EPCs to avoid the potential selection bias problem that typically applies to studies using voluntary energy audits as the treatment. Our treatment group consists of single-household dwellings in Sweden sold from 2008, i.e., when EPCs became legally required in connection with sales of residential buildings, to 2015; while the control group consists of houses sold between 2002 and 2008, i.e., without an EPC. The results show that there is no statistically significant treatment effect for most of the measures that a household can take to improve the energy performance of their house.
    Keywords: energy performance certificate (EPC); home energy audits; quasi-natural experimental design; incomplete information; investment decision; energy efficiency gap; policy evaluation
    JEL: D83 Q41 Q48
    Date: 2018–09–26
  7. By: Yoo, Do-il; Kim, Hyeon-woong; Kwon, Ji-soo; Kim, So-Jin
    Keywords: Natural Resource Economics, Demand and Price Analysis, Resource and Environmental Policy Analysis
    Date: 2018–06–20
  8. By: Klamka, Jonas; Wolf, André; Ehrlich, Lars G.
    Abstract: We quantify the cost savings potential of photovoltaic self-consumption by single-family houses with small-scale roof-top photovoltaic (PV) systems in Germany against the background of recent storage applications after the end of the legal support period. We analyze different systems where an already installed PV system is combined with battery storage and/or a power-to-heat solution (heating rod plus thermal storage). A comparison is made in terms of a household's electricity and heating costs under cost-minimizing operation of each system. For this purpose, we carry out comprehensive simulations of site-specific PV production and determine the optimal selfconsumption as well as the optimal charging of the hot water thermal storage and the battery system. We use 25 representative electricity load profiles, which differ only in the temporal distribution of consumption, to obtain a broader picture of the cost savings potential. Results suggest that the major share of the savings potential is due to direct PV self-consumption and thus concerns the electricity costs. A profitability analysis reveals that the inclusion of a hot water thermal storage and/or a battery storage system does not pay off when juxtaposing cost savings and investment expenses, at least at current prices.
    Keywords: residential photovoltaic,self-sufficiency,battery system,power-to-heat
    Date: 2018
  9. By: Caroline Orset (Université Paris-Saclay, AgroParisTech, ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: Despite the various measures taken to reduce air pollution in France, the French continue to use high-emission vehicles. We propose to evaluate the willingness to pay (WTP) for four means of transport: two high-emission vehicles (diesel taxi and diesel personal vehicle) and two low-emission vehicles (rented electric vehicle and public transport). Successive messages revealing the effects of air pollution on health and the environment are provided to individuals in a different order. The information conveyed changes both of the WTP of individuals and of their choices. However, the use of high-emission vehicles has not diminished , personal vehicles remain the most popular. Using data collected from our survey, a multinomial logit model is used to determine individual choices. We find that improving individuals' confidence in air pollution recommendations would be a good way to lead them to choose low-emission rather than high-emission means of transport. Moreover, these estimates also indicate that individuals who attach great importance to comfort are less likely to choose low-emission vehicles than those who value price above other factors. Individual interest can therefore prevail over collective interest, thus verifying the theory of the tragedy of the commons. Different policies (taxes, subsidies, or standard) to encourage people to adopt low-emission vehicles are then tested.
    Keywords: Air Pollution,Information Campaign,Means of Transport,Tax-Subsidy-Standard,Travellers' Willingness to Pay
    Date: 2018
  10. By: Riza Demirer (Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, USA.); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Qiang Ji (Center for Energy and Environmental Policy Research, Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China.); Aviral Kumar Tiwari (Montpellier Business School, Montpellier, France)
    Abstract: This paper hypothesizes that global geopolitical risks (GPRs) can predict oil market return and volatility. For our purpose, we use a k-th order nonparametric causality-inquantiles test, applied to a daily data set covering the period of 15th May, 1996 to 31st May, 2018 of six oil prices (the Nigerian Bonny Light, Brent, Dubai, OPEC, Tapis, and WTI). Our results indicate that the relationship between oil returns and GPRs is highly nonlinear and hence, linear tests of Granger causality cannot be relied upon. Based on the data-driven econometric method, we observe that GPRs have predictability for oil returns of the West African Bonny Light, OPEC and Tapis, while in terms of volatility, causality is observed for all oil prices barring the case of Dubai. In sum, the impact of GPRs is primarily on volatility of oil markets, but more importantly, the impact of GPRs is not uniform across the oil markets.
