nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒12‒24
43 papers chosen by
Roger Fouquet
London School of Economics

  1. Climate Change: The Ultimate Challenge for Economics By Nordhaus, William D.
  2. Dynamic Panel Modeling of Climate Change By Peter C.B. Phillips
  3. Parallel tracks towards a global treaty on carbon pricing By Jeroen C.J.M. van den Bergh; Arild Angelsen; Andrea Baranzini; W.J. Wouter Botzen; Stefano Carattini; Stefan Drews; Tessa Dunlop; Eric Galbraith; Elisabeth Gsottbauer; Richard B. Howarth; Emilio Padilla; Jordi Roca; Robert Schmidt
  4. Strategic behaviour in a capacity market? The new Irish electricity market design By Teirilä, J.; Ritz, R.
  5. Whither the American West? Natural Amenities, Energy and Nonmetropolitan County Growth By Rickman, Dan S.; Wang, Hongbo
  6. Der Preis der Energiewende: Anstieg der Kostenbelastung einkommensschwacher Haushalte By Frondel, Manuel; Sommer, Stephan
  7. Precio de las emisiones de CO2 en la generación eléctrica By Gómez-Ríos, María del Carmen; Juárez-Luna, David
  8. Unbundling, regulation and pricing: Evidence from electricity distribution By Heim, Sven; Krieger, Bastian; Liebensteiner, Mario
  9. Economic Assessment of Using Electric Vehicles and Batteries as Domestic Storage Units in the United Kingdom By Donato A. Melchiorre.; Sinan Küfeoglu
  10. Online Appendix to Oil prices in a general equilibrium model with precautionary demand for oil" By Conny Olovsson
  11. Regulation of Location-Specific Externalities By Eirik S. Amundsen; Lars Gårn Hansen; Hans Jørgen Whitta-Jacobsen
  12. Pass-through, profits and the political economy of regulation By Grey, F.; Ritz, R.
  13. Decompositions and Policy Consequences of an Extraordinary Decline in Air Pollution from Electricity Generation By Stephen P. Holland; Erin T. Mansur; Nicholas Muller; Andrew J. Yates
  14. EEG-Umlage: Umverteilung von unten nach oben By Schaefer, Thilo
  15. The Social Cost of Carbon and the Ramsey Rule. By Cees A. Withagen
  16. Regional Resources and Democratic Secessionism By Kai Gehring; Stephan A. Schneider
  17. Size matters: Estimation sample length and electricity price forecasting accuracy By Carlo Fezzi; Luca Mosetti
  18. Redes inteligentes y mecanismo de respuesta de la demanda: el caso del sector eléctrico colombiano By John Jairo García; Alejandro Gutiérrez; Luisa Vargas; Hermilson Velásquez
  19. A theoretical framework to consider energy transfers within growth theory By Benjamin Leiva; Octavio Ramirez; John R. Schramski
  20. Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election By Stefano Ramelli; Alexander F. Wagner; Richard J. Zeckhauser; Alexandre Ziegler
  21. Green Growth and Trade in Environmental Goods and Services: A South Asian Perspective By Kshitiz Dahal; Posh Raj Pandey
  23. Using published bid/ask curves to error dress spot electricity price forecasts By Gunnhildur H. Steinbakk; Alex Lenkoski; Ragnar Bang Huseby; Anders L{\o}land; Tor Arne {\O}ig{\aa}rd
  24. Low Carbon Cities By World Bank Group
  25. Policy Evolution under the Clean Air Act By Richard Schmalensee; Robert N. Stavins
  26. High and Low Intraday Commodity Prices: A Fractional Integration and Cointegration Approach By Yaya, OlaOluwa S; Gil-Alana, Luis A.
  27. Deploying gas power with CCS: The role of operational flexibility, merit order and the future energy system By Matthias Schnellmann; Chi-Kong Chyong; David Reiner; Stuart Scott
  28. Energy performance certificates and investments in building energy efficiency: a theoretical analysis By Pierre Fleckinger; Matthieu Glachant; Paul-Hervé Tamokoué Kamga
  29. Decoupling the EU ETS from subsidized renewables and other demand side effects Lessons from the impact of the EU ETS on CO2 emissions in the German electricity sector By Sebastian Schaefer
  30. Auswirkung der Elektromobilität auf die Haushaltsstrompreise in Deutschland By Wietschel, Martin; Kühnbach, Matthias; Stute, Judith; Gnann, Till; Marwitz, Simon; Klobasa, Marian
  31. Congestion Management: From Physics to Regulatory Instruments By Hirth, Lion; Glismann, Samuel
  32. The influence of renewables on electricity price forecasting: a robust approach By Luigi Grossi; Fany Nan
  33. Carbon Prices are Redundant in the 2030 EU Climate and Energy Policy Package By Finn Roar Aune; Rolf Golombek
  34. Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets Part II: Solution Algorithm By Sarfatia, M.; M., Hesamzadeha.; Holmberg, P.
  35. Restructuring the Chinese Electricity Supply Sector - How industrial electricity prices are determined in a liberalized power market: lessons from Great Britain By Pollitt, M.; Dale, L.
