nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒11‒19
eighteen papers chosen by
Roger Fouquet
London School of Economics

  1. Market Timing with Moving Averages for Fossil Fuel and Renewable Energy Stocks By Chang, C-L.; Ilomäki, J.; Laurila, H.; McAleer, M.J.
  2. Technoeconomic Assessment of Microgrids in Myanmar* By Masako Numata; Masahiro Sugiyama; Gento Mogi; Wunna Swe; Venkatachalam Anbumozhi
  3. Financial Development and Economic Growth in Oil-Dependent Economy: The case of Bahrain By Naser, Hanan
  4. Diversifying portfolios of U.S. stocks with crude oil and natural gas: A regime-dependent optimization with several risk measures By Hayette Gatfaoui
  5. The propagation of regional shocks in housing markets: Evidence from oil price shocks in Canada By Kilian, Lutz; Zhou, Xiaoqing
  6. Managing coal sector transition under the ambitious emission reduction scenario in Poland. Focus on labour By Jan Witajewski-Baltvilks; Piotr Lewandowski; Aleksander Szpor; Jan Baran; Marek Antosiewicz
  7. Green Growth and Taste Heterogeneity By Jan Witajewski-Baltvilks
  8. Natural Resources from Curse to a Blessing : conjuring the curse By Saloua Chaouche; rachid toumache; Imane Benameur
  9. Incentives for Information Provision: Energy Efficiency in the Spanish Rental Market By Bian, Xueying; Fabra, Natalia
  10. Dynamic Industry Productivity Measures: The case of thermal electricity generation by South Korean plants 2001-2008 and in Chinese regions 2000-2004* By Førsund, Finn R.; Heshmati, Almas; Wang, Ke
  11. Estimation of Households’ and Businesses’ Willingness to Pay for Improved Reliability of Electricity Supply in Nepal By Naghmeh Niroomand; Glenn P. Jenkins
  12. Household Electrification and Education Outcomes: Panel Evidence from Uganda By Faisal Buyinza; Jakob Kapeller
  13. Evaluation of the Economic Performance of Hydropower Developments Supported by the World Bank Group 1975 to 2015 By Glenn P. Jenkins; Saule Baurzhan; Author-Name:Godwin O. Olasehinde-Williams
  14. The Effects of Experience on Landowner Preferences over Bioenergy Feedstocks By Van Deynze, B.
  15. La gestión del agua desde el punto de vista del Nexo entre el agua, la energía y la alimentación en el Perú: estudio de caso del valle de Ica By Zegarra Méndez, Eduardo
  16. Fossil fuel subsidies, income inequality and poverty. Evidence from developing countries By Cécile Couharde; Sara Mouhoud
  17. The Rocky Road to Canada-wide Carbon Pricing By Tracy Snoddon
  18. No-tolerant Consumers, Information Treatments, and Demand for Stigmatized Foods: the Case of Fukushima Nuclear Power Plant Accident in Japan By Shimokawa, S.; Niiyama, Y.; Kito, Y.; Kudo, H.; Yamaguchi, M.

  1. By: Chang, C-L.; Ilomäki, J.; Laurila, H.; McAleer, M.J.
    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: 2018–09–01
  2. By: Masako Numata; Masahiro Sugiyama; Gento Mogi; Wunna Swe; Venkatachalam Anbumozhi (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: The electrification rate of Myanmar is the second-lowest in Asia, so its improvement is an urgent matter. Sustainable Development Goal 7 recognises the importance of energy access and calls for finding a way to realise the Government of Myanmar’s goal to reach 100% electrification by 2030. To achieve this ambitious target, both centralised (main-grid extension) and decentralised approaches should be considered. In this study, we focused on distributed microgrids amongst electrification options. In Myanmar, as in other developing countries of the Association of Southeast Asian Nations (ASEAN), diesel generators are widely used as power sources of microgrids. Considering the global trend of renewable energy, especially opportunities available for solar photovoltaics (PVs), power sources should be selected carefully. When discussing possible power sources, cost-competitiveness is an important aspect. Therefore, we researched the question: How cost-competitive are microgrids powered by solar PVs compared to conventional diesel power source? We used the primary data collected through interviews and field surveys and calculated the levelised cost of electricity (LCOE) of microgrids. Our results show that solar PVs and batteries are cost-competitive compared with diesel in off-grid areas where diesel fuel prices are much higher than in urban areas. However, to improve efficiency, daytime use of electricity (e.g. productive use) needs to be promoted
    Keywords: Energy access; Rural electrification; Myanmar; LCOE; minigrid
    JEL: Q42 O22
  3. By: Naser, Hanan
    Abstract: This paper attempts to identify the relationship between energy consumption, oil prices, market shares, dividend yields and economic growth for the Kingdom of Bahrain from year 2006 to 2016. For this purpose, unit root test, Johansen cointegration techniques for analysing the long run relationship, and Vector Error Correction Model (VECM) are used. The key findings are summarized as follow: (i) long run relationship exists between the suggested variables. (ii) Both energy and financial markets are significant in the long run relationship, and positively affect the economic growth of Bahrain. (iii) According to the estimated ECM term, the model is stable in the short run. (iv) Decline in the international price of oil has negative significant drawback on the economic growth of Bahrain. Accordingly, it is recommended that policy makers in the Kingdom of Bahrain focuses on implement strong strategies that aim at encouraging investments in non-oil sectors and carbon emissions reduction policy in the long run without impeding energy sector or economic growth in order to move towards sustainability.