    Keywords: Geopolitical Risks, Oil Prices, Nonparametric Causality-in-Quantiles Test
    JEL: C22 C32 Q41
    Date: 2018–09
  11. By: Asongu, Simplice
    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
  12. By: Klingler, Anna-Lena; Luthander, Rasmus
    Abstract: With increasing number of installations of photovoltaic (PV) systems and lower equipment costs, the subsidies dedicated to residential PV systems are reduced in many countries. Instead of the subsidies for selling PV electricity, prospectively self-consumption is the key parameter for the profitability of PV systems. In this paper, we study the market diffusion of residential PV systems for de-tached houses in Germany and Sweden. For this, we develop a hybrid model of the adoption of PV installations driven by self-consumption. We model the profitability and investment decisions for PV systems in a first step and account for inhibiting factors by introducing an adoption rate. The adoption rate is based on empirical data from the market diffusion of heat pumps in Sweden. We also study the market diffusion of battery systems aimed to increase self-consumption. A base case with several sensitivities on long-term trends of different parameters is analysed to examine the variation of the market diffusion until 2040. The results show a large difference in the market share of PV systems in Germany and Sweden in 2040. A base case scenario results in a market share for PV systems of 65% of the German detached houses in 2040, compared to 12% in Sweden. The results show that the market share in Sweden is most sensitive to electricity price changes, whereas the German market is most sensitive to changes in the adoption rate. Since the high electricity price in Germany makes PV profitable for most of the households at an early stage, it is mainly the adoption rate that limits the market diffusion in Germany. For Sweden, where the electricity price is less than half of the German price, the profitability is the main limiting factor. This is reflected in the hybrid adoption model, where the market diffusion is dependent on both the profitability and the adoption rate. The market share for battery systems is 5% in Germany and 0% in Sweden in 2040 in the base case scenario. The results show the influences of several parameters on the market diffusion based on the different initial mar-ket conditions, which can be extended to other national markets.
    Keywords: Market diffusion,self-consumption,PV,battery,technology adoption
    Date: 2018
  13. By: Goetzke, Frank; Vance, Colin
    Abstract: Drawing on the 2009 and 2017 waves of the National Household Transportation Survey, this paper models the determinants of vehicle miles traveled, with the aim of parameterizing the magnitude of the fuel price elasticity. To capture changes in this magnitude over the two years of the survey, our specification interacts the logged fuel price with a dummy indicating the 2017 survey year. We find a small but statistically significant mean elasticity of about -0.05 for the year 2009, which increases over fourfold to -0.23 by the year 2017. We explore the robustness of this result to different model specifications and estimation techniques, including instrumental variable estimation to account for the possible endogeneity of fuel prices, as well as quantile regression to account for heterogeneity according to driving intensity. A similar pattern of substantially increasing elasticity emerges across all these models. We speculate that one possible source of this pattern is economic duress from the 2008 financial crisis, which the data suggests reoriented mode choice patterns.