  36. Pricing in Day-Ahead Electricity Markets with Near-Optimal Unit Commitment By Eldridge, B.; O’Neill, R.; Hobbs, B.
  37. Redes inteligentes y mecanismo de respuesta de la demanda: el caso del sector eléctrico colombiano Smart grids and demand response mechanism: the case of the Colombian electricity market? By John J. Garcia-Rendon; Alejandro Gutiérrez Gómez; Luisa Vargas Tobón; Hermilson Velasquez Ceballos
  38. Monitoring Sustainable Development. Climate and Energy Policy Indicators By Claudia Kettner-Marx; Daniela Kletzan-Slamanig; Angela Köppl; Beate Littig; Irina Zielinska
  39. Re-examining the Foreign direct investment, Renewable energy consumption and Economic growth nexus: Evidence from a new Bootstrap ARDL test for Cointegration By Ghazouani, tarek
  40. From forward to spot prices: producers, retailers and loss averse consumers in electricity markets By Valeria Di Cosmo; Elisa Trujillo-Baute
  41. Risks associated with the decarbonisation of the Polish power sector By Jan Witajewski-Baltvilks; Marek Antosiewicz; Andrzej Ceglarz; Haris Doukas; Alexandros Nikas; Jakub Sawulski; Aleksander Szpor; Baiba Witajewska-Baltvilka
  42. Pricing in Day-Ahead Electricity Markets with Near-Optimal Unit Commitment By Brent Eldridge; Richard O'Neill; Benjamin Hobbs
  43. The Billion Dollar Question: How Much Will it Cost to Decarbonise Cities’ Transport Systems? By Nicolas Wagner

  1. By: Nordhaus, William D. (Yale University)
    Abstract: William D. Nordhaus delivered his Prize Lecture on 8 December 2018 at the Aula Magna, Stockholm University.
    Keywords: long-term growth; climate change
    JEL: O00
    Date: 2018–12–08
  2. By: Peter C.B. Phillips (Cowles Foundation, Yale University)
    Abstract: We discuss some conceptual and practical issues that arise from the presence of global energy balance effects on station level adjustment mechanisms in dynamic panel regressions with climate data. The paper provides asymptotic analyses, observational data computations, and Monte Carlo simulations to assess the use of various estimation methodologies, including standard dynamic panel regression and cointegration techniques that have been used in earlier research. The findings reveal massive bias in system GMM estimation of the dynamic panel regression parameters, which arise from fixed effect heterogeneity across individual station level observations. Difference GMM and Within Group (WG) estimation have little bias and WG estimation is recommended for practical implementation of dynamic panel regression with highly disaggregated climate data. Intriguingly from an econometric perspective and importantly for global policy analysis, it is shown that despite the substantial differences between the estimates of the regression model parameters, estimates of global transient climate sensitivity (of temperature to a doubling of atmospheric CO {2}) are robust to the estimation method employed and to the specific nature of the trending mechanism in global temperature, radiation, and CO {2}.
    Keywords: Climate modeling, Cointegration, Difference GMM, Dynamic panel, Spatio-temporal modeling, System GMM, Transient climate sensitivity, Within group estimation
    JEL: C32 C33
    Date: 2018–12
  3. By: Jeroen C.J.M. van den Bergh (Universitat Autònoma de Barcelona, ICREA & VU University Amsterdam); Arild Angelsen (Norwegian University of Life Sciences); Andrea Baranzini (University of Applied Sciences Western Switzerland); W.J. Wouter Botzen (VU University Amsterdam & Utrecht University); Stefano Carattini (Yale School of Forestry & Environmental Studies, Grantham Research Institute & London School of Economics and Political Science); Stefan Drews (Universitat Autònoma de Barcelona); Tessa Dunlop (Universitat Autònoma de Barcelona); Eric Galbraith (Universitat Autònoma de Barcelona & ICREA); Elisabeth Gsottbauer (University of Innsbruck); Richard B. Howarth (Dartmouth College); Emilio Padilla (Universitat Autònoma de Barcelona); Jordi Roca (Universitat de Barcelona); Robert Schmidt (University of Kaiserslautern)
    Abstract: We argue that a global carbon price is the only way to effectively tackle free riding in international climate policy, required to substantially reduce greenhouse gas emissions. We briefly review the main reasons behind the essential role of carbon pricing, address common misunderstandings and scepticism, and identify key complementary policy instruments. Negotiating global carbon pricing is argued to be much easier than negotiating binding country-level targets, especially if it includes equitable revenue recycling. Moreover, a global carbon price can be more readily adapted to new data and insights of climate science. We propose a political strategy towards a global carbon price that consists of two tracks. The first entails assembly of a carbon-pricing club, a specific case of a climate club, to gradually move towards a full participatory agreement on carbon pricing. The second track involves putting time and energy into re-focusing UNFCCC negotiations on a carbon-pricing agreement. The two tracks reinforce one another, increasing the likelihood of a successful outcome.
    Keywords: Carbon Tax, Carbon Market, Cap-and-Trade, Tradable Permits, Equity, Climate Agreement, Climate Club
    JEL: Q54 Q58 Q48
    Date: 2018
  4. By: Teirilä, J.; Ritz, R.
    Abstract: The transition to a low-carbon power system requires growing the share of generation from (intermittent) renewables while ensuring security of supply. Policymakers and economists increasingly see a capacity mechanism as a way to deal with this challenge. Yet this raises new concerns about the exercise of market power by large players via the capacity auction. We present a new modelling approach that captures such strategic behaviour together with a set of ex ante empirical estimates for the new Irish electricity market design (I-SEM) – in which a single firm controls 44% of generation capacity (excluding wind). We find significant costs of strategic behaviour, even with new entry: In our baseline scenarios, procurement costs in the capacity auction are around 150-400 million EUR (or 40-100%) above the competitive least-cost solution. From a policy perspective, we also examine how market power can be measured and mitigated through auction design.
    Keywords: capacity market, strategic behaviour, competitive benchmark analysis, restructured electricity market, auction design
    JEL: D44 H57 L13 L94
    Date: 2018–10–30
  5. By: Rickman, Dan S.; Wang, Hongbo
    Abstract: The American West has long experienced strong economic growth. The varied economy of the region though has produced a diversity of economic outcomes and trends. In this paper, we assess whether there have been significant relative shifts in economic growth across the nonmetropolitan counties of the region between the periods of 1992-2004 and 2004-2016. We find significant relative downward growth shifts in areas most abundant in natural amenities. Further analysis suggests the downward growth shifts in high amenity counties resulted from the capitalization of the amenities into housing costs, not from diminished quality of life in the counties. Economic growth significantly accelerated in counties where significant oil and gas extractive activity occurred, in which most of the counties were not previously considered as highly dependent on the energy industry. Counties with low levels of natural amenities and an absence of oil and gas resources continued to struggle and are suggested to likely be in need of place-based labor demand policies.
