nep-ene New Economics Papers
on Energy Economics
Issue of 2019‒01‒14
fifty papers chosen by
Roger Fouquet
London School of Economics

  1. Time Rebound Effect in Households’ Energy Use: Theory and Evidence By Kenichi Mizobuchi; Hiroaki Yamagami
  2. How Effective is Energy-efficient Housing?: Evidence From a Field Experiment in Mexico By Lucas Davis; Sebastián Martínez; Bibiana Taboada
  3. Lighting up Lives through Cooking Gas and transforming society By Barua, S. K.; Agarwalla, Sobhesh Kumar
  4. Selling Wind By Ali Kakhbod; Asuman Ozdaglar; Ian Schneider
  5. Estimating the impacts of financing support policies towards photovoltaic market in Indonesia: A social-energy-economy-environment (SE3) model simulation By al Irsyad, M. Indra; Halog, Anthony; Nepal, Rabindra
  6. Locational (In-)Efficiency of Renewable Power Generation Feeding in the Electricity Grid: A Spatial Regression Analysis By Höfer, Tim; Madlener, Reinhard
  7. Rural electrification through mini-grids: Challenges ahead By Peters, Jörg; Sievert, Maximiliane; Toman, Michael A.
  8. How to deal with the risks of phasing out coal in Germany through national carbon pricing By Osorio, Sebastian; Pietzcker, Robert Carl; Pahle, Michael; Edenhofer, Ottmar
  9. The Role of Electricity in Decarbonizing European Road Transport – Development and Assessment of an Integrated Multi-Sectoral Model By Helgeson, Broghan; Peter, Jakob
  10. A comparative study of financial cost and co-benefits of electric bus vis a vis conventional diesel bus-A case study of Navi Mumbai buses By Kumar Sunil; Garg, Amit; Tripathi, Girish Chandra
  11. Driven by Change: Commercial Drivers’ Acceptance and Perceived Efficiency of Using Light-Duty Electric Vehicles in Germany By Wolff, Stefanie; Madlener, Reinhard
  12. Optimal allocation of electric vehicle charging infrastructure using GIS methodology By Kumar Sunil; Parihar, Shrutika; Garg, Amit
  13. Subsidizing Mass Adoption of Electric Vehicles: Quasi-Experimental Evidence from California By Erich Muehlegger; David S. Rapson
  14. On the impact of government-initiated CfD’s in Australia’s National Electricity Market By Simshauser, P.
  15. Econometric modelling and forecasting of intraday electricity prices By Micha{\l} Narajewski; Florian Ziel
  16. On entry cost dynamics in Australia’s National Electricity Market By Simshauser, P.; Gilmore, J.
  17. Energy, hierarchy and the origin of inequality By Fix, Blair
  18. The impacts of energy prices on industrial foreign investment location: evidence from global firm level data By Aurélien Saussay; Misato Sato
  19. Navigating the oil bubble: A non-linear heterogeneous-agent dynamic model of futures oil pricing By Cifarelli, Giulio; Paesani, Paolo
  20. On the China factor in international oil markets: A regime switching approach By Jamie L. Cross; Chenghan Hou; Bao H. Nguyen
  21. Oil Price Volatility, Financial Institutions and Economic Growth By , Kamiar Mohaddes; Uchechukwu Jarrett; Hamid Mohtadi
  22. Multimodal deep learning for short-term stock volatility prediction By Marcelo Sardelich; Suresh Manandhar
  23. Deep neural networks algorithms for stochastic control problems on finite horizon, Part 2: numerical applications By Achref Bachouch; Côme Huré; Nicolas Langrené; Huyen Pham
  24. Multifractal cross-correlations between the World Oil and other Financial Markets in 2012-2017 By Marcin W\k{a}torek; Stanis{\l}aw Dro\.zd\.z; Pawe{\l} O\'swi\c{e}cimka; Marek Stanuszek
  25. Financial Liquidity, Geopolitics, and Oil Prices By Hany Abdel-Latif; Mahmoud El-Gamal
  26. Dynamic return and volatility spillovers among S&P 500, crude oil and gold By Mehmet Balcilar; Zeynel Abidin Ozdemir; Huseyin Ozdemir
  27. How Cash Flow News and Discount Rate News Impact the Unexpected Stock Returns of Energy Firms of Pakistan By Kausar, Rabia; Qayyum, Abdul
  28. The gruesome murder of Jamal Khashoggi : Saudi Arabia's new economy dream at risk ? By Jamal Bouoiyour; Refk Selmi
  29. Does Central Bank Independence Matter in Arab Oil Exporters By Hoda Selim
  30. Fiscal Outcomes in Bahrain: Oil Price Volatility, Fiscal Institutions or Politics? By Hoda El Enbaby; Hoda Selim
  31. Oil Revenues Shocks and Inequality in Iran By Mohammad Reza Farzanegan; Tim Krieger
  32. L’impact De L’investissement Des Revenus Pétroliers Sur La Croissance, L’inflation Et Le Chômage : Cas D’Algérie (2000-2015) By BENYOUB, Mohammed
  33. Effects of higher required rates of return on the tax take in an oil province By Lars Lindholt
  34. Sortir du « resource curse » : où en-est la diversification de l’économie russe ? By Ahmadou Saïd Ba
  35. CO2 intensity and GDP per capita By Hannesson, Rögnvaldur
  36. Bad Outputs By Sushama Murty; R. Robert Russell
  37. Charging infrastructure optimization for electric buses using mixed integer linear programming By Kumar Sunil; Jayaswal, Sachin; Garg, Amit
  38. ¬¬¬¬¬¬From Nonrenewable to Renewable Energy and Its Impact on Economic Growth: Silver Line of Research & Development Expenditures in APEC Countries By Zafar, Muhammad Wasif; Shahbaz, Muhammad; Hou, Fujun; Sinha, Avik
  40. Dynamic Efficiency in Experimental Emissions Trading Markets with Investment Uncertainty By Timothy N. Cason; Frans P. de Vries
  41. The Green Paradox and learning by doing By Hannesson, Rögnvaldur
  42. Threshold Regressions for the Resource Curse By Nicolas Clootens; Djamel Kirat
  43. Some principles for corrective taxation of externalities in a second-best world with commodity taxes By Sushama Murty
  44. Interacting collective action problems in the commons By Nicolas Querou
  45. Green employment: What, where and how much? By Francesco Vona; Giovanni Marin; Davide Consoli
  46. Network tariff design with prosumers and electromobility: who wins, who loses? By Quentin Hoarau; Yannick Perez
  47. Foreign Demand and Greenhouse Gas Emissions: Empirical Evidence with Implications for Leakage By Geoffrey Barrows; Hélène Ollivier
  48. Tourist arrivals, energy consumption and pollutant emissions in a developing economy–implications for sustainable tourism By Nepal, Rabindra; al Irsyad, M. Indra; Nepal, Sanjay Kumar
  49. Central- versus Self-Dispatch in Electricity Markets By Holmberg, Pär; Tangerås, Thomas; Ahlqvist, Victor
  50. Using emissions trading schemes to reduce heterogeneous distortionary taxes: The case of recycling carbon auction revenues to support renewable energy By Gavard, Claire; Voigt, Sebastian; Genty, Aurélien

  1. By: Kenichi Mizobuchi (Matsuyama University); Hiroaki Yamagami (Seikei University)
    Abstract: Time-saving (time-efficient) goods and services are increasingly developed and diffused. Such goods and services increase the disposable time for households, and the time saved may be allocated to other activities consuming energy/electricity. The present study sets a simple theoretical model and shows a mechanism, called the time rebound effect, with which time-saving goods increase energy consumption through household behaviors. Furthermore, we reveal empirical evidence for this model by conducting a Japanese household survey. In particular, our analysis shows that the time rebound effect occurs on using the dishwasher, clothes dryer, or a net ordering/delivery service. However, its impact is very small: the extra electricity usage is about 1.4% of the daily usage at most.