    Keywords: fuel price elasticity,household VMT,heterogeneity
    JEL: D12 Q41 R48
    Date: 2018
  14. By: Hassan Shavandi; Mehrdad Pirnia; J. David Fuller
    Abstract: This paper finds near equilibrium prices for electricity markets with nonconvexities due to binary variables, in order to reduce the market participants' opportunity costs, such as generators' unrecovered costs. The opportunity cost is defined as the difference between the profit when the instructions of the market operator are followed and when the market participants can freely make their own decisions based on the market prices. We use the minimum complementarity approximation to the minimum total opportunity cost (MTOC) model, from previous research, with tests on a much more realistic unit commitment (UC) model than in previous research, including features such as reserve requirements, ramping constraints, and minimum up and down times. The developed model incorporates flexible price responsive demand, as in previous research, but since not all demand is price responsive, we consider the more realistic case that total demand is a mixture of fixed and flexible. Another improvement over previous MTOC research is computational: whereas the previous research had nonconvex terms among the objective function's continuous variables, we convert the objective to an equivalent form that contains only linear and convex quadratic terms in the continuous variables. We compare the unit commitment model with the standard social welfare optimization version of UC, in a series of sensitivity analyses, varying flexible demand to represent varying degrees of future penetration of electric vehicles and smart appliances, different ratios of generation availability, and different values of transmission line capacities to consider possible congestion. The minimum total opportunity cost and social welfare solutions are mostly very close in different scenarios, except in some extreme cases.
    Date: 2018–09
  15. By: Gollier, Christian
    Abstract: When an intertemporal carbon budget is imposed to fight climate change, abating emissions earlier has a social rate of return that is equal to the growth rate of the marginal abatement cost, i.e., of the carbon price. I use a normative version of asset pricing theory to determine the efficient level of the growth rate of expected carbon price in this Hotelling’s framework under uncertainty. When future marginal abatement costs are negatively correlated with aggregate consumption, an immediate vigorous reduction in emissions provides a hedge against the macroeconomic risk borne by the representative agent. The growth rate of expected carbon price should therefore be smaller than the interest rate in that case, and the initial carbon price should be large. The opposite is true when this correlation is positive, and the Hotelling’s rule applies as a limit case with independence. We calibrate a simple two-period version of the model by introducing infrequent macroeconomic catastrophes à la Barro in order to fit the model to observed assets pricing in the economy. From this numerical exercise, we recommend a growth rate of expected carbon price around 3.5% per year (plus inflation), which is much larger than the 1% equilibrium interest rate in our economy.
    Keywords: Uncertain mitigation cost; marginal abatement cost; Hotelling’s rule; consumptionbased CAPM
    JEL: D81 G12 Q54
    Date: 2018–09
  16. By: Sun, Shanxia; Johnson, David R.; Hertel, Thomas W.
    Keywords: Resource and Environmental Policy Analysis, Environmental and Nonmarket Valuation, Natural Resource Economics
    Date: 2018–06–20
  17. By: Akshay Shanker; David Stern
    Abstract: World and U.S. energy intensities have declined over the past century, falling at an average rate of approximately 1.2–1.5 percent a year. The decline has persisted through periods of stagnating or even falling energy prices, suggesting the decline is driven in large part by autonomous factors, independent of price changes. In this paper, we use directed technical change theory to understand the autonomous decline in energy intensity and investigate whether the decline will continue. We show in an economy with no state-dependence, where existing knowledge does not make R&D more profitable, energy intensity continues to decline, albeit at a slower rate than output growth, due to energy-augmenting innovation. However, in an economy with extreme state-dependence, energy intensity eventually stops declining because labor-augmenting innovation crowds out energy-augmenting innovation. Our empirical analysis of energy intensity in 100 countries between 1970 and 2010 suggests a scenario without extreme state dependence where energy intensity continues to decline; in either case, energy intensity never declines faster than output grows, and so energy use always increases, as long as the extraction cost of energy stays constant.
    Keywords: Energy, Directed Technological Change, Economic Growth
    JEL: O33 O41 Q43
    Date: 2018–09
  18. By: Ma, Lin (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: This paper studies the importance of demand and supply shocks in the oil market, and tries to explain the formation of the short-run oil price by applying an extended commodity storage model to the cyclical components of the price. First, I employ a multivariate method to extract the cyclical component of the oil price, world oil consumption, and global GDP. Next, I find a large and positive effect of global GDP shock on the oil price cycles in a VAR model. Then, I estimate the commodity storage model using a moment-matching method. All parameters are estimated significantly, and the model shows good capability of reproducing the volatility and persistence of oil pricecycles. IfindthattheGDPshockgeneratesamuchmoremoderateeffectontheoil price cycles in the extended commodity storage model than the empirical evidence from the VAR analysis, and the production shock plays an important role for the variance of the cyclical component of the oil price.