    Keywords: Natural amenities; Oil and gas boom; Nonmetropolitan counties
    JEL: R11 R12 R23
    Date: 2018–11–16
  6. By: Frondel, Manuel; Sommer, Stephan
    Abstract: Seit dem Jahr 2000 haben sich die Strompreise für private Haushalte mehr als verdoppelt. Von steigenden Stromkosten sind Millionen von armutsgefährdeten Haushalten besonders betroffen, weil diese Kosten regressive Wirkungen haben: Arme Haushalte haben einen größeren Anteil ihres Einkommens zur Finanzierung ihres Energiebedarfs aufzuwenden als wohlhabende Haushalte. Vor diesem Hintergrund untersucht der vorliegende Beitrag exemplarisch für einige Haushaltstypen mit geringem Einkommen, wie stark ihre Stromkostenbelastung in den Jahren 2006 bis 2016 relativ zu ihrem Einkommen zugenommen hat. Nach unseren Abschätzungen auf Basis empirischer Daten zum Energieverbrauch privater Haushalte mussten die von uns betrachteten armutsgefährdeten Haushaltstypen im Jahr 2016 allesamt mehr für Strom ausgeben als zur Deckung ihres Energiebedarfs zum Heizen und zur Warmwassererzeugung. Es muss davon ausgegangen werden, dass im Zuge der Energiewende der Strompreis auch in den kommenden Jahren weiter steigen wird. Dies gilt insbesondere angesichts der stark gestiegenen Preise für Emissionszertifikate, die sich in der Steigerung der Börsenstrompreise bemerkbar machen. Damit stellt sich immer drängender die Frage nach Maßnahmen zur Abschwächung von weiteren Strompreisanstiegen und zur sozialen Abfederung ihrer regressiven Wirkungen.
    Keywords: Regressive Wirkungen,Kostenverteilung,Akzeptanz
    JEL: D12 D31
    Date: 2018
  7. By: Gómez-Ríos, María del Carmen; Juárez-Luna, David
    Abstract: This paper aims to identify the effects of including the price of CO2 emissions in the Total Levelized Cost of Generation (CTNG, in Spanish) of the combined cycle power plant. Monte Carlo simulation is used to estimate the probability densities of the CTNG and the Total Levelized Cost of Generation with Externalities (CTNGE). The effects of the price of CO2 emissions in the CTNG of the combined cycle plant are analysed through the concepts of stochastic dominance. We find that the price of CO2 emissions makes the CTNGE of the combined cycle plant to be higher and riskier than the CTNG. On the other hand, the CTNGE of the combined cycle plant is very sensitive to changes in the price of CO2 emissions. The analysis suggests that the share of electricity generation through combined cycle plants should be reduced to replace it with clean technologies. A limitation of the work is that the CTNG and CTNGE probability densities, generated through Monte Carlo simulation, depend on the data used, so they are sensitive to changes in the input parameters.
    Keywords: CO2 Emissions, Generation, Electricity, Levelized Cost.
    JEL: Q40 Q53
    Date: 2018–10–19
  8. By: Heim, Sven; Krieger, Bastian; Liebensteiner, Mario
    Abstract: Unbundling of vertically integrated utilities has become an integral element in the regulation of network industries and has been implemented in many jurisdictions. The idea of separating the network, as the natural monopoly, from downstream retailing, which may be exposed to competition, is still subject to contentious debate. This is because there is much empirical evidence that unbundling eliminates economies of vertical integration while empirical evidence on price reducing effects is still lacking. In this paper we study the effect of legal unbundling on grid charges in the German electricity distribution industry. Using panel data on German distribution system operators (DSOs) we exploit the variation in the timing of the implementation of legal unbundling and the fact that not all DSOs had to implement unbundling measures. We are also able to identify heterogeneous effects of legal unbundling for different types of price regulation, because we observe a switch in the price regulation regime from rate-of-return regulation to incentive regulation during our observation period. Our findings suggest that legal unbundling of the network stage significantly decreases grid charges in the range of 5% to 9%, depending on the type of price regulation in place.
    Keywords: Vertical Integration,Electricity Distribution,Unbundling,Regulation
    JEL: D22 L11 L22 L51 L94 Q48
    Date: 2018
  9. By: Donato A. Melchiorre.; Sinan Küfeoglu
    Abstract: Increasing residential renewable energy generation and the consumers’ demand for reducing their electricity bills leads to new opportunities to use electric vehicles (EVs) and batteries as domestic storage units. This paper assesses the economic feasibility of Vehicle-to-Home (V2H) and domestic battery systems in the United Kingdom (UK). To do the analysis, a UK average EV and domestic battery have been established; called UKEV and UKBat respectively. The UKEV characteristics were determined by taking a weighted average from the five highest selling EVs in the UK. An arithmetic mean was used for the individual UKBat features based on seven models currently available on the UK market. The UKEV and UKBat were compared under four scenarios. These are Ofgem’s two domestic electricity profile classes (PC1, PC2) and two existing time-of-use tariffs; one with two and the other with three rates during a day. Maximum annual saving for the consumer was estimated to be around 35% and 57% per annual electricity bill for the EV and battery, respectively. On average, for both UKEV and UKBat, the three-rate tariff yielded 30% more savings than the two-rate tariff. Battery degradation cost was the major parameter affecting the economic feasibility of V2H and domestic batteries, but these costs are expected to continue to fall. Suitable time-of-use tariff design is the key to maximising consumers’ savings in using these units.