    Keywords: Oil prices; energy consumption; financial sector performance; economic growth; Bahrain.
    JEL: C51 C58 E61 G14
    Date: 2018–07–11
  4. By: Hayette Gatfaoui
    Abstract: Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios' risk exposure. Vulnerability results mainly from price trends and fluctuations, following supply and demand shocks. Such energy price uncertainty attracts many market participants in the energy commodity markets. First, energy producers and consumers hedge adverse price changes with energy derivatives. Second, financial market participants use commodities and commodity derivatives to diversify their conventional portfolios. For that reason, we consider the joint dependence between the United States (U.S.) natural gas, crude oil and stock markets. We use Gatfaoui's (2015) time varying multivariate copula analysis and related variance regimes. Such approach handles structural changes in asset prices. In this light, we draw implications for portfolio optimization, when investors diversify their stock portfolios with natural gas and crude oil assets. We minimize the portfolio's variance, semi-variance and tail risk, in the presence and the absence of constraints on the portfolio's expected return and/or U.S. stock investment. The return constraint reduces the performance of the optimal portfolio. Moreover, the regime-specific portfolio optimization helps implement an enhanced active management strategy over the whole sample period. Under a return constraint, the semi-variance optimal portfolio offers the best risk-return tradeoff, whereas the tail-risk optimal portfolio offers the best tradeoff in the absence of a return constraint.
    Date: 2018–11
  5. By: Kilian, Lutz; Zhou, Xiaoqing
    Abstract: Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the regional level, we find that unexpected increases in the real price of oil raise housing demand and real house prices not only in oil-producing regions, but also in other regions. We develop a theoretical model of the propagation of real oil price shocks across regions that helps understand this finding. The model differentiates between oil-producing and non-oil-producing regions and incorporates multiple sectors, trade between provinces, government redistribution, and consumer spending on fuel. We empirically confirm the model prediction that oil price shocks are propagated to housing markets in non-oil-producing regions by the government redistribution of oil revenue and by increased interprovincial trade.
    Keywords: house price,regional heterogeneity,oil price,redistribution,resource boom,regional propagation,Canada
    JEL: F43 Q33 Q43 R12 R31
    Date: 2018
  6. By: Jan Witajewski-Baltvilks; Piotr Lewandowski; Aleksander Szpor; Jan Baran; Marek Antosiewicz
    Abstract: This report presents the main economic facts on the role of coal in the Polish economy, and analyses the implications of the transition away from coal for coal consumption and coal mining employment in Poland. Poland’s energy mix relies on coal, most of which is domestically produced. We argue that issues related to job creation and the cushioning of negative shocks for workers are key for the phasing out of coal in Poland, especially at the regional and local levels. Our simulations show that achieving the Paris Agreement target is feasible in Poland provided hard coal consumption is cut by 20% between 2015 and 2030, and by 55% between 2015 and 2050. We estimate that this reduction in coal consumption would translate into a decline in mining employment of 47% between 2015 and 2030, and of 77% between 2015 and 2050. On the labour supply side, the reduction in employment can be achieved through natural attrition; i.e., through an outflow of workers to retirement and a moderate inflow of new workers. Training programmes, vocational courses, in-work benefits, and social policy instruments should be used to ease the transition.