    Keywords: Oilprice; demandshock; supplyshock; competitivestorage model; BeverageNelson decomposition; simulated method of moments
    JEL: C15 G10 O13 Q40
    Date: 2018–09–17
  19. By: Arezki, Rabah; Fetzer, Thiemo; Pisch, Frank
    Abstract: This paper provides novel empirical evidence of the effects of a plausibly exogenous change in relative factor prices on United States manufacturing production and trade. The shale gas revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world reflecting differences in endowment of difficult-to-trade natural gas. Guided by economic theory, empirical tests on output, factor reallocation and international trade are conducted. Results show that U.S. manufacturing exports have grown by about 10 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.
    Keywords: Manufacturing; Exports; Energy prices; Shale gas
    JEL: L71 N52 O13 Q33 R11
    Date: 2017–03–25
  20. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Hennlock, Magnus (Swedish Environmental Research Institute (IVL),); Sterner, Thomas
    Abstract: In this paper, we analyze the effects of the interaction between national and local policies designed to reduce an environmental externality that causes environmental damages both nationally and locally. We formulate a theoretical model to develop hypotheses regarding the combined effects of such policies on the stringency of the local policies and on firms’ emissions reductions. To test our hypotheses, we use actual data for Sweden, where emissions of nitrogen oxides from combustion plants are subject to a heavy national tax and to individual emissions standards set by county authorities. Our analytical findings suggest that it is unlikely that local regulators will impose emissions standards stringent enough to achieve further reductions than those induced by the national tax. This is confirmed in our data, where most emissions reductions can be attributed to the national tax and the effects of the emissions standards are not significant.
    Keywords: environmental regulation; multi-governance; federalism; emission taxes; command-and-control; air pollution; N0x; Sweden
    JEL: D62 H23 H77 Q58
    Date: 2018–09
  21. By: Grillitsch, Markus (Lund University); Hansen, Teis (Lund University)
    Abstract: As response to environmental challenges such as global warming and the extinction of species sustainable regional development has become a key policy objective. Regions, however, vary in their preconditions for green industrial path development. Taking existing regional industrial specialization patterns as a starting point, this paper develops a new typology linking regional preconditions to various pathways for green industrial path development. This provides the foundation for identifying place-based policy implications for growing clean industries in different types of regions, grounded in the emerging perspective in innovation studies on policies for transformative change. The paper thereby helps to understand the pathways for greening the economy in different regional contexts and how such green pathways can be promoted through policy.
    Keywords: Green growth; regional development; cleantech; industrial path development; place-based policy; regional policy
    JEL: O30 O38 P48 Q50 Q58 R10 R58
    Date: 2018–09–27
  22. By: Walker Hanlon (NYU Stern School of Business)
    Abstract: "This study provides new evidence on the impact of air pollution in London over the century from 1866-1965. To identify weeks with elevated pollution levels I use new data tracking the timing of London’s famous fog events, which trapped emissions in the city. These events are compared to detailed new weekly mortality data. My results show that acute pollution exposure due to fog events accounted for at least one out of every 200 deaths in London during this century. I provide evidence that the presence of infectious diseases of the respiratory system, such as measles and tuberculosis, increased the mortality effects of pollution. As a result, success in reducing the infectious diseases burden in London in the 20th century reduced the impact of pollution exposure and shifted the distribution of pollution effects across age groups."
    JEL: N00
    Date: 2018–04
  23. By: Ray Chaudhuri, A. (Tilburg University, Center For Economic Research); Benchekroun, H.; Breton, Michele
    Abstract: We examine the profitability of horizontal mergers within nonrenewable resource industries, which account for a large proportion of merger activities worldwide. Each firm owns a private stock of the resource and uses open-loop strategies when choosing its extraction path. We analytically show that even a small merger (merger of 2 firms) is always profitable when the resource stock owned by each firm is small enough. In the case where pollution is generated by the industry's activity, we show that an environmental policy that increases the firms' production cost or reduces their selling price can deter a merger. This speeds up the industry's extraction and thereby causes emissions to occur earlier than under a laissez-faire scenario.