    Keywords: electric vehicles; battery; vehicle-to-home systems; tariffs
    JEL: L94
    Date: 2018–10–16
  10. By: Conny Olovsson (Sveriges Riksbank)
    Abstract: Online appendix for the Review of Economic Dynamics article
    Date: 2018
  11. By: Eirik S. Amundsen; Lars Gårn Hansen; Hans Jørgen Whitta-Jacobsen
    Abstract: In this paper, we study regulation of externalities involving many small-scale polluters, where the damages from emissions depend on the polluters’ locations. Examples include nutrient and pesticide emissions from farms, particulate emissions from vehicles and home heating units, emissions of hazardous chemical compounds from small business etc. With such emission problems, regulatory authorities often apply a combination of firm-level, possibly differentiated standards for ‘cleaner’ technologies, and market-level, undifferentiated dirty input regulations. We establish general principles for how such regulations should be designed and combined. We find that the optimal regulation design crucially depends on the type of cleaner technologies available to polluters. If these are ‘emission capturing’, optimal technology standards encourage the use of cleaner technologies in both high and low damage areas, while if they are ‘input displacing’, optimal technology regulation encourages cleaner technologies in high damage areas, but discourages their use in low damage areas. Regulation should always discourage the use of dirty input and the optimal regulation intensity may be substantial, particularly if the available cleaner technologies are input displacing.
    JEL: H23 Q58 D62
    Date: 2018
  12. By: Grey, F.; Ritz, R.
    Abstract: Government regulation, such as the pricing of externalities, often raises the unit costs of regulated firms, and its impact on their profits is important to its political economy. We introduce a reduced-form model (“GLM”) that nests existing models of imperfect competition under weaker assumptions. We show how a firm's cost passthrough is a sufficient statistic for the profit impact of regulation. We apply the GLM to carbon pricing for US airlines. We find large inter-firm heterogeneity in pass-through, even for a uniform cost shock. The GLM allows us to sidestep estimation of a consumer demand system, firm markups and conduct parameters. We derive the second-best emissions tax including lobbying a government “for sale”.
    Keywords: Cost pass-through, regulation, carbon pricing, airlines, political economy
    JEL: D43 H23 L51 L92 Q54
    Date: 2018–10–17
  13. By: Stephen P. Holland; Erin T. Mansur; Nicholas Muller; Andrew J. Yates
    Abstract: We determine the change in air pollution damages from U.S. power plant emissions over 2010 to 2017. Annual damages fell from $245 billion to $133 billion over this period, with most of the decline occurring in the East. Decomposition shows that changes in emissions rates reduced damages by $63 billion, changes in generation shares reduced damages by $60 billion, and a reduction in fossil generation reduced damages by $25 billion. However, changes in damage valuations per ton of emissions increased damages by $35 billion. We estimate that marginal damages declined in the East from about 9¢ per kWh in 2010 to 6¢ in 2017. This decrease is slower than the decrease in total damages. Despite little or no change in total damages in the West and Texas, marginal damages increased. The environmental benefit of electric vehicles increased so that they are now cleaner than gasoline vehicles on average, though substantial heterogeneity remains. The environmental benefit of solar panels decreased in the East but increased elsewhere.
    JEL: D62 H23 Q53 Q54
    Date: 2018–12
  14. By: Schaefer, Thilo
    Abstract: Die EEG-Umlage, das Instrument zur Förderung des Ausbaus Erneuerbarer Energien verteilt um: Der Anteil ihres Einkommens, den Haushalte mit geringen Einkommen für die EEG-Umlage aufwenden müssen, ist höher als bei einkommensstarken Haushalten. Letztere betreiben häufiger Solaranlagen und profitieren damit von der Förderung.
    Date: 2018
  15. By: Cees A. Withagen
    Abstract: The objective of this paper is to critically assess the use simple rules for the social cost of carbon (SCC) employing a rudimentary form of the Ramsey rule. Two interrelated caveats apply. First, if climate change poses a serious problem, it is hard to justify an exogenous constant growth rate of consumption. Second, to derive the SCC one needs full knowledge of the entire future. Popular assumptions to get around this, such as assuming current GDP is optimal, are difficult to justify.
    JEL: Q54
    Date: 2018
  16. By: Kai Gehring; Stephan A. Schneider
    Abstract: Although regional resources have been shown to influence secessionist conflicts in developing countries, their effect in established democracies has largely been neglected. We integrate regional resource value and inter-regional transfers in a model on the optimal size of nations, and show that regional wealth correlates positively with secessionist party success in a large panel of regions. To establish causality, our difference-in-differences and triple-differences designs exploit that Scotland and Wales both feature separatist parties, but only an independent Scotland would profit from oil discoveries off its coast. We document an economically and statistically significant positive effect of regional resources and rule out plausible alternative explanations.
    Keywords: fiscal federalism, inter-regional transfers, redistribution, secession, separatism, size of nations, resources, economic voting
    JEL: D70 H77 N90
    Date: 2018
  17. By: Carlo Fezzi; Luca Mosetti
    Abstract: Electricity price forecasting models are typically estimated via rolling windows, i.e. by using only the most recent observations. Nonetheless, the current literature does not provide much guidance on how to select the size of such windows. This paper shows that determining the appropriate window prior to estimation dramatically improves forecasting performances. In addition, it proposes a simple two-step approach to choose the best performing models and window sizes. The value of this methodology is illustrated by analyzing hourly datasets from two large power markets with a selection of ten different forecasting models. Incidentally, our empirical application reveals that simple models, such as the linear regression, can perform surprisingly well if estimated on extremely short samples.
    Keywords: electricity price forecasting, day-ahead market, parameter instability, bandwidth selection, artificial neural networks
    JEL: C22 C45 C51 C53 Q47
    Date: 2018
  18. By: John Jairo García; Alejandro Gutiérrez; Luisa Vargas; Hermilson Velásquez
    Keywords: Respuesta de la demanda, ARIMAX – ARCH, Beneficios económicos, Colombia.