    Keywords: Time rebound effect, Households, Electricity consumption, Time allocation, Energy
    JEL: D11 D13 Q4 Q5
    Date: 2018–12
  2. By: Lucas Davis; Sebastián Martínez; Bibiana Taboada
    Abstract: This paper evaluates a field experiment in Mexico in which a quasi-experimental sample of new homes was provided with insulation and other energy efficient upgrades. A novel feature of our study is that we deploy large numbers of data loggers which allow us to measure temperature and humidity at high frequency inside homes. We find that the upgrades had no detectable impact on electricity use or thermal comfort, and this is true both in summer and non-summer months. These results stand in contrast to the engineering estimates that predicted up to a 26% decrease in electricity use. Part of the explanation is that air conditioner ownership is lower than expected, thus reducing the potential for reductions in energy use. In addition, we document that most households have their windows open on hot days, nullifying the thermal benefits of roof and wall insulation.
    Keywords: Air Conditioning, Thermal comfort, Energy demand, Energy efficiency, Energy Efficiency, Energy Demand, Thermal Comfort, Air Conditioning
    JEL: H23 Q54 D12 Q40
    Date: 2018–02
  3. By: Barua, S. K.; Agarwalla, Sobhesh Kumar
    Abstract: The study, reported in the form of a case, narrates the story of a major attempt at social transformation through a simple mechanism of providing cooking gas (LPG) to the marginalized in society. Targeting about 100 million households in India who still use dung-cakes, firewood, and coal as the primary fuel for cooking, the Pradhan Mantri Ujjwala Yojana (PMUY) was conceived with the objective of replacing these traditional fuels with LPG which is a clean fuel. The initial target of providing 50 million Below Poverty Line (BPL) families with LPG at the time of the launch of the scheme on May 1, 2016 was increased to 80 million by 2019-20, and as of January, 2018 over 30 million families had already been covered by the scheme. The key findings are as follows. The scale and speed of implementation were achieved through excellent coordination between the government system, the government-owned Oil Marketing Companies (OMCs) and the banking system. The government system represented by officials from the central government, the state governments, and the village heads (Sarpanchs) helped in identifying BPL beneficiaries and in mobilizing people to canvass the idea of switching over to LPG from traditional fuels for cooking. The OMCs (the three companies involved in the implementation were IOCL, BPCL and HPCL) designed and created the robust logistics system needed for bottling and distribution of cooking gas. They also designed and created the IT platform required for easy transaction and record keeping for the entire logistics system. The banks provided the infrastructure needed for flow of funds, including flow and accounting of subsidies from the government. PMUY is clearly one of the largest social intervention schemes executed anywhere in the world in challenging environment. Its successful implementation provides insights into management of such interventions. The lessons that can be drawn from the implementation would be of use for similar large-scale social interventions.
    Date: 2018–12–17
  4. By: Ali Kakhbod; Asuman Ozdaglar; Ian Schneider
    Abstract: We offer a parsimonious model to investigate how strategic wind producers sell energy under stochastic production constraints, where the extent of heterogeneity of wind energy availability varies according to wind farm locations. The main insight of our analysis is that increasing heterogeneity in resource availability improves social welfare, as a function of its effects both on improving diversification and on reducing withholding by firms. We show that this insight is quite robust for any concave and downward-sloping inverse demand function. The model is also used to analyze the effect of heterogeneity on firm profits and opportunities for collusion. Finally, we analyze the impacts of improving public information and weather forecasting; enhanced public forecasting increases welfare, but it is not always in the best interests of strategic producers.
    Date: 2018–12
  5. By: al Irsyad, M. Indra (University of Queensland, School of Earth and Environmental Sciences); Halog, Anthony (University of Queensland, School of Earth and Environmental Sciences); Nepal, Rabindra (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This study estimates the impacts of four solar energy policy interventions on the photovoltaic (PV) market potential, government expenditure, economic growth, and the environment. An agent-based model is developed to capture the specific economic and institutional features of developing economies, citing Indonesia as a specific case study. We undertake a novel approach to energy modelling by combining energy system analysis, input-output analysis, life-cycle analysis, and socio-economic analysis to obtain a comprehensive and integrated impact assessment. Our results, after sensitivity analysis, call for abolishing the existing PV grant policy in the Indonesian rural electrification programs. The government, instead, should encourage the PV industry to improve production efficiency and to provide after-sales service. A 100-watt peak (Wp) PV under this policy is affordable for 33.2 percent of rural households without electricity access in 2010. Rural PV market size potentially increases to 82.4 percent with rural financing institutions lending 70 percent of capital cost for five years at 12 percent annual interest rate. Additional 30 percent capital subsidy and 5 percent interest subsidy slightly increase the rural PV market potential to 89.6 percent of PV adopters. However, the subsidies are crucial for creating PV demands by urban households but the most effective policy for promoting PV to urban households is the net metering scheme. Several policy proposals are discussed in response to these findings.
    Keywords: hybrid energy model, developing country, renewables policy, impact assessments, agent-based modelling, photovoltaic system
    JEL: C60 Q21 Q43 Q48
    Date: 2018
  6. By: Höfer, Tim (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: This paper analyzes the negative external effects caused by the introduction of variable renewable energy sources into an inflexible power system. We investigate the costs that arise due to the need for temporarily reducing their output to relief grid overstress in the case of high electricity feed-in. The responsible system operator has to remunerate the power plant operator for this lost output. The resulting costs for the system operator, the so-called feed-in management costs, are passed on to the end-consumers in the respective region via the grid use tariff scheme. In this paper, we develop a two-part regression model that explains (i) the occurrence of feed-in management and (ii) the regional variation of feed-in management costs. In the first part, we use a logit model to explain why some regions experienced feed-in management in recent years and others did not. The second part covers an augmented spatial econometric model that investigates the interregional variability of feed-in management costs. The estimates of both models show that especially the installed capacity of wind energy connected to the medium and high voltage level have a negative impact on feed-in management and that high load in a region reduces the need for feed-in management measures. The augmented spatial model indicates for the case of four major DSOs in Germany that an increase by 1 MW of wind energy capacity at the medium and high voltage level lead to an increase in feed-in management costs by 1.9% and 0.9% in regions that already experienced feed-in management, respectively. The policy implication of this finding is that price signals for the reinforcement of the grid infrastructure or for the siting of VRES should be given.
    Keywords: FM; Spatial Econometrics; System Integration Cost; Grid-Related Cost; Renewable Energy
    JEL: C33 Q42 R10 R58
    Date: 2018–10–01
  7. By: Peters, Jörg; Sievert, Maximiliane; Toman, Michael A.
    Abstract: Recent debates on how to provide electricity to the roughly one billion still unconnected people in developing countries have identified mini-grids as a promising way forward. High upfront costs of transmission lines are avoided, and unlike home-scale solar, mini-grids can provide sufficient electricity for productive uses. This note outlines the challenges the mini-grid sector faces to achieve that potential. To date, few examples of sustainably working mini-grid programs exist. We identify regulatory issues, low electricity demand in rural areas, high payment default rates and over-optimistic demand projections as among the key challenges. Business models that account for high transaction costs in rural areas and are based on realistic demand forecasts could considerably increase the commercial viability of village grids.