    Keywords: exhaustible resources; horizontal mergers; environmental regulation; differential games
    JEL: Q39 L41 Q58
    Date: 2018
  24. By: Hitaj, Claudia; Weber, Jeremy G.; Hopkins, Jeffrey W.; Erickson, Kenneth W.
    Keywords: Natural Resource Economics, Ag Finance and Farm Management, Rural/Community Development
    Date: 2018–06–20
  25. By: Irarrazabal, Alfonso A. (BI Norwegian Business School); Ma, Lin (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: This paper identifies the effect of income shocks on the real price of oil. We find that for the period 1973-2016 shocks to world GDP created a response of a permanent rise in the oil price. In contrast, oil production does not correct the disequilibrium from a stable long-run equilibrium. Whereas shocks to GDP are persistent, shocks to the oil price are mostly transitory once we control for changes in world GDP and oil production. We find evidence of a structural change in the response of the oil price after 1973. We conjecture that the response of oil production is key to the differences.
    Keywords: Oil Market; Real Oil Price; Commodity Markets; Cointegratio
    JEL: C13 C22 Q02 Q43
    Date: 2018–09–17
  26. By: Bantle, Melissa (Helmut Schmidt University, Hamburg); Muijs, Matthias (University of Hohenheim)
    Abstract: Market delineation is a fundamental tool in modern antitrust analysis. However, the definition of re- levant markets can be very difficult in practice. This preliminary draft applies a new methodology combining a simple price correlation test with hierarchical clustering -a method known from machine learning- in order to analyze the competitive situation in the German retail gasoline market. Our analysis reveals two remarkable results: At first, there is a uniform pattern across stations of the same brand regarding their maximum daily prices which confirms the claim that prices are partly set centrally. But more importantly, price reactions are also influenced by regional or local market conditions as the price setting of gasoline stations is strongly affected by commuter routes.
    Keywords: market definition; gasoline market; price tests; competition; k-means clustering; hierarchical clustering
    JEL: D22 D40 D43 L10
    Date: 2018–08–29
  27. By: Kim, Haein; Du, Xiaodong; Johnston, Craig
    Keywords: Resource and Environmental Policy Analysis, Natural Resource Economics, Behavioral & Institutional Economics
    Date: 2018–06–20
  28. By: Kim, Hyungkwan; Preckel, Paul; Gotham, Douglas; Liu, Andrew
    Keywords: Industrial Org./Supply Chain Management, Natural Resource Economics, Risk and Uncertainty
    Date: 2018–06–20
  29. By: Kitchel, Hannah; Boehm, Rebecca L.; Cash, Sean B.
    Keywords: Food and Agricultural Marketing, Environmental and Nonmarket Valuation, Food Safety and Nutrition
    Date: 2018–06–20
  30. By: Darbandi, Elham; Saghaian, Sayed
    Abstract: Keeping global temperature rises below two degrees Celsius is a targeted international community goal. The literature suggests that it is important to explicitly consider the consumption side, as well as the production side to achieve this goal. However, the lack of awareness among the public related to the linkage of the livestock sector and climate change may hinder consumers to change their consumption behavior to reduce Green House Gas (GHG) emissions. This study has two purposes. First, we quantify the environmental loading of U.S. beef sector by calculating emission levels over the period of 1990-2017. Beef cattle is one of the most emission-intensive sectors, which is responsible for 54% of total GHGs from livestock. Following International Panel on Climate Change (IPCC) guideline, we identify three sources of emissions, including enteric fermentation, manure management, and manure left on pastures. Second, we provide an understanding of consumption-environmental connection related to the beef industry. This knowledge might help to avoid the catastrophic climate change consequences in the future.