    JEL: C32 L52
    Date: 2018–11–01
  19. By: Benjamin Leiva; Octavio Ramirez; John R. Schramski
    Abstract: Growth theory has rarely considered energy despite its invisible hand in all physical systems. We develop a theoretical framework that places energy transfers at centerstage of growth theory based on two principles: (1) goods are material rearrangements and (2) such rearrangements are done by energy transferred by prime movers (e.g. workers, engines). We derive the implications of these principles for an autarkic agent that maximizes utility subject to an energy budget constraint and maximizes energy surplus to relax such constraint. The solution to these problems shows that growth is driven by positive marginal energy surplus of energy goods (e.g. rice, oil), yet materializes through prime mover accumulation. This perspective brings under one framework several results from previous attempts to insert energy within growth theory, reconciles economics with natural sciences, and provides a basis for a general reinterpretation of economics and growth as the interplay between human desires and thermodynamic processes.
    Date: 2018–12
  20. By: Stefano Ramelli; Alexander F. Wagner; Richard J. Zeckhauser; Alexandre Ziegler
    Abstract: Donald Trump's 2016 election and the subsequent nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate change policy. Firms' stock-price reactions to these events reveal whether their climate strategies affected their valuations. As widely reported, firms in industries with high carbon intensity benefited, at least briefly. It might be expected that companies with "responsible" strategies on climate change would also have lost value, since they were paying for actions that seemed less urgent. In fact, investors actually rewarded such firms. The analysis shows that this observed climate responsibility premium results, at least in part, from the strategic behavior of long-horizon investors who looked into the future to assess the valuation of corporations.
    JEL: G14 G38
    Date: 2018–11
  21. By: Kshitiz Dahal (South Asia Watch on Trade, Economics and Environment); Posh Raj Pandey (South Asia Watch on Trade, Economics and Environment)
    Abstract: This paper looks at the patterns, trends, and existing barriers in the trade of environmental goods and services (EGS) in South Asia. It also looks at the state of green growth in the region, with particular emphasis on carbon dioxide emission and energy supply and consumption pattern, to deduce whether the trade of EGS has been happening at a level conducive to promoting green growth. Although the trade of environmental goods has been exhibiting an increasing trend, the increase is almost exclusively the result of increasing imports. The lackluster export performance of environmental goods by South Asian countries, except for India, is indicative of a dismal state of environment industry in South Asia region. The most visible benefits of outcome of the liberalization of environmental goods would thus be increased imports. However, we did not find strong relation between import of environmental goods and level of green growth. The proximate reasons for such relation are the environmentally hazardous energy mix - coal and oil still dominate the primary energy supply, energy consumption, and electricity generation, implying unsustainable modes of consumption and production - and hence the perpetually increasing greenhouse gas emissions for all the South Asian countries. A strong commitment to green economy through legislations, policy, governing bodies as well as behavioral changes are needed to dissociate economic growth from environmental impacts. Analysis of tariffs on environmental goods in South Asia suggests some tariff barriers are present alongside non-tariff barriers. There is a lack of data to analyze the trade of environmental services in South Asia but evidence suggests that significant barriers for liberalization of environmental services are firmly in place.
    Keywords: Green Growth, Environmental Goods, Environmental Services, OECD List, APEC List, Friends List, Greenhouse Gases, List Approach, Project Approach, Integrated Approach, Request and Offer methodology, Hybrid Approach, Carbon dioxide emission, Total Primary Energy Supply Mix (TPES), Total Energy Consumption Mix, Electricity Generation Mix
    JEL: F1 O0 Q2 Q3 Q4
    Date: 2018–05
  22. By: Hoang Anh Nguyen-Trinh (USTH - University of sciences and technologies of hanoi); Yorgos Rizopoulos (LADYSS - Laboratoire dynamiques sociales et recomposition des espaces - UP1 - Université Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)
    Date: 2018
  23. By: Gunnhildur H. Steinbakk; Alex Lenkoski; Ragnar Bang Huseby; Anders L{\o}land; Tor Arne {\O}ig{\aa}rd
    Abstract: Accurate forecasts of electricity spot prices are essential to the daily operational and planning decisions made by power producers and distributors. Typically, point forecasts of these quantities suffice, particularly in the Nord Pool market where the large quantity of hydro power leads to price stability. However, when situations become irregular, deviations on the price scale can often be extreme and difficult to pinpoint precisely, which is a result of the highly varying marginal costs of generating facilities at the edges of the load curve. In these situations it is useful to supplant a point forecast of price with a distributional forecast, in particular one whose tails are adaptive to the current production regime. This work outlines a methodology for leveraging published bid/ask information from the Nord Pool market to construct such adaptive predictive distributions. Our methodology is a non-standard application of the concept of error-dressing, which couples a feature driven error distribution in volume space with a non-linear transformation via the published bid/ask curves to obtain highly non-symmetric, adaptive price distributions. Using data from the Nord Pool market, we show that our method outperforms more standard forms of distributional modeling. We further show how such distributions can be used to render `warning systems' that issue reliable probabilities of prices exceeding various important thresholds.
    Date: 2018–12
  24. By: World Bank Group
    Keywords: Environment - Carbon Policy and Trading Environment - Climate Change Mitigation and Green House Gases Environment - Environment and Energy Efficiency Urban Development - National Urban Development Policies & Strategies Urban Development - Urban Economic Development Urban Development - Urban Environment
    Date: 2018–09
  25. By: Richard Schmalensee; Robert N. Stavins
    Abstract: The U.S. Clean Air Act, passed in 1970 with strong bipartisan support, was the first environmental law to give the Federal government a serious regulatory role, established the architecture of the U.S. air pollution control system, and became a model for subsequent environmental laws in the United States and globally. We outline the Act’s key provisions, as well as the main changes Congress has made to it over time. We assess the evolution of air pollution control policy under the Clean Air Act, with particular attention to the types of policy instruments used. We provide a generic assessment of the major types of policy instruments, and we trace and assess the historical evolution of EPA’s policy instrument use, with particular focus on the increased use of market-based policy instruments, beginning in the 1970s and culminating in the 1990s. Over the past fifty years, air pollution regulation has gradually become much more complex, and over the past twenty years, policy debates have become increasingly partisan and polarized, to the point that it has become impossible to amend the Act or pass other legislation to address the new threat of climate change.