    Keywords: public infrastructure,rural electrification,energy planning systems
    JEL: H54 O13 O21 Q48
    Date: 2018
  8. By: Osorio, Sebastian; Pietzcker, Robert Carl; Pahle, Michael; Edenhofer, Ottmar
    Abstract: Germany has an ambitious climate target for 2030 that cannot be achieved without reducing the high share of coal in power generation. In the face of this, the country has set up a commission to phase out coal. A UK-style carbon price floor is one of the options being considered. Yet implementing such a policy comes with important risks related to the following two aspects: (1) the price level necessary to reduce emissions to reach the 2030 climate target; and (2) the waterbed effect that arises from such a policy under the EU Emissions Trading Scheme (ETS) cap. In this paper, we quantify these risks using the numerical electricity market model LIMES-EU, and consider their implications as well as different options for dealing with them. Our results show that under baseline assumptions a carbon price floor of around 33 €/tCO2 would be sufficient to reach the 2030 target. Under unfavourable conditions, an appropriate price floor may be nearly twice as high (57 €/tCO2). The waterbed effect and related risks for the EU ETS could be reduced substantially in the mid-term (2030) through the recently introduced cancellation of allowances through the Market Stability Reserve (MSR), or through a larger coalition of countries. Germany could even fully alleviate the waterbed effect by cancelling 1.1 GtCO2 of certificates. In the long-term (until 2050), emission reductions leading up to 2030 would be almost completely (91%) offset at the EU level. Accordingly, it is essential that the national price initiates a policy sequence that leads to the EU level.
    Keywords: EU ETS,carbon price floor,carbon price,coal phase-out,interaction,waterbed effect
    JEL: L94 Q58
    Date: 2018
  9. By: Helgeson, Broghan (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Peter, Jakob (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Despite regulation efforts, CO2 emissions from European road transport have continued to rise. Increased use of electricity offers a promising decarbonization option, both to fuel electric vehicles and run power-to-x systems producing synthetic fuels. To understand the economic implications of increased coupling of the road transport and electricity sectors, an integrated multi-sectoral partial-equilibrium investment and dispatch model is developed for the European electricity and road transport sectors, linked by an energy transformation module to endogenously account for, e.g., increasing electricity consumption and flexibility provision from electric vehicles and power-to-x systems. The model is applied to analyze the effects of sector-specific CO2 reduction targets on the vehicle, electricity and ptx technology mix as well as trade flows of ptx fuels in European countries from 2020 to 2050. The results show that, by 2050, the fuel shares of electricity and ptx fuels in the European road transport sector reach 37% and 27%, respectively, creating an additional electricity demand of 1200 TWh in Europe. To assess the added value of the integrated modeling approach, an additional analysis is performed in which all endogenous ties between sectors are removed. The results show that by decoupling the two sectors, the total system costs may be significantly overestimated and the production costs of ptx fuels may be inaccurately approximated, which may affect the merit order of decarbonization options.
    Keywords: Energy system modeling; electricity sector; road transport; Power-to-X; synthetic fuels; sector coupling; decarbonization
    JEL: C61 N70 Q41 Q42 Q48 R42
    Date: 2019–01–07
  10. By: Kumar Sunil; Garg, Amit; Tripathi, Girish Chandra
    Abstract: Local air pollution is a major concern in almost all Indian cities. High vehicular tailpipe emission is one of the primary reasons behind it. Fast adoption of electric vehicles may provide relief for air quality in these rapidly urbanizing Indian cities. The adoption rate of electric vehicles, however, depends on many factors, Total cost of Ownership (TCO) of vehicles, charging infrastructure, and range dilemma being the most prominent. This paper analyzes one of these factors and calculates the TCOs of existing IC engine public buses and compare it with the same capacity electric buses. The study also calculates co-benefits of electric bus separately to analyze the impact of diesel buses on society and environment and compares this with those of Electric buses. A Sensitivity analysis for TCO is performed to identify the factors which have the highest impact on the TCO of an electric bus. Scenario analysis is also done to verify our assumptions in various scenarios. The result of the study shows that TCO of an electric bus is lesser than a comparable diesel bus in present Indian scenario for the city of Navi Mumbai but at the same time, sensitivity analysis shows that it is mainly due to the various incentives offered by Central and State governments. Sensitivity analysis also identifies the most influential input variables for the TCO of an electric bus as Initial Bus Price, Government Incentive and Electricity Cost. Scenario analysis results show that if we remove Government incentives on the initial cost of the vehicle, the picture reverses.
    Date: 2018–12–11
  11. By: Wolff, Stefanie (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In this paper, we examine to what extent commercial drivers accept the substitution of conventional cars with light-duty e-vehicles (LDEVs) by conducting a cross-sectional survey at Deutsche Post, a major German postal delivery service provider. Specifically, we explore drivers’ acceptance from two perspectives. First, we investigate whether drivers are more satisfied with the LDEVs than with the conventional vehicles. Second, we question whether the EVs increase drivers’ perceived efficiency. Combining these two perspectives, we show that the greater the drivers’ overall satisfaction with LDEVs, the higher is the drivers’ perceived efficiency. We prove this by means of latent measures, such as perceived usefulness and perceived ease of use, using adaptations of Davis’ Technology Acceptance Model and Rogers’ Diffusion of Innovation Theory to form our Unified Technology Acceptance Model. Findings suggest that, on average, drivers are slightly more satisfied with their assigned LDEVs than with the available conventional cars. If drivers were able to choose their preferred vehicles, the majority of them would favor LDEVs. We detect statistically significant patterns of latent measures affecting perceived usefulness and perceived ease of use of LDEVs. While this paper focuses on German delivery service employees, the methodology presented here could easily be applied to any enterprise in the growing logistics sector electrifying its car fleet. Hence, our contributions are valuable for transportation research, and more specifically, to all potential commercial EV drivers, e.g., our insights might be relevant for approximately 500,400 drivers employed in the German logistics sector alone.
    Keywords: Electric vehicles (EVs); Driver acceptance; Commercial EV fleet; Perceived efficiency; Germany; Technology Acceptance Model
    JEL: C38 D23 M50 O33 Q55 R40
    Date: 2018–08
  12. By: Kumar Sunil; Parihar, Shrutika; Garg, Amit
    Abstract: The utilization of charging infrastructure for electric vehicles is very important in order to get returns from the investments made for charging assets. The charging infrastructure utilization, however, depends on many factors such as vehicle ownership, location and type of parking spaces, paying capacity, and owner profile. The paper determines the optimal charging locations through multifactor analysis using Global Information System (GIS) over 23 factors separately for home (4), workplace (1), and public charging (18). This is done for the city of Navi Mumbai using real demographic and land use data. The potential locations are demand driven. The potential office charging locations are mostly spread in Southern parts of Navi Mumbai that has more government offices. Home and public charging locations are almost evenly spread across all wards except Airoli and Koparkhairane that seem to be lagging in demand.
    Date: 2018–12–11
  13. By: Erich Muehlegger; David S. Rapson
    Abstract: Little is known about demand for EVs in the mass market. In this paper, we exploit a natural experiment that provides variation in large EV subsidies targeted at low- and middle-income households in California. Using transaction-level data, we estimate two important policy parameters using triple differences: the subsidy elasticity of demand for EVs and the rate of subsidy pass-through. Estimates show that demand for EVs amongst low- and middle-income households is price-elastic and pass-through is complete. We use these estimates to calculate the expected subsidy bill required for California to reach its goal of 1.5 million EVs by 2025.
    JEL: H22 H23 H71 L62 Q48 Q55 Q58 R48
    Date: 2018–12
  14. By: Simshauser, P.
    Abstract: An intriguing characteristic of Australian energy market policymaking is the almost exclusive focus on spot market dynamics. The policy development cycle displays a virtual disregard for, and of, power system financial markets. The irony is that forward contract prices form the defining wholesale price input to end-user consumer tariffs. In this article, the impacts of a wide-ranging program of government-initiated CfDs on power system financial markets are analysed. Government-initiated CfDs are highly effective in correcting market failures, but they need to be used judiciously because – while they add to demand-side liquidity, they simultaneously extract supply-side forward contract market liquidity. Consequently, when used en-masse in loosely interconnected energy-only markets, CfDs have pro-competitive effects in the spot market by introducing ‘quasi-market participants’ but damage power system financial markets via the loss of liquidity. Power system modelling in this article demonstrates that a wide-ranging policy of government-initiated CfDs can produce shortages of ‘primary issuance’ hedge contact supply. This is far more than theory. In the South Australian region of the NEM, shortages of primary-issuance hedge contract supply have arisen through renewable entry and coal plant exit. Hedge shortages have had the effect of raising forward contract price premiums above efficient levels, needlessly forced the most price-elastic (Industrial/Manufacturing) customers into accepting unwanted spot market exposures, and unintentionally foreclosed non-integrated (2nd tier) energy retailers, all of which ultimately harms consumer welfare. CfDs have a targeted role to play in energy markets by correcting market failure; but broad-based market mechanisms are preferred.