    Keywords: coal, mining, low-carbon transition, structural change, labour market
    JEL: J21 L71 Q43
    Date: 2018–10
  7. By: Jan Witajewski-Baltvilks
    Abstract: The recent contributions in directed technological change theory show that technological progress in clean industries (i.e. industries which do no produce CO2 emissions) lead to emission decline only if clean and dirty goods are sufficiently substitutable. The result raises a question whether a government could design a policy which increases this substitutability. In this paper I show that elasticity of substitution between clean and dirty goods increases with the number of varieties of clean good. This is shown in the theoretical model, which combines the insights from the directed technological change literature and discrete choice literature. The policy implications of the finding is that environmental policy which promotes development of clean industries should be supplemented with a policy which ensures the diversity of clean goods. For example a subsidy for R&D in clean transport should support a wide range of alternative technologies rather than selected few.
    Keywords: green growth, directed technological change, clean and dirty goods substitutability, optimal variety
    JEL: D11 O44 Q55
    Date: 2018–09
  8. By: Saloua Chaouche (École nationale supérieure de statistique et d'économie appliquée); rachid toumache (ENSSEA d'Alger); Imane Benameur (ENSSEA)
    Abstract: Many countries are blessed with natural resources which logically have the power to transform their economies, so that the development of the natural resource could produce wealth for that nation, but actually it leads to become overly dependent on one resource, to the detriment of the rest of the economy. In fact, the discovery of natural resources is very often followed by economic instability in many of those countries. Moreover, the volatile resource prices have especially negative impacts on weak-state economies and cause growth to be unstable, so the resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer. Given this very sad picture, one can ask if the curse of natural resources is a fatality, can anything be done? The main point for our purpose is to explore if the improvement of the governance, education sector , and high institutional quality with more transparency can be the antidotes and will help to conjure the spell and turn to "resource blessing".Using the L S method we estimated the regression whose dependent on GDP variable for the period from 1986 to 2017, which is a function of a vector of explanatory variables, including the variable that measures the abundance of natural resources, those measuring institutional quality, as well as other control variables. We chose two ways to measure the abundance of natural resources to ensure that our results are unbiased: The first measure is the percentage of oil, gas and ores rent from GDP. The second measure is the logarithm of one plus the value of per capita oil production. We used as measure of institutional quality : Rule of law that represents the credibility rate of the population in state institutions , regulatory quality which reflects the ability of the public authorities to put in place sound policies and regulations that allow the development of the private sector. Government Effectiveness which reflects the perception of the quality of public services, the quality of the public service and its degree of independence from political pressures, the quality of policy formulation and implementation, and credibility of the government?s commitment to these policies. And we used: degree of openness, gross fixed capital formation, life expectancy at birth, and number average years of schooling at the age of 15 as control variables.
    Keywords: Natural resources, institution quality, government effectiveness
    JEL: C19 C59 C51
    Date: 2018–11
  9. By: Bian, Xueying; Fabra, Natalia
    Abstract: Energy certificates (ECs) provide information about the houses' energy efficiency, potentially al- lowing owners to earn a premium when renting more efficient houses. In this paper, we build a search model with asymmetric information regarding energy efficiency to shed light on the owners' incentives to obtain and disclose the ECs. From both a theoretical and empirical perspective, we address three questions: (i) is there an efficiency rent premium?; (ii) do owners of inefficient houses have incentives to hide their ECs?; and (iii) how do both questions depend on the disclosure rate of ECs in the local housing market? We document a premium for more efficient houses, both with respect to less efficient houses as well as with respect to unlabeled ones. We also document a rent penalty for unlabeled houses, which is higher the greater the disclosure rate of ECs. Therefore, in local markets with higher disclosure rates, owners face stronger incentives to obtain and disclose their ECs. Through this channel, higher fines for non-compliance can give rise to a virtuous circle of disclosure that goes beyond the direct effects of increasing fines.
    Keywords: adoption rate; asymmetric information; energy efficiency; rental market
    Date: 2018–10
  10. By: Førsund, Finn R. (Dept. of Economics, University of Oslo); Heshmati, Almas (Sogang University, Seoul); Wang, Ke (Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing)
    Abstract: A framework for applied production theory should focus on the crucial features of the industry to be studied. First of all, to be useful for a dynamic study, a distinction has to be made between the theoretical production possibilities before investment takes place and the actual empirical production possibilities in the short run after investment has taken place. Then there is the distinction between production possibilities at the micro level of a plant or even division within a plant, and the aggregate production possibilities for the industry as a whole. Entry and exit of plants, and embodied technological change at the micro or plant level drive the dynamics. South Korean thermal plants using bituminous coal are studied for the period 2001-2008. The requirement of plant level data has severely restricted the use of the approach. However, the paper shows that such production function concepts can be applied to coal-fired electricity generation aggregated to the Chinese province level and still get valuable structural information for policy analysis. Development in Total Variable Factor Productivity (TVFP) and bias of technical change are estimated and illuminated using figures for isoquant maps, capacity regions in input coefficient space and average- and marginal cost functions both for the plant level in South Korea and for the aggregated province level in China.