    JEL: Q28 Q40 Q48 Q54 Q58
    Date: 2018–11
  26. By: Yaya, OlaOluwa S; Gil-Alana, Luis A.
    Abstract: This paper examines the behaviour of high and low prices of four commodities, namely crude oil, natural gas, gold and silver, and of the corresponding ranges using both daily and intraday data at various frequencies. For this purpose, it applies fractional integration and cointegration techniques; in particular, an FCVAR model is estimated to capture both the long-run equilibrium relationships between high and low commodity prices, referred to as the range, and the long-memory properties of their linear combination. Fractional cointegration in found in all cases, with the range showing stationary and nonstationary patterns and changing substantially across the frequencies. The findings may assist investors in improving their trading strategies since high and low prices serve as entry and exit signals in the market.
    Keywords: Commodity prices, intraday, fractional integration, fractional cointegration, FCVAR
    JEL: C22 C32 G11 G15
    Date: 2018–12–05
  27. By: Matthias Schnellmann (University of Cambridge); Chi-Kong Chyong (University of Cambridge); David Reiner (University of Cambridge); Stuart Scott (University of Cambridge)
    Date: 2018–11
  28. By: Pierre Fleckinger (MINES ParisTech and PSL University & Paris School of Economics); Matthieu Glachant (MINES ParisTech and PSL University); Paul-Hervé Tamokoué Kamga (MINES ParisTech and PSL University)
    Abstract: In the European Union, Energy Performance Certificates (EPCs) provide potential buyers or tenants with information on a property's energy performance. By mitigating informational asymmetries on real estate markets, the conventional wisdom is that they will reduce energy use, increase energy-efficiency investments, and improve social welfare. We develop a dynamic model that partly contradicts these predictions. Although EPCs always improve social welfare, their impact on energy use and investments is ambiguous. This implies that, in a second-best world where energy externalities are under-priced and/or homeowners have behavioral biases hindering investments (myopia), EPCs can damage social welfare. This calls for using mandatory energy labeling in contexts where additional instruments efficiently mitigate the other imperfections.
    Keywords: Energy Labeling, Energy Efficiency, Buildings
    JEL: Q48 R31
    Date: 2018
  29. By: Sebastian Schaefer (University of Siegen)
    Abstract: This paper analyzes the impact of the EU ETS on CO2 reduction in the German electricity sector. We find an ETS-induced emission abatement which is not exceeding 6 % of total emissions with a maximum already in 2010. Thereafter the ETS has not induced additional reductions. This outcome is sub-optimal. It corresponds to the recent debate about sub-optimal performance of the EU ETS caused by excessive allowances. Following up on this we develop a unilateral flexible cap to eliminate demand side effects which lead to excessive allowances. The unilateral flexible cap is based on emission intensities. Using the works of Newell and Pizer (2008); Sue Wing et al. (2009) we prove in a first step that an intensity-based emission cap is advantageous in the German electricity sector when compared to an absolute cap. An ex-post analysis shows that the amount of excessive allowances resulting from the economic crisis during the second trading period could have been significantly lowered with a unilateral flexible cap. This approach also decouples the EU ETS from a simultaneous promotion of renewable energy.
    Keywords: Decoupling Overlapping Regulations, Promotion of Renewable Energy, Emissions Trading, Intensity Standard
    JEL: Q41 Q42 Q48 Q54
    Date: 2018
  30. By: Wietschel, Martin; Kühnbach, Matthias; Stute, Judith; Gnann, Till; Marwitz, Simon; Klobasa, Marian
    Abstract: [Einleitung ...] Das Arbeitspapier gliedert sich wie folgt. Im nächsten Kapitel wird ein Markthochlaufszenario für Elektrofahrzeuge, das mögliche Ladeverhalten von Nutzern der Elektrofahrzeuge sowie der Einfluss einer höheren Ladeleistung auf die Mobilität dargestellt. Aufbauend auf dem entwickelten Szenario werden in Kapitel 3 auf der Basis einer Energiesystemmodellierung für Deutschland die möglichen Aus-wirkungen der Elektromobilität auf die Erzeugungspreise von Strom berechnet. Dabei werden auch die Effekte des Lastmanagements von Elektrofahrzeugen auf die Stromerzeugung betrachtet. Dann wird in Kapitel 4 der Einfluss von Elektrofahrzeugen auf Stromverteilnetze und die Netzentgelte simuliert. Hierzu wird ein Untersuchungsfall definiert, der aus einem Photovoltaik- und Netzszenario besteht. Verschiedene Fälle mit unterschiedlicher Ladeleistung der Elektrofahr-zeuge sowie gesteuertem und ungesteuertem Laden werden dabei untersucht. Anschließend (Kapitel 5) werden die Auswirkungen auf den gesamten Strompreis für Haushaltskunden analysiert. Im letzten Kapitel erfolgt eine Zusammenfassung und anschließend werden Schlussfolgerungen für die Politik gezogen.
    Date: 2018
  31. By: Hirth, Lion; Glismann, Samuel
    Abstract: In recent years, power flows in many European transmission and distribution networks have increased, making the management of network congestion a much-debated – and increasing politicized – topic. This paper is an introduction to and a review of congestion management in European electricity grids. We review the physical measures available to avoid congestion, using a newly introduced analytical framework. Also, we provide a com-prehensive review of regulatory instruments used and proposed to incentivize those measures. Finally, we provide a description of the implementation of three prominent instruments, including so-called redispatch.