    Keywords: Variable Renewable Energy, Contracts-for-Differences, Hedge Contracts
    JEL: D52 D53 G12 L94 Q40
    Date: 2019–01–03
  15. By: Micha{\l} Narajewski; Florian Ziel
    Abstract: In the following paper we analyse the ID$_3$-Price on German Intraday Continuous Electricity Market using an econometric time series model. A multivariate approach is conducted for hourly and quarter-hourly products separately. We estimate the model using lasso and elastic net techniques and perform an out-of-sample very short-term forecasting study. The model's performance is compared with benchmark models and is discussed in detail. Forecasting results provide new insights to the German Intraday Continuous Electricity Market regarding its efficiency and to the ID$_3$-Price behaviour. The supplementary materials are available online.
    Date: 2018–12
  16. By: Simshauser, P.; Gilmore, J.
    Abstract: In theory, well designed electricity markets should deliver an efficient mix of technologies at least-cost. But energy market theories and energy market modelling are based upon equilibrium analysis and in practice electricity markets can be off-equilibrium for extended periods. Near-term spot and forward contract prices can and do fall well below, or substantially exceed, relevant entry cost benchmarks and associated long run equilibrium prices. However, given sufficient time higher prices, on average or during certain periods, create incentives for new entrant plant which in turn has the effect of capping longer-dated average spot price expectations at the estimated cost of the relevant new entrant technologies. In this article, we trace generalised new entrant benchmarks and their relationship to spot price outcomes in Australia’s National Electricity Market over the 20-year period to 2018; from coal, to gas and more recently to variable renewables plus firming, notionally provided by – or shadow priced at – the carrying cost of an Open Cycle Gas Turbine. This latest entry benchmark relies implicitly, but critically, on the gains from exchange in organised spot markets, using existing spare capacity. As aging coal plant exit, gains from exchange may gradually diminish with ‘notional firming’ increasingly and necessarily being met by physical firming. At this point, the benchmark must once again move to a new technology set.
    Keywords: Variable Renewable Energy, Electricity Prices, Power System Planning
    JEL: D61 L94 L11 Q40
    Date: 2018–12–21
  17. By: Fix, Blair
    Abstract: Where should we look to understand the origin of inequality? Most research focuses on three windows of evidence: (1) the archaeological record; (2) existing traditional societies; and (3) the historical record. I propose a fourth window of evidence - modern society itself. I hypothesize that we can infer the origin of inequality from the modern relation between energy use, hierarchy, and inequality. To do this, I create a large-scale numerical model that is informed by modern evidence. I then use this model to project modern trends into the past. The results are promising. The model predicts an explosion of inequality with the transition to agrarian levels of energy use. Subsequent increases in energy use are predicted to have little effect on inequality. The results are broadly consistent with the available evidence. This suggests that the hierarchical structure of modern societies may provide a window into the origin of inequality.
    Keywords: origin of inequality,hierarchy,energy,institution size,numerical model,function,coercion
    Date: 2018
  18. By: Aurélien Saussay (CIRED & OFCE, Sciences Po, Paris); Misato Sato (Grantham Research Institute on Climate Change and the Environment, LSE)
    Abstract: This paper analyzes the role of energy prices in firms’ investment location decisions in the manufacturing sector. Building on the application of discrete choice theory to the firm location problem, we specify a conditional logit model linking bilateral foreign direct investment (FDI activity to relative energy prices. We then empirically test this link using a global dataset of M&A deals in the manufacturing sector covering 41 countries between 1995 and 2014, using econometric techniques adapted from the estimation of gravity models. The results suggest that upon deciding to invest, firms are attracted to regions that have lower energy prices. However, counterfactual simulations reveal that unilateral implementation of a $50/tCO2 carbon tax by various coalitions of countries is expected to have limited negative impact on the attractiveness of economies to foreign industrial investments. Hence, our results support the pollution haven effect, but find the magnitude is limited and could be addressed with targeted measures in the most energy intensive sectors.
    Keywords: FDI, Mergers and Acquisitions, energy prices, firm location, competitiveness impacts, carbon leakage
    JEL: F21 H23 Q52
    Date: 2018–12
  19. By: Cifarelli, Giulio; Paesani, Paolo
    Abstract: We analyze short-term futures oil pricing over the 2003-2016 time-period in order to analyze the bubble-like dynamics, which characterizes the 2007-2009 years according to a large body of recent literature. Our investigation, based on a flexible three-agent model (hedgers, fundamentalist speculators and chartists), confirms the presence of a bubble price pattern, which we attribute to the strong destabilizing behaviour of fundamentalist speculators (e.g. hedge funds). The inclusion of the 2009-2016 sub-period, in spite of sharp and unexpected fluctuations in oil prices and a significant increase in the influence of geopolitical factors, fails to invalidate our financial interpretation.
    Keywords: Oil pricing, Bubble, Speculation, Dynamic hedging, Logistic smooth transition, Multivariate GARCH
    JEL: G13 G14 G15
    Date: 2018–12–12
  20. By: Jamie L. Cross; Chenghan Hou; Bao H. Nguyen
    Abstract: We investigate the relationship between world oil markets and China's macroeconomic performance over the past two decades. Our analysis starts by proposing a simple method for disentangling real economic activity stemming from China and the rest of the world. We then consider a sufficiently large set of dynamic VAR models to distinguish between abrupt and gradual changes in the macroeconomic relationships and volatility clustering in the shocks. A model exercise shows that a Markov-switching model is preferred to previously used models in the literature. When investigating the role of oil market shocks on China's output, we find that oil supply shocks tend to elicit a positive response, while the response of oil demand shocks is negative. Next, when analyzing world oil price dynamics, we find that demand shocks have had significant positive impacts over the past two decades. The average proportion of oil price variation explained by demand from China and rest of world demand are around 30 percent over the sample period. Importantly, while China specific effects are relatively constant, rest of world aggregate demand shocks are found to have larger impact during times of global macroeconomic downturn. This highlights the importance of our model comparison exercise. Finally, we find that the recent 2014/15 oil price drop was due to a combination of increased oil supply and decreased demand from China.
    Keywords: Oil prices, China, Vector autoregression (VAR), Markov-switching, Sign restrictions
    Date: 2018
  21. By: , Kamiar Mohaddes (University of Cambridge); Uchechukwu Jarrett; Hamid Mohtadi
    Abstract: Theory attributes finance with the ability to both promote growth and reduce output volatility. But evidence is mixed in both regards, partly due to endogeneity effects. For example, financial institutions themselves might be a source of volatility, as the events of 2008 suggest. We address this endogeneity issue by using oil price volatility as a source of exogenous volatility, to study the effect of finance. To do this, we use two empirical methodologies. First, we develop a quasi-natural experiment by studying the dramatic decline of oil prices in 2014 and beyond, using a synthetic control methodology. Our hypothesis is that the ability of oil-rich countries to mitigate the effects of this decline rested on the quality of their financial institutions. We focus on 11 oil-rich countries between 1980 and 2014 that had “poor” measures of financial development (treatment group) out of 20 such countries and synthetically create counterfactuals from the remaining (control) group with “superior” financial development. We subject both to the oil price shock of 2014. We find evidence that better financial institutions do indeed reduce output volatility and mitigate its negative effect on growth in the year that showed a sustained decline of the oil price. To address any remaining potential endogeneity between oil prices and finance, we further examine our findings by using a Panel CS-ARDL approach with 30 oil producing countries in our sample (and data over the period 1980-2016), illustrating that the effect of oil price volatility on growth is mitigated with better financial institutions. Our results make a strong case for the support of the positive role of financial development in growth and development.