    Keywords: Thermal electricity generation; Short-run production function; Dynamic structural change; Total Variable Factor Productivity measure; Factor bias
    JEL: C43 C61 D24
    Date: 2018–11–08
  11. By: Naghmeh Niroomand (Cambridge Resources International.Inc); Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: For the decade prior to 2016 Nepal suffered from the worst electricity shortages in South Asia. During this period load shedding occurred for up to 18 hours a day when hydropower generation is low. This research uses parametric and non-parametric models to estimate households’ and businesses’ willingness to pay (WTP) for improved reliability of electricity services in Nepal. A contingent valuation (CV) survey was completed by 1,800 households and 590 businesses. The parametric models are estimated using Logit regressions. The median, Turnbull and the Kriström mean estimation approach were used for the non-parametric estimations. Both households and businesses are willing to pay more to get from a 50% reduction to a complete elimination of outages than they are willing to pay to get from their current situation to a 50% reduction in outages. This difference in the estimates of the WTP for these two options is even more important in the case of businesses than for households. It is estimated that the annual benefit in 2017 from improving the reliability of the electricity service would be approximately US$324 million with a present value over 20 years of between US$2 and 3.8 billion.
    Keywords: : Nepal, willingness to pay, electricity outage, contingent valuation, non-parametric methods estimation Electricity.
    JEL: D61 Q41
    Date: 2018–05
  12. By: Faisal Buyinza (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Jakob Kapeller (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: We investigate the impact of household electrification on educational outcomes in Uganda using household panel data and employ a probit model. The findings indicate that electrification increases school enrolment at all education cycles. Also, education level of household head, marital status, gender and good housing increase education outcomes. Our results provide insights on the existing gaps in designing supportive policies for increased access to electricity for rural households where there are high disproportionately poor education outcomes. The results suggest that policies to eliminate all barriers to access to electricity will greatly enhance educational outcomes in Uganda.
    Keywords: Household electrification, education outcomes, gender, panel data, Uganda
    Date: 2018–08
  13. By: Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus); Saule Baurzhan (Department of Economics, Eastern Mediterranean University, North Cyprus); Author-Name:Godwin O. Olasehinde-Williams (Department of Economics,Eastern Mediterranean University, North Cyprus)
    Abstract: One solution to the global energy challenge is the intensification of investment in hydropower projects that provide clean, reliable and affordable energy (IEA, 2012). Advocates of hydropower projects site their numerous benefits such as reduction in fossil fuel consumption, provision for water for irrigation and other uses, flood control and inland water transport. However, a common challenge often faced by hydropower projects is the issue of cost and time overruns. This study builds on the earlier work of Awojobi and Jenkins (2015) which examined the net economic benefits of 58 WBG financed hydropower projects between 1975 and 2005. It is thus important to evaluate the net benefits attached to hydropower projects constructed post-2005. This study extends the sample size by 10 more to cover 68 WBG financed hydropower projects and re-computes the results for the previous 58 hydro dams using a consistent set of data and assumptions. This extended sample will enable one to evaluate changes that might have taken place in project design and appraisal over time. Acknowledgments This project is a World Bank Group assisted project under the contract Number: 1476474. The assistance of all World Bank Group officials to enhance the completion of this project is greatly appreciated. under the contract Number: 1476474. The assistance of all World Bank Group officials to enhance the completion of this project is greatly appreciated.