    Keywords: Redispatch,Congestion Management
    Date: 2018
  32. By: Luigi Grossi (University of Verona); Fany Nan (European Commission's Joint Research Centre (JRC))
    Abstract: In this paper a robust approach to modelling electricity spot prices is introduced. Differently from what has been recently done in the literature on electricity price forecasting, where the attention has been mainly drawn by the prediction of spikes, the focus of this contribution is on the robust estimation of nonlinear SETARX models (Self-Exciting Threshold Auto Regressive models with eXogenous regressors). In this way, parameters estimates are not, or very lightly, influenced by the presence of extreme observations and the large majority of prices, which are not spikes, could be better forecasted. A Monte Carlo study is carried out in order to select the best weighting function for Generalized M-estimators of SETAR processes. A robust procedure to select and estimate nonlinear processes for electricity prices is introduced, including robust tests for stationarity and nonlinearity and robust information criteria. The application of the procedure to the Italian electricity market reveals the forecasting superiority of the robust GM-estimator based on the polynomial weighting function respect to the non-robust Least Squares estimator. Finally, the introduction of external regressors in the robust estimation of SETARX processes contributes to the improvement of the forecasting ability of the model.
    Keywords: Electricity Price, Nonlinear Time Series, Price Forecasting, Robust GM-Estimator, Spikes, Threshold Models
    JEL: C13 C15 C22 C53 Q47
    Date: 2018
  33. By: Finn Roar Aune; Rolf Golombek
    Abstract: In June 2018, an agreement between key EU institutions – the Commission, the European Parliament, and the European Council – was reached after a long-lasting discourse over the 2030 EU climate and energy policy package. This paper offers a comprehensive assessment of the EU package, with its three main targets: lower greenhouse gas emissions, higher renewable share in final energy consumption, and improved energy efficiency. We find that the renewable and energy-efficiency targets have been set so high that the derived emissions reduction exceeds the EU climate target. Hence, carbon prices are redundant in reaching the EU climate goal. This policy, however, is not cost efficient.
    Keywords: climate policy, renewables, energy efficiency, nuclear phase out, energy modeling
    JEL: Q28 Q41 Q48 Q54
    Date: 2018
  34. By: Sarfatia, M.; M., Hesamzadeha.; Holmberg, P.
    Abstract: In part I of this paper, we proposed a Mixed-Integer Linear Program (MILP) to analyse imperfect competition of oligopoly producers in two-stage zonal power markets. In part II of this paper, we propose a solution algorithm which decomposes the proposed MILP model into several subproblems and solve them in parallel and iteratively. Our solution algorithm reduces the solution time of the MILP model and it allows us to analyze largescale examples. To tackle the multiple Subgame Perfect Nash Equilibria (SPNE) situation, we propose a SPNE-band approach. The SPNE band is split into several subintervals and the proposed solution algorithm finds a representative SPNE in each subinterval. Each subinterval is independent from each other, so this structure enables us to use parallel computing. We also design a pre-feasibility test to identify the subintervals without SPNE. Our proposed solution algorithm and our SPNE-band approach are demonstrated on the 6-node and the modified IEEE 30-node example systems. The computational tractability of our solution algorithm is illustrated for the IEEE 118-node and 300-node systems.
    Keywords: Modified Benders decomposition, Multiple Subgame Perfect Nash equilibria, Parallel computing, Wholesale electricity market, Zonal pricing
    JEL: C61 C63 C72 D43 L13 L94
    Date: 2018–11–28
  35. By: Pollitt, M.; Dale, L.
    Abstract: In this paper, we begin by discussing the components of the price of industrial electricity in Great Britain, as an example of a fully reformed electricity market, where the market is roughly comparable in size to a reasonably large Chinese province. We go on to discuss the key actors in the liberalized electricity system in Great Britain, before unpacking each of the components of the price. We discuss the market determined elements first, then go on to introduce and discuss the regulated elements of the price before finishing with the central government determined price components. Our discussion covers the determination of the wholesale price, the retail margin, transmission charges, system balancing charges, distribution charges and environmental levies and taxes. In each of these cases we discuss the process by which they are determined (led by the market, the regulator, the central government or more than one) and the specific lessons for China. We conclude by emphasizing some of the high-level lessons on electricity price determination for China.
    Keywords: Chinese power market reform; industrial electricity price; electricity liberalization
    JEL: L94
    Date: 2018–11–28
  36. By: Eldridge, B.; O’Neill, R.; Hobbs, B.
    Abstract: This paper revisits some peculiar pricing properties of near-optimal unit commitment solutions. Previous work has found that prices can behave erratically even as unit commitment solutions approach the optimal solution, resulting in potentially large wealth transfers due to suboptimality of the solution. Our analysis considers how recently proposed pricing models affect this behavior. Results demonstrate a previously unknown property of one of these pricing models, called approximate Convex Hull Pricing (aCHP), that eliminates erratic price behavior, and therefore limits wealth transfers with respect to the optimal unit commitment solution. The absence of wealth transfers may imply fewer strategic bidding incentives, which could enhance market efficiency.
    Keywords: Unit commitment, nonconvex pricing, mixed integer programming, market design
    JEL: C60 C72 D44 L94
    Date: 2018–11–28
  37. By: John J. Garcia-Rendon; Alejandro Gutiérrez Gómez; Luisa Vargas Tobón; Hermilson Velasquez Ceballos
    JEL: C32 L52
    Date: 2018–11–29
  38. By: Claudia Kettner-Marx (WIFO); Daniela Kletzan-Slamanig (WIFO); Angela Köppl (WIFO); Beate Littig; Irina Zielinska
    Abstract: Both the UN SDGs and the Paris Agreement imply ambitious long-term targets which only can be met with a fundamental restructuring of economic and social systems. We propose a set of energy and climate policy indicators that allows informed policy making and goes beyond the approaches that mainly focus on progress based on the UN indicator set. The sustainable energy indicators cover the whole energy system as well as the three dimensions of sustainability. The approach combines an energy service centred perspective with research on energy and climate indicators and embeds the indicator framework in broader socio-ecologic context. For the four demand-side sectors a set of 118 high-level energy indicators has been assembled that can be further disaggregated to about 387 indicators. For electricity and heat supply a set of 25 energy indicators has been compiled that can be further disaggregated to about 130 indicators differentiating by energy source and plant type. Interactions (i.e., synergies and conflicts) between the different target dimensions and the corresponding indicators need to be carefully considered. Given the complexity of the issue and the lack of adequate indicators and gaps in data availability it is difficult to interpret certain observable trends. This needs to be kept in mind when using the indicator system for policy analysis.