    Date: 2018–10–10
  22. By: Marcelo Sardelich; Suresh Manandhar
    Abstract: Stock market volatility forecasting is a task relevant to assessing market risk. We investigate the interaction between news and prices for the one-day-ahead volatility prediction using state-of-the-art deep learning approaches. The proposed models are trained either end-to-end or using sentence encoders transfered from other tasks. We evaluate a broad range of stock market sectors, namely Consumer Staples, Energy, Utilities, Heathcare, and Financials. Our experimental results show that adding news improves the volatility forecasting as compared to the mainstream models that rely only on price data. In particular, our model outperforms the widely-recognized GARCH(1,1) model for all sectors in terms of coefficient of determination $R^2$, $MSE$ and $MAE$, achieving the best performance when training from both news and price data.
    Date: 2018–12
  23. By: Achref Bachouch (UiO - University of Oslo); Côme Huré (LPSM UMR 8001 - Laboratoire de Probabilités, Statistique et Modélisation - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique, UPD7 - Université Paris Diderot - Paris 7); Nicolas Langrené (CSIRO - Data61 [Canberra] - ANU - Australian National University - CSIRO - Commonwealth Scientific and Industrial Research Organisation [Canberra]); Huyen Pham (LPSM UMR 8001 - Laboratoire de Probabilités, Statistique et Modélisation - UPD7 - Université Paris Diderot - Paris 7 - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique, UPD7 - Université Paris Diderot - Paris 7)
    Abstract: This paper presents several numerical applications of deep learning-based algorithms that have been analyzed in [11]. Numerical and comparative tests using TensorFlow illustrate the performance of our different algorithms, namely control learning by performance iteration (algorithms NNcontPI and ClassifPI), control learning by hybrid iteration (algorithms Hybrid-Now and Hybrid-LaterQ), on the 100-dimensional nonlinear PDEs examples from [6] and on quadratic Backward Stochastic Differential equations as in [5]. We also provide numerical results for an option hedging problem in finance, and energy storage problems arising in the valuation of gas storage and in microgrid management.
    Date: 2018–12–12
  24. By: Marcin W\k{a}torek; Stanis{\l}aw Dro\.zd\.z; Pawe{\l} O\'swi\c{e}cimka; Marek Stanuszek
    Abstract: Statistical and multiscaling characteristics of WTI Crude Oil prices expressed in US dollar in relation to the most traded currencies as well as to gold futures and to the E-mini S$\&$P500 futures prices on 5 min intra-day recordings in the period January 2012 - December 2017 are studied. It is shown that in most of the cases the tails of return distributions of the considered financial instruments follow the inverse cubic power law. The only exception is the Russian ruble for which the distribution tail is heavier and scales with the exponent close to 2. From the perspective of multiscaling the analysed time series reveal the multifractal organization with the left-sided asymmetry of the corresponding singularity spectra. Even more, all the considered financial instruments appear to be multifractally cross-correlated with oil, especially on the level of medium-size fluctuations, as the multifractal cross-correlation analysis carried out by means of the multifractal cross-correlation analysis (MFCCA) and detrended cross-correlation coefficient $\rho_q$ show. The degree of such cross-correlations is however varying among the financial instruments. The strongest ties to the oil characterize currencies of the oil extracting countries. Strength of this multifractal coupling appears to depend also on the oil market trend. In the analysed time period the level of cross-correlations systematically increases during the bear phase on the oil market and it saturates after the trend reversal in 1st half of 2016. The same methodology is also applied to identify possible causal relations between considered observables. Searching for some related asymmetry in the information flow mediating cross-correlations indicates that it was the oil price that led the Russian ruble over the time period here considered rather than vice versa.
    Date: 2018–12
  25. By: Hany Abdel-Latif (Swansea University); Mahmoud El-Gamal
    Abstract: This paper aims simultaneously to study the global dynamic relationship of oil prices, financial liquidity, and geopolitical risk, on the one hand, and the economic performance of oil-dependent economies on the other. Global and country-specific dynamics are studied together in a Global Vector Autoregression (GVAR) model that allows different lag structures for different variables in different countries. Impulse response functions from the estimated model suggest that new waves of high oil prices are unlikely, despite the likely continuation of high global financial liquidity and heightened geopolitical risk, which had driven earlier episodes of very high oil prices. With oil remaining at modest to low prices by recent historical standards, we study the prospects for economic growth in oil-dependent economies through dramatic increases in domestic investment, as planned under Visions 2030 of a number of Arab economies, and conclude that success is unlikely.
    Date: 2018–11–15
  26. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Zeynel Abidin Ozdemir (Gazi University, Ankara, Turkey); Huseyin Ozdemir (Gazi University, Ankara, Turkey)
    Abstract: This paper examines the return and volatility spillover effects among S&P 500, crude oil and gold by employing the spillover index of Diebold and Yilmaz (2012). Monthly realized volatility and return series covering the period from January 1986 to August 2018 are used to examine the return and volatility spillovers. Our findings indicate a bi-directional return and volatility spillover among these assets. The full sample empirical evidence is consistent with the structure in which oil plays a central role in the information transmission mechanism. The role of oil and gold as a safe haven has changed over time in financial and non-financial economic turbulence time-span. Commodity market financialization has decreased the effectiveness of adding commodities to portfolios after 2002.
    Keywords: S&P 500 index; Oil price; Gold Price; Return spillover; Volatility spillover
    JEL: C13 C53 C58 G10 G12 G14 Q43
    Date: 2018
  27. By: Kausar, Rabia; Qayyum, Abdul
    Abstract: This study has used the model of Volunteeno (2000). The objective of this study is to analyse the impact of the cash flow news and discount rate news on stock returns of energy firms of Pakistan from 2000 to 2015. We used the balanced panel data technique. Estimated the random effect model after employing the Hausman Test. The results of this research show that only discount rate news is significance and positively related with unexpected stock return returns of energy firms which describe that increase in variability in the discount rate news increase the variability in unexpected stock returns. As cash flow news is insignificance which conclude that there is no permanent effect occur in the unexpected stock return due to change in book value and earning. Moreover these firms are large; it’s also concluded that large firms are not affected by the cash flow news
    Keywords: Cash Flow News; Discount Rate News; Unexpected Stock Returns; Energy Firms of Pakistan, Balance Panel Data
    JEL: C33 G0
    Date: 2018
  28. By: Jamal Bouoiyour (CATT, IRMAPE); Refk Selmi (CATT, IRMAPE)
    Abstract: With the horrific Jamal Khashoggi killing, Mohammed Bin Salman's image in the international community has been damaged. This study seeks to test whether Khashoggi murder discourage businesses from investing in Saudi Arabia. We use an event-study methodology and asset pricing model to assess, at sectoral level, the dynamics of stock prices surrounding the killing of the Saudi journalist on 2 October at the kingdom's consulate in Istanbul. A series of robustness tests, including the Corrado ranking test and the non-parametric conditional distribution approach, have been conducted. We consistently show that the khashoggi killing had the most adverse impact on banks and financial services, materials, and technology. Oil and gas companies, however, were moderately or insignificantly affected. Overall, our results suggest that the crown prince's ambitious project for a Saudi Arabian economy moving beyond oil wealth are threatened as this recent event dampened foreign interest in investing in the kingdom.
    Date: 2018–12
  29. By: Hoda Selim (International Monetary Fund)
    Abstract: The paper shows that central banks in Arab oil exporters are not independent. Low independence reflects institutional arrangements that allow the executive branch to influence, interfere and in some cases, dominate over central bank operations. The paper argues that in a context of weak institutions, CBI has not always mattered for macroeconomic policy outcomes in Arab oil exporters. GCC central banks delivered a better macroeconomic policy performance than those of the populous group. CBI mattered less for the GCC because the credible peg discouraged discretion and was a good substitute for it. Soft peg arrangements in the populous economies in a context of weak institutions and discretionary policymaking in the absence of a de facto independent central bank led to disappointing monetary policy outcomes. As oil exporters adapt to a new normal of low oil prices, the sustainability of fixed exchange regimes may not be guaranteed without sound macroeconomic institutions. Stronger institutions and effective accountability mechanisms are needed to insulate central banks from political pressures. In the short-term, a rules-based framework could help.