    Keywords: : hydropower, electricity, cost overrun, time overview, economic benefits
    JEL: D61 L94 O22 Q4
    Date: 2018–06
  14. By: Van Deynze, B.
    Abstract: This study examines how landowners prior experience with bioenergy feedstock crops affects their intentions to lease land to produce those crops, and how attitudes and concerns about bioenergy affect intentions differently for landowners with differing levels of experience. I analyze stated preference data from a representative sample of landowners in Northern Michigan and Wisconsin. Landowners were asked whether they would provide cropland or farmable noncropland to produce three different bioenergy feedstocks: corn stover, switchgrass, and poplar. I develop measures of landowner attitudes and concerns through confirmatory factor analysis and use the resulting measures along with a proxy for experience as covariates in probit models with intention to provide land as the dependent variable. The results indicate that experience has a significant effect on landowners decisions for switchgrass and poplar, but less of an impact on the decisions for corn stover. Experience also activates pro-bioenergy attitudes while nullifying concerns about rental and process disamenities. However, experience can increase the impact of concerns about environmental disamenities created by poplar. These findings suggest that targeted outreach can significantly increase the supply of land to produce bioenergy feedstocks. Acknowledgement : This research was funded by the Department of Energy Great Lakes Bioenergy Research Center (DOE BER Office of Science DE-FC02- 07ER64494), DOE OBP Office of Energy Efficiency and Renewable Energy (DE-AC05-76RL01830), the W.K. Kellogg Biological Station, MSU AgBioResearch, and the USDA National Institue of Food and Agriculture. For access to the survey data and methodological guidance, I thank Scott Swinton. For feedback on earlier drafts of this paper, I thank Soren Anderson and Frank Lupi.
    Keywords: Resource/Energy Economics and Policy
    Date: 2018–07
  15. By: Zegarra Méndez, Eduardo
    Abstract: El presente estudio utiliza el enfoque del Nexo entre el agua, la energía y la alimentación para analizar las interacciones entre actores públicos y privados en el valle de Ica, ubicado a 300 kilómetros al sur de Lima, Perú. Esto se realiza presentando un diagnóstico del marco institucional para la gestión del agua e indagando sobre la forma en que el Nexo ha evolucionado históricamente y se manifiesta actualmente en este territorio específico. Mediante el enfoque del Nexo se pueden encarar las políticas públicas orientadas a cumplir con las orientaciones de planes nacionales y los Objetivos de Desarrollo Sostenible (ODS) a los que se ha comprometido el país para el año 2030.
    Date: 2018–11–08
  16. By: Cécile Couharde; Sara Mouhoud
    Abstract: The past two decades have witnessed widespread attempts to reform fossil fuel subsidies in developing countries. If the reforms are likely to improve economic efficiency, the expected effects on income distribution and poverty are more controversial. This paper reviews the recent literature that examines the impacts of fossil fuel subsidies and their reform on income inequality and poverty. It identifies the different channels that have been explored in the literature and surveys the empirical evidence on the importance ofthese channels in practice. Drawing on diverse country experiences, it also discusses why fossil fuel subsidies are particularly challenging to reform and highlights several ways in which efforts to reform may be feasible and successful.
    Keywords: fossil fuel subsidies, developing countries, distributional impact, subsidy reform
    JEL: E62 H71 I32
    Date: 2018
  17. By: Tracy Snoddon (Wilfrid Laurier University)
    Keywords: Energy and Natural Resources; Environmental Policies and Norms;Resources Rights and Management;Resources Taxation and Revenues; Fiscal and Tax Policy; Federalism and Constitution;Federal-Provincial Transfers;Provincial Taxation and Budgets
    JEL: Q54
    Date: 2018–10
  18. By: Shimokawa, S.; Niiyama, Y.; Kito, Y.; Kudo, H.; Yamaguchi, M.
    Abstract: Six years on from the Fukushima nuclear power plant accident in Japan, some consumers still avoid purchasing foods from Fukushima prefecture even when their safety is scientifically guaranteed. Exploiting this situation, we demonstrate how the willingness-to-pay (WTP) approach can be misleading to analyze the demand for food that is stigmatized by some consumers. Conducting choice experiments for rice in Japan in 2016, we explicitly separate the consumers who excessively avoid Fukushima foods (no-tolerant consumers) from other ordinary consumers. We then investigate whether the WTP for Fukushima rice and the safety standard label are systematically different between the two types of consumers. We also examine how providing additional scientific information influences the WTP differently between the two types. We found that 33% of our sample were no-tolerant consumers, and their WTP for Fukushima rice was substantially lower than the market price while ordinary consumers WTP was higher than the market price. Without distinguishing the two types, the average WTP became lower than the market price even with the safety standard label, which misleadingly understated the value of Fukushima rice and the label. Lastly, we found little effect of providing additional scientific information on the WTP in both types. Acknowledgement :
    Keywords: Consumer/Household Economics
    Date: 2018–07

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