    Keywords: sustainable development, indicator systems, energy policy, climate policy
    Date: 2018–12–13
  39. By: Ghazouani, tarek
    Abstract: This study re-examines the long-run relationship among foreign direct investment (FDI), renewable energy consumption (RE) and economic growth (GDP) for 9 Middle East and North Africa (MENA) countries over the period 1990–2015 using a newly developed cointegration test by McNown et al. (2018), the bootstrap autoregressive distributed lag (ARDL) which allows us to generate critical values for ARDL tests that are valid and appropriate for the specific data sets used and allow for endogeneity and feedback that may exist among the variables. In the long run analysis, we found evidence of cointegraion: (i) for Algeria, Armenia, Mauritania, and Tunisia when GDP is the dependant variable; (ii) for Egypt, Iran, Israel, Tunisia and Turkey when FDI is the dependent variable; and (iii) only for Iran, Morocco, and Tunisia when RE is the dependent variable. The short run Granger-causality analysis reveals varied nature of direction of causality between all variables and that is different among countries. This confirms that uniform policy recommendation relating to the causality between these variables may not work for these selected MENA countries.
    Keywords: FDI; Renewable energy consumption; Economic growth; Bootstrap ARDL; MENA
    JEL: C15 F21 O11 Q43
    Date: 2018–11–11
  40. By: Valeria Di Cosmo (Economic and Social Research Institute, Dublin & Fondazione Enrico Mattei, Milan); Elisa Trujillo-Baute (Chair of Energy Sustainability, Universitat de Barcelona & Institut d’Economia de Barcelona (IEB))
    Abstract: The benefits of smoothing demand peaks in the electricity market has been widely recognised. European countries such as Spain and some of the Scandinavian countries have recently given to the consumers the possibility to face the spot prices instead of having a fixed tariffs determined by retailers. This paper develops a theoretical model to study the relations between risk averse consumers, retailers and producers, both in the spot and in the forward markets when consumers are able to choose between fixed tariffs and the wholesale prices. The model is calibrated on a real market case - Spain - where since 2014 spot tariffs were introduced beside the flat tariffs for household consumers. Finally, simulations of agents behavior and markets performance, depending on consumers risk aversion and the number of producers, are used to analyse the implications from the model. Our results show that the quantities the retailers and the producers trade in the forward market are positively related with the loss aversion of consumers. The quantities bought by the retailers in the forward market are negatively related with the skewness of the spot prices. On the contrary, quantity sold forward by producers are positively related with the skewness of the spot prices (high probability of getting high prices increase the forward sale) and with the total market demand. In the spot market, the degree of loss aversion of consumers determine the quantity the retailers buy in the spot market but does not have a direct effect on the spot prices.
    Keywords: Electricity Spot Market, Electricity Forward Market, Risk Aversion
    JEL: D40 L11 Q41
    Date: 2018
  41. By: Jan Witajewski-Baltvilks; Marek Antosiewicz; Andrzej Ceglarz; Haris Doukas; Alexandros Nikas; Jakub Sawulski; Aleksander Szpor; Baiba Witajewska-Baltvilka
    Abstract: The Polish power sector currently stands at a crossroads, facing two alternative pathways. First, the decarbonisation pathway with radical CO2 emissions reduction, which involves a fast phase-down of coal. Second, the baseline pathway that abandons emission reduction targets, and involves a slow coal phase-down. Both pathways are associated with risks. The decarbonisation pathway requires large-scale investment in carbon-free technologies in the power sector that may crowd out investment in other sectors of the economy. Other risks associated with this pathway include the destabilisation of the power system, dependency on imported technologies and job losses in mining. The baseline pathway may involve the loss of international reputation, the waste of research and development (R&D) resources on coal technologies, and a growing dependency on imported coal. In this report we define the electricity mix associated with each pathway and compare their financial and macroeconomic costs using simulation models. We also perform a qualitative analysis of the risks that are not captured by the models. We argue that the decarbonisation pathway is unlikely to be significantly more costly than the alternative pathway of no reduction targets. Some socioeconomic risks of decarbonisation such as a potential fall in employment and increased dependency on imported technologies could be mitigated if the government communicates to firms and workers that the scale-down of coal sector is inexorable given the global commitment to combat climate change. However, it will be accompanied by a simultaneous scale-up of the sector related to carbon-free technologies.
    Keywords: low-carbon transition, DSGE and bottom-up modelling, stakeholder engagement
    JEL: Q43 Q52 Q58
    Date: 2018–11
  42. By: Brent Eldridge (Federal Energy Regulatory Commission, Washington DC); Richard O'Neill (Federal Energy Regulatory Commission, Washington DC); Benjamin Hobbs (Environmental Health and Engineering Department, Johns Hopkins University)
    Date: 2018–11
  43. By: Nicolas Wagner (International Transport Forum)
    Abstract: This paper puts numbers on the investment needs for urban transport infrastructure under different policy scenarios. The cities of the future will be shaped by today’s decisions about physical transport assets, and the urgent need to halt climate change makes it more important than ever to get it right. The analysis shows that a low-carbon transport system is not necessarily more expensive than today’s mobility system, and can even be more cost-efficient.
    Date: 2018–11–09

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