    Date: 2018–09–18
  30. By: Hoda El Enbaby (International Food Policy Research Institute); Hoda Selim
    Abstract: The paper argues that political economy factors, rather than oil wealth, shape the budgetary process and outcomes in Bahrain. Fiscal volatility and excessive current spending (in the form of wages, social welfare and subsidies) leading to unsustainable non-oil deficits are not fully derived from oil price volatility. Weak institutions including those underlying the budgetary process contributed to some fiscal laxity. They have allowed rulers to use current spending as a channel for the redistribution of oil rents and to secure political stability and allegiance to the regime in a turbulent socio-political environment. The budgetary process is undermined by the structure of the bicameral parliament and the absence of restrictions on the parliament to amend the budget weaken the position of the executive. In the general context of limited transparency and accountability, the government may also be exercising its discretionary powers over the budget execution but it would not be known.
    Date: 2018–10–10
  31. By: Mohammad Reza Farzanegan (Philipps-University Marburg); Tim Krieger
    Abstract: We study the responses of income inequality to positive per capita oil and gas revenues shocks in Iran. Using historical data from 1973 to 2016 and vector autoregression (VAR) -based impulse response functions, we find a positive and statistically significant response of income inequality to oil booms. Our analysis can help policymakers evaluate and accommodate the possible positive or negative effects on inequality in Iran resulting from the 2016 lifting of the embargo against the country.
    Date: 2018–09–18
  32. By: BENYOUB, Mohammed
    Abstract: This paper investigates the short-run and long-run relationships between four main Algerian macroeconomic variables, the investment of oil revenues, economic growth, unemployment rate, inflation rate, using the Johansen multivariate cointegration techniques as well as VAR model for the period 2000-2015. The results indicate that there is not a long relationship between these four macroeconomic variables. The impulse functions and the variance decomposition from the stationary VAR show that the investment of oil revenues is very important to short run dynamics of the Algerian economy, when there is a shock in investment of oil revenues, GDP responds positively (13%) while the unemployment rate responds negatively (11%), in the long term. This is in line with the Algerian government's investment strategy, increasing GDP and reducing the unemployment rate.
    Keywords: VAR model, oil revenues, public investment, gross domestic product, unemployment, inflation.
    JEL: C01 C02 C3 C32 C5 C54 E2 E22 E24 E60
    Date: 2018–01–01
  33. By: Lars Lindholt (Statistics Norway)
    Abstract: For different reasons the oil companies might apply higher required rates of return than they did some years ago, and this will have consequences for investments and tax revenue in oil provinces. By applying various required rates of return as well as various oil prices, this study derives future Norwegian tax revenue during 2018-2050 by using a partial equilibrium model for the global oil market. The model explicitly accounts for reserves, development and production. Both investment in new reserves and production are profit driven. With rising required rates of return less of the high cost reserves become profitable to develop and investments decline. Because the government in practice carries a large fraction of the investments, less investment in a period increases the tax base and the tax income. The initial effect is offset by a subsequent reduction in production which has a negative effect on future taxes. The result is that increasing required rates of return will lead to small variations in net present value of total tax revenue. With lower oil prices, tax take increases significantly when required rates of return rise.
    Keywords: Norwegian continental shelf; oil market; rates of return; fiscal policy; tax take; equilibrium model; firm behaviour
    JEL: H21 H32 L20 Q38
    Date: 2019–01
  34. By: Ahmadou Saïd Ba (Université Paris-Dauphine, PSL Research University)
    Abstract: Peu de discussions sur la politique économique de la Russie au cours de la dernière décennie ont omis de mentionner la nécessité pour le pays de modifier la composition des secteurs productif et commercial. Parfois, l'objectif de la politique économique a été appelé « diversification » et, à d'autres occasions, il a été appelé « modernisation ». Mais quelle que soit la terminologie utilisée, les décideurs politiques russes ont toujours souligné qu'un changement radical par rapport à une économie basée sur les ressources naturelles était un objectif politique central. Pendant la campagne présidentielle de 2012, l'ancien et futur président Vladimir Poutine avait réaffirmé l'engagement des autorités russes à stimuler les secteurs non marchands de l'économie, à améliorer le climat des affaires et à rendre l'économie plus attrayante pour l'investissement direct étranger. Dans le même temps, il avait concédé que, malgré des initiatives de réforme importantes depuis plusieurs années, aucun changement significatif n'était intervenu. Cette situation n'a pas beaucoup évolué depuis 2012, le pétrole et le gaz représentent maintenant plus de 60% des exportations totales de biens et la structure globale des exportations s'est quelque peu rétrécie depuis le milieu des années 90. Les recettes pétrolières et gazières contribuent environ à la moitié du budget fédéral. L'économie reste très énergivore, notamment en raison de la sous-évaluation persistante de la valeur intrinsèque de l'énergie. Et contrairement à d'autres grands marchés émergents, la Russie n'a pas réussi à maintenir un bon niveau d'apports de capitaux domestiques et d'IDE, pourtant nécessaires à son économie. Au contraire, rien qu'en 2011, les évasions de capitaux avaient totalisé plus de 80 milliards de dollars US. Ce rapport cherche à comprendre pourquoi davantage de progrès n'ont pas été réalisés, fondant son évaluation sur une analyse détaillée des obstacles potentiels à une diversification réussie en Russie. La première partie du rapport est consacrée à l'étude des fondamentaux de l'économie russe ainsi qu'à son degré de diversification. La deuxième partie traite de la stratégie russe de réduction de sa dépendance aux exportations de matières premières. La dernière partie est une analyse des freins à la pleine réalisation de cette stratégie et propose des voies d'amélioration.
    Keywords: Resource curse,Dutch disease,Russie,Diversification,Economie,Modernisation,Dépendance aux matières premières,Matières premières
    Date: 2018–03–14
  35. By: Hannesson, Rögnvaldur (Dept. of Economics, Norwegian School of Economics)
    Abstract: The relationship between CO2 intensity and GDP per capita is studied. Most rich countries show falling CO2 intensity over time and a negative correlation with GDP per capita. Many poor and medium rich countries show the opposite, a positive time trend and a positive correlation with GDP per capita. For the majority of countries with a negative correlation between CO2 intensity and GDP per capita a non-linear function fits the data better than a linear one, implying that CO2 intensity falls at a diminishing rate as countries get richer. Hence, economic growth will not by itself go very far in reconciling economic growth and reductions in CO2 emissions. There are indications that poor and medium rich countries experience a boost in CO2 intensity as they embark on industrialization. This will also make it harder to reconcile economic growth and cuts in CO2 emissions.