    Keywords: Agribusiness, Agricultural and Food Policy, Livestock Production/Industries
    Date: 2018–01–17
  31. By: Weiland, Brandon; Sesmero, Juan Pablo; Preckel, Paul; Wetzstein, Michael E.
    Keywords: Natural Resource Economics, Resource and Environmental Policy Analysis, Productivity Analysis and Emerging Technologies
    Date: 2018–06–20
  32. By: Keith Sugden (University of Cambridge); Sebastian A.J. Keibek; Leigh Shaw-Taylor (University of Cambridge)
    Abstract: This study uses male occupational data abstracted from the Court of Common Pleas to determine the location of the English woollen manufacturing industry circa 1500, and from county probate records to track temporal change 1601-1801. It shows that the onset of de- industrialization in textile counties in southern England occurred toward the end of the seventeenth century when the industry began to shift to the West Riding of Yorkshire. Occupations of fathers recorded in Anglican baptism registers 1813-20 indicate that the industry relocated to a relatively small number of places. This study establishes a clear association between these places and the proximity of water and the coalfields. This relationship concurs with the views of Adam Smith to show that coal was important to the woollen manufacture decades before the mechanization of spinning and weaving and the use of steam power.
    Keywords: Woollen cloth manufacture, location, timing, coal, water
    JEL: N73
  33. By: Cohen, Jed J.; Elbakidze, Levan; Jackson, Randall
    Keywords: Resource and Environmental Policy Analysis, Natural Resource Economics, Productivity Analysis and Emerging Technologies
    Date: 2018–06–20
  34. By: Eryilmaz, Derya; Sun, Bixuan; Konidena, Rao
    Keywords: Research Methods/Econometrics/Stats, Resource and Environmental Policy Analysis, Risk and Uncertainty
    Date: 2018–06–20
  35. By: Tang, Chuan; Czajkowski, Jeffrey; Heintzelman, Martin D.; Montgomery, Marilyn; Li, Minghao
    Keywords: Environmental and Nonmarket Valuation, Resource and Environmental Policy Analysis, Risk and Uncertainty
    Date: 2018–06–20
  36. By: Kapoor, Advik; Kaur, Vijay
    Abstract: Economic dispatch is an approach that can indirectly improve the power system resonance. A novel algorithm called JAYA is introduces in this manuscript to have an answer for the non-convex multiple-area economic dispatch (MAED). MAED comprises some zone which satisfy the load-generation balance in each area. The aggregated cost is minimized through transferring the energy from the area that has the lower cost to the zone owns the higher-cost. In above of the transmission line rating, our proposed approach provides the scientists with the multiple petroleum cost function for the generators as well as the prohibited zones for generating the power in the large-scale power generations. Moreover, a new procedure according to the electro search optimization algorithm (ESOA) is projected to obtain the global solution for the MAED problem, when all the limitations are simultaneously considered. The proposed approach is tested to validate its performance through a case system consist of seven generators located in two areas. The results show that the proposed ESOA procedure is more efficient in compare with the other approaches.
    Keywords: Economic Dispatch, Prohibited Operating Zone, Transmission line rating, Optimization approach.
    JEL: A23 E31 E37 I39 O21
    Date: 2018–09–12
  37. By: Pokharel, Krishna; Lynes, Melissa; Featherstone, Allen M.; Archer, David W.
    Keywords: Agribusiness Economics and Management, Productivity Analysis and Emerging Technologies, Production Economics
    Date: 2018–06–20
  38. By: Ratliff, English L.; Vassalos, Michael; Motallebi, Marzieh
    Keywords: Food and Agricultural Marketing, Demand and Price Analysis, Agribusiness Economics and Management
    Date: 2018–06–20
  39. By: Sharma, Bijay P.; Yu, Tun-Hsiang Edward; English, Burton C.; Boyer, Christopher M.
    Keywords: Agribusiness Economics and Management, Industrial Org./Supply Chain Management, Resource and Environmental Policy Analysis
    Date: 2018–06–20
  40. By: Dong, Xiao; Klaiber, Allen; Gopalakrishnan, Sathya; Wrenn, Douglas H.
    Keywords: Resource and Environmental Policy Analysis, Natural Resource Economics, Environmental and Nonmarket Valuation
    Date: 2018–06–20

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