    Keywords: Carbon dioxide; economic growth; CO2 intensity
    JEL: O44 Q43 Q54
    Date: 2018–12–12
  36. By: Sushama Murty (Jawaharlal Nehru University); R. Robert Russell (University of California, Riverside)
    Abstract: This draft chapter, prepared for inclusion in the (prospective) Handbook of Production Economics, Vol. 1 (Theory), edited by Subash Ray, Robert Chambers, and Subal Kumbhakar, analyses recent developments in the modeling of pollution-generating technologies. We first lay out the inadequacies of the traditional, single-equation representations of models of such technologies prominently associated with the classic 1975 (and 1988) book by William J. Baumol and Wallace E.Oates on The Theory of Environmental Policy. In particular, these models lack the “degrees of freedom” needed to capture the complex array of trade-offs that are integral to the production of unintended as well as intended outputs using emission-generating inputs. We reprise the insight, articulated in the classic 1965 book by Ragner Frisch on the Theory of Production, that the representation of specific technologies may require the use of multiple functional restrictions. The relevance of this insight for modeling pollution-generating technologies was first highlighted in 1972 and 1998 papers by Finn Førsund. We show that the use of a particular set of functional restrictions, a phenomenon referred to as by-production in our 2012 paper with Steven Levkoff, facilitates the modeling of pollution-generating technologies. In particular, a by-production technology is obtained as the intersection of an intended-output sub-technology and an unintendedoutput sub-technology. We illustrate these principles by sketching a model of coal-fired electrical-power generation and demonstrate the use of the model for the measurement of both output-based and graph-based technical efficiency.Length:58 pages
  37. By: Kumar Sunil; Jayaswal, Sachin; Garg, Amit
    Abstract: Optimization of charging infrastructure for electric buses is critical for the transition from conventional buses to electric buses since chargers, especially for chargers since they constitute almost two-thirds of the total charging infrastructure costs. Different modeling frameworks to optimize the charging capacity are developed separately for the depot charging and opportunity charging and tested for the transit network of Navi Mumbai Municipal Transport (India). The models determine the optimal number and capacity of chargers such that the existing bus operational schedules are maintained – a prime requirement of bus operators. Since the route coverage per bus per day would require en-route charging, the opportunity charging model determines the optimal locations for installing these chargers. A sensitivity analysis is also conducted to analyze the effects of the specific energy consumption of the buses and their rated battery capacity on charger selection. These models are first of their kind to be used for electric bus adoption in India. Keywords: Electric bus, charging infrastructure, charging schedule, cost optimization modeling, public transit networks
    Date: 2018–12–11
  38. By: Zafar, Muhammad Wasif; Shahbaz, Muhammad; Hou, Fujun; Sinha, Avik
    Abstract: This study disaggregates energy, i.e. non-renewable and renewable energy consumption, and investigates its effect on economic growth. The time period of 1990-2015 is used to examine Asia Pacific Economic Cooperation (APEC) countries. This paper determines the cross-sectional dependence and employs a second-generation panel unit root test for precise estimation. The Pedroni and Westerlund cointegration tests are used to examine the long-run equilibrium relationship between the variables and confirm the presence of cointegration in the long run. The FMOLS and DOLS approaches are applied to investigate long-term output elasticities between the variables. The results show the stimulating role of energy (renewable and nonrenewable) consumption in economic growth. Research and development expenditures and trade openness have a positive effect on economic growth. Moreover, the time series individual country analysis also confirms that renewable energy has a positive impact on economic growth. The Granger causality analysis reveals the unidirectional causal relationship running from renewable energy consumption to economic growth and economic growth to non-renewable energy. This empirical evidence suggests that countries should increase investment in renewable energy sectors and plan for development in renewable energy for sustainable energy growth.
    Keywords: Renewable Energy, Nonrenewable Energy, Economic Growth, Trade, FMOLS, APEC
    JEL: A1
    Date: 2018–12–03
  39. By: Karatetskaya Efrosiniya (National Research University Higher School of Economics); Lakshina Valeriya (National Research University Higher School of Economics)
    Abstract: The article is devoted to the estimation of volatility spillovers occurred on the oil and gas market taking into account cross-sectional dependence. The latter is implemented via spatial specifications of the BEKK multivariate volatility model. We also use DCC, GO-GARCH and ADCC models as a benchmark.
    Keywords: multivariate volatility models, spillover effects, spatial specifications, oil and gas market.
    JEL: C32 C58 G15 G17
    Date: 2018
  40. By: Timothy N. Cason; Frans P. de Vries
    Abstract: This study employs a laboratory experiment to assess the performance of tradable permit markets on dynamic efficiency arising from cost-reducing investment. The permit allocation rule is the main treatment variable, with permits being fully auctioned or grandfathered. The experimental results show significant investment under both allocation rules in the presence of ex ante uncertainty over the actual investment outcome. However, auctioning permits generally provides stronger incentives to invest in R&D, leading to greater dynamic efficiency compared to grandfathering.
    Keywords: Pollution permits; Allowance auction; Grandfathering; Investment incentives; Stochastic R&D; Laboratory experiments
    JEL: C91 D80 O31 Q55 Q58
    Date: 2018–12
  41. By: Hannesson, Rögnvaldur (Dept. of Economics, Norwegian School of Economics)
    Abstract: Production of a renewable substitute to fossil fuels is modeled as causing the cost of this backstop technology to fall over time in proportion to the scale of the substitute production and how long it has been in use. The unit cost of resource extraction is assumed to rise as the stock is depleted, so learning by doing will increase the reserves permanently left in the ground. The green paradox can nevertheless be present, in the sense that the resource extraction path can initially lie above what it would be in the absence of a parallel production of renewable energy. In a monopolistic market, the resource monopolist’s optimal price path is two-phased, even with inelastic demand. In the limit-pricing phase, the price is falling, due to the progressive learning by doing effect, and the extraction path is rising.
    Keywords: Green Paradox; carbon dioxide emission; fossil fuels
    JEL: Q00 Q31 Q54
    Date: 2018–12–13
  42. By: Nicolas Clootens (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique); Djamel Kirat (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper analyzes the behavior of cross-country growth rates with respect to resource abundance and dependence. We reject the linear model that is commonly-used in growth regressions in favor of a multiple-regime alternative. Using a formal sample-splitting method, we find that countries exhibit different behaviors with respect to natural resources depending on their initial level of development. In high-income countries, natural resources play only a minor role in explaining the differences in national growth rates. On the contrary, in low-income countries abundance seems to be a blessing but dependence restricts growth.
    Keywords: non-renewable resources,growth,resource curse,threshold regressions
    Date: 2018–11
  43. By: Sushama Murty (Jawaharlal Nehru University)
    Abstract: Some principles for the design of commodity-taxes are derived, when they are employed for correcting externalities in addition to meeting the conventional revenue and redistributive objectives of the government. With production externalities, production efficiency is violated at the second-best, which involves intermediate-input taxation of (i)the externality-causing good directly, or (ii)“non-substitutable inputs” or outputs produced by them in manufacturing chains that include the externality-generating goods, or (iii)commodities whose use as inputs is complementary to the input usage of goods that generate externalities, or (iv)some combinations of (i)–(iii). Second-best consumption taxes have two independent and additive components: (a)a conventional equity and efficiency-balancing “many person Ramsey rule”(MPRR)-based VAT or GST and (b)an “externality-correcting” excise duty. The externality components of both consumption and optimal intermediate-input taxes are linked and cannot be chosen independently, although there exist several degrees of freedom in selecting them at a second-best. The optimal VAT is zero for commodities with indirectly-derived demands such as electricity, motoring-fuel, and road-services. The input-tax credit to a producer, who pays retail price for an intermediate-input, is equal to the GST plus the excess of the externality-excise component of the consumption tax over the corresponding intermediate-input tax. Many real-life commodity-tax policies are compared with our resultsLength: 48 pages
  44. By: Nicolas Querou (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: We consider a setting where agents are subject to two types of collective action problems, any group user's individual extraction inducing an externality on others in the same group (intra-group problem), while aggregate extraction in one group induces an externality on each agent in other groups (intergroup problem). One illustrative example of such a setting corresponds to a case where a common-pool resource is jointly extracted in local areas, which are managed by separate groups of individuals extracting the resource in their respective location. The interplay between both types of externality is shown to affect the results obtained in classical models of common-pool resources. We show how the fundamentals affect the individual strategies and welfare compared to the benchmark commons problems. Finally, different initiatives (local cooperation, inter-area agreements) are analyzed to assess whether they may alleviate the problems, and to understand the conditions under which they do so.
    Keywords: externalities,common-pool resource,collective action
    Date: 2018
  45. By: Francesco Vona (Observatoire français des conjonctures économiques); Giovanni Marin (University of Urbino); Davide Consoli (Institute of Innovation and Knowledge Management)
    Abstract: Addressing grand environmental challenges (e.g. climate change) entails adapting the skill base and, thus, the composition of the workforce. Recent interventions both in the form of environmental regulation or of subsidies – i.e. the American Recovery and Reinvestment Act (ARRA) of 2009 and its green component which accounts approximately for 15% of the overall fiscal stimulus – revived the debate on whether environmental policies create or destroy employment. However, existing empirical evidence on green employment is limited in terms of timespan and scope due to data constraints. In a recent study (Vona et al., 2018), we tackle this gap by elaborating a novel approach to measure green employment in US local labour markets. Using the task approach to approximate the time a worker spends in green activities (Acemoglu and Autor, 2011), allows us to provide a nuanced picture of how green employment has evolved in the turbulent period between 2006 and 2014 as well as a suggestive estimation of the effect of “becoming greener” for local labour markets. [First paragraph]
    Keywords: Green activities; Green employment; Us labor market
    Date: 2018–10
  46. By: Quentin Hoarau; Yannick Perez
    Abstract: Distributed Energy Resources (DERs), mostly in the form of solar photovoltaic (PV) or lithium-ion batteries, and electric vehicles (EVs) are emerging as three disruptive innovations in power grids. Recent studies have pointed out the potential synergies between these technologies, while others have studied the difficulty to design adequate network tariff when some consumers can adopt DERs (prosumers). In this paper, we fill gaps in both strands of the literature by investigating the combined effect of DERs and EVs on grid cost recovery. To study these effects, we use a bi-level model that captures the conflict between a regulator and the network users. In the lower level, prosumers canreact to tariff changes by installing DERs and by adapting their EV charging. In the upper level, the regulator sets network tariffs by enforcing the total grid costs recovery and anticipating the prosuming behaviors of network users. We study how the levels of EV penetration and prosuming affect tariffs. The influence of the tariff structure is also investigated. First, we find that grid cost recovery concerns caused by load-defecting prosumers installing DER can be balanced by the diffusion of EVs in the network. Second, we highlight that EVs and DERs adoptions are conflicting through the network tariff design. In particular, we find that the more a tariff structure gives incentives for DERs, the less beneficial it is for EVs, and viceversa.
    Keywords: Network tariff design, Electric vehicles, Prosumers, Solar PV, Distributed energy resources
    Date: 2018
  47. By: Geoffrey Barrows (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique); Hélène Ollivier (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: With asymmetric climate policies, regulation in one country can be undercut by missions growth in another. Previous research finds evidence that regulation erodes the competitiveness of domestic firms and leads to higher imports, but increased imports need not imply increased emissions if domestic sales are jointly determined with export sales or if emission intensity of manufacturing adjusts endogenously to foreign demand. In this paper, we estimate for the first time how production and emissions of manufacturing firms in one country respond to foreign demand shocks in trading partner markets. Using a panel of large Indian manufacturers and an instrumental variable strategy, we find that foreign demand growth leads to higher exports, domestic sales, production, and CO2 emissions, and slightly lower emission intensity. The results imply that a representative exporter facing the average observed foreign demand growth over the period 1995-2011 would have increased CO2 emissions by 1.39% annually as a result of foreign demand growth, which translates into 6.69% total increase in CO2 emissions from Indian manufacturing over the period. Breaking down emission intensity reduction into component channels, we find some evidence of product-mix effects, but fail to reject the null of no change in technology. Back of the envelope calculations indicate that environmental regulation that doubles energy prices world-wide (except in India) would only increase CO2 emissions from India by 1.5%. Thus, while leakage fears are legitimate, the magnitude appears fairly small in the context of India.
    Keywords: leakage,trade and environment,product mix,technological change
    Date: 2018–11
  48. By: Nepal, Rabindra (Tasmanian School of Business & Economics, University of Tasmania); al Irsyad, M. Indra (University of Queensland, School of Earth and Environmental Sciences); Nepal, Sanjay Kumar (University of Waterloo, Department of Geography and Environmental Management (Environment) School of Earth and Environmental Sciences)
    Abstract: Sustainable tourism management policies should aim at maximising economic benefits from tourist arrivals while minimizing associated adverse impacts on the environment. This study assesses the short-run and long-run relationships between tourist arrivals, per capita economic output, emissions, energy consumption and capital formation, citing Nepal as a specific case study. We developed four hypotheses and tested them using time-series econometrics based on the autoregressive distributed lag model and Granger causality tests. The results provide strong evidence of an economy driven tourism sector where expansion in economic output leads to expansion in tourist arrivals. More tourist arrivals, in turn, generate positive impacts on gross capital formation. Energy consumption negatively affects tourist arrivals, calling for increased attention towards improving energy efficiency and energy diversity. We conclude that national policies to increase tourist arrivals should be integrated with national energy and environmental policies in order to facilitate the transition towards a sustainable tourism sector.
    Keywords: sustainable tourism; autoregressive distributed lag (ARDL); Granger causality; energy consumption; climate change
    JEL: C32
    Date: 2018
  49. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN)); Ahlqvist, Victor (Research Institute of Industrial Economics (IFN))
    Abstract: In centralized markets, producers submit detailed cost data to the day-ahead market, and the market operator decides how much should be produced in each plant. This differs from decentralized markets that rely on self-commitment and where producers send less detailed cost information to the operator of the day-ahead market. Ideally centralized electricity markets would be more effective, as they consider more detailed information, such as start-up costs and no-load costs. On the other hand, the bidding format is rather simplified and does not allow producers to express all details in their costs. Moreover, due to uplift payments, producers have incentives to exaggerate their costs. As of today, US has centralized wholesale electricity markets, while most of Europe has decentralized wholesale electricity markets. The main problem with centralized markets in US is that they do not provide intra-day prices which can be used to continuously up-date the dispatch when the forecast for renewable output changes. Intra-day markets are more flexible and better adapted to deal with renewable power in decentralized markets. Iterative intra-day trading in a decentralized market can also be used to sort out coordination problems related to non-convexities in the production. The downside of this is that increased possibilities to coordinate increase the risk of getting collusive outcomes. Decentralized day-ahead markets in Europe can mainly be improved by considering network constraints in more detail.
    Keywords: Wholesale electricity markets; Market clearing; Centralization; Decentralization; Unit-commitment; Self-dispatch
    JEL: D44 L13 L94
    Date: 2018–12–17
  50. By: Gavard, Claire; Voigt, Sebastian; Genty, Aurélien
    Abstract: While emissions trading schemes are developed by nations to mitigate their greenhouse gas emissions, behavioural studies have shown that the political and public acceptability of these market-based instruments depends on the way the associated revenues are used. One option the general public approves of is to use them to support renewable energy. If this consists in reducing a pre-existing electricity levy that heterogeneously applies to the various sectors of the economy, the reduction of this distortionary tax thanks to the carbon revenues results in general equilibrium effects that may have unequal sectoral impacts. This is what we examine in the case of the European Union. With a modelling approach including a detailed disaggregation of European sectors, we find that using auction revenues from the Emissions Trading Scheme (ETS) to support electricity generation from renewable sources results in a 2% rise in electricity demand in the whole economy due to the reduced electricity levy that electricity consumers have to pay to support renewable energy. This results in a 1.8% ETS carbon price increase. The carbon constraint for the non-ETS sectors is 5.9% looser as a consequence of the larger electricity use by these sectors. While the energy intensive sectors generally benefit from electricity levy exemptions, we observe that, due to the energy and ETS price increase, the combination of these exemptions and of the use of carbon auction revenues to support renewable energy makes the ETS sectors worse off than if carbon revenues are transferred to households. In aggregate, the recycling option analysed here results in a GDP gain due to its impacts on the non-ETS sectors, the reduction of the electricity levy and associated distortionary effects.
    Keywords: carbon auctions,renewable energy support,electricity levy,emissions trading scheme,revenues recycling
    JEL: C68 E62 H21 H23 Q42 Q54
    Date: 2018

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