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on Energy Economics |
| By: | Tsao, Jeffrey Y.; Schubert, E. Fred; Fouquet, Roger; Lave, Matthew |
| Abstract: | We present and analyze three powerful long-term historical trends in the electrification of energy by free-fuel sources. These trends point toward a future in which energy is affordable, abundant, and efficiently deployed; with major economic, geo-political, and environmental benefits to humanity.We present and analyze three powerful long-term historical trends in energy, particularly electrical energy, as well as the opportunities and challenges associated with these trends. The first trend is from a world containing a diversity of energy currencies to one whose predominant currency is electricity, driven by electricity’s transportability, exchangeability, and steadily decreasing cost. The second trend is from electricity generated from a diversity of sources to electricity generated predominantly by free-fuel sources, driven by their steadily decreasing cost and long-term abundance. These trends necessitate a just-emerging third trend: from a grid in which electricity is transported unidirectionally, traded at near-static prices, and consumed under direct human control; to a grid in which electricity is transported bidirectionally, traded at dynamic prices, and consumed under human-tailored artificial agential control. These trends point toward a future in which energy is not costly, scarce, or inefficiently deployed but instead is affordable, abundant, and efficiently deployed; with major economic, geo-political, and environmental benefits to humanity. |
| Keywords: | energy generation; energy storage; environment; fossil fuel; government policy and funding |
| JEL: | R14 J01 |
| Date: | 2018–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100205&r=all |
| By: | Jan Abrell (ETH Zurich, Switzerland); Clemens Streitberger (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland) |
| Abstract: | This paper uses theoretical and numerical economic equilibrium models to examine optimal renewable energy (RE) support policies for wind and solar resources in the presence of a carbon externality associated with the use of fossil fuels. We emphasize three main issues for policy design: the heterogeneity of intermittent natural resources, budget-neutral financing rules, and incentives for carbon mitigation. We find that differentiated subsidies for wind and solar, while being optimal, only yield negligible efficiency gains. Policies with smart financing of RE subsidies which either relax budget neutrality or use “polluter-pays-the-price” financing in the context of budget-neutral schemes can, however, approximate socially optimal outcomes. Our analysis suggests that optimally designed RE support policies do not necessarily have to be viewed as a costly second-best option when carbon pricing is unavailable. |
| Keywords: | Renewable Energy, Wind, Solar, Environmental Regulation, Climate Policy, Decarbonization, Renewable Subsidies, Carbon Pricing, Heterogeneity of Natural Resources, Feed-in tariffs, Green quota |
| JEL: | Q28 Q42 Q52 Q58 C61 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-286&r=all |
| By: | Wolf-Peter Schill; Alexander Zerrahn |
| Abstract: | Using electricity for heating can contribute to decarbonization and provide flexibility to integrate variable renewable energy. We analyze the case of electric storage heaters in German 2030 scenarios with an open-source electricity sector model. Making customary night-time storage heaters temporally more flexible offers only moderate benefits because renewable availability during daytime is limited in the heating season. As storage heaters feature only short-term heat storage, they also cannot reconcile the seasonal mismatch of heat demand in winter and high renewable availability in summer. Generally, flexible electric heaters increase the use of generation technologies with low variable costs, which are not necessarily renewables. |
| Keywords: | Power-to-heat, renewable energy, electricity sector, power system model, flexibility, storage |
| JEL: | C61 Q41 Q42 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1769&r=all |
| By: | Thomas Eichner; Rüdiger Pethig |
| Abstract: | We investigate the displacement effects of phase-out-of-coal policies in a stylized model of electricity generation and CO2 regulation, in which a group of countries operates an emissions trading scheme (ETS). Electricity markets are either international or national and the emissions cap remains either unchanged or is tightened. With constant emissions cap and trade in electricity, some emissions as well as some coal-based electricity ‘leak’ into other countries and the aggregate welfare of the group of countries declines, if a country unilaterally phases out coal. With constant emissions cap and no trade in electricity, the unilaterally phasing-out country is worse off and the other countries are better off. Following a suggestion in a recently revised EU ETS Directive, we then combine a country’s phase-out policy with canceling the permits it formerly used to generate electricity from coal. When electricity is traded, that combined policy prevents the leakage of emissions and coal-based electricity and shifts a share of the welfare costs to other countries. Without trade in electricity, the other countries generate less coal-based electricity and all countries’ consumption welfare decreases, but all countries benefit from reduced climate damage. Finally, we offer an empirical calibration of our model to the European Union. |
| Keywords: | phase-out, gas, electricity, leakage, ETS |
| JEL: | H22 Q37 Q48 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7554&r=all |
| By: | Kyritsis, Evangelos; Andersson, Jonas |
| Abstract: | In this paper we investigate the dynamic relations between crude oil price returns and a set of energy price returns, namely diesel, gasoline, heating, and the natural gas. This is performed by means of Granger non-causality tests for US spot closing prices over the period from January 1997 to December 2017. In previous studies this has been done by testing for the added predictive value of including lagged values of one energy price return in predicting the conditional expectation of another. In this paper, we instead focus on different ranges of the full conditional distribution within the framework of a dynamic quantile regression model, and identify the quantile ranges from which causality arises. The results constitute a richer set of findings than what is possible by just considering a single moment of the conditional distribution, which can be useful for implementing better substitution investment strategies and effective policy interventions. We find several interesting one-directional dynamic relations between the employed energy prices, especially in the tail quantiles, but also a bi-directional causal relation between energy prices for which the classical Granger non-causality test suggests otherwise. Our results are robust to alternative measures of the price of oil and different data frequencies. |
| Keywords: | Energy price returns, Granger non-causality, Quantile regression, Tail quantiles, Environment, energy and climate policy, C22, G14, Q41, |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:116&r=all |
| By: | Jan Abrell (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland); Clemens Streitberger (ETH Zurich, Switzerland) |
| Abstract: | Mitigating climate change will require integrating large amounts of highly intermittent renewable energy (RE) sources in future electricity markets. Considerable uncertainties exist about the cost and availability of future large-scale storage to alleviate the potential mismatch between demand and supply. This paper examines the suitability of regulatory (public policy) mechanisms for coping with the volatility induced by intermittent RE sources, using a numerical equilibrium model of a future wholesale electricity market. We find that the optimal RE subsidies are technology-specific reflecting the heterogeneous value for system integration. Differentiated RE subsidies reduce the curtailment of excess production, thereby preventing costly investments in energy storage. Using a simple cost-benefit framework, we show that a “smart” design of RE support policies significantly reduces the level of optimal storage. We further find that the marginal benefits of storage rapidly decrease for short-term (intra-day) storage and are small for long-term (seasonal) storage independent of the storage level. This suggests that storage is not likely to be the limiting factor for decarbonizing the electricity sector. |
| Keywords: | Renewable Energy, Electricity, Volatility, Intermittency, Storage, Technology-specific Regulation, Subsidies, Energy Policy, Climate Policy |
| JEL: | C63 Q42 Q48 Q54 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-310&r=all |
| By: | Sebastien Houde (ETH Zurich, Switzerland); Erica Myers (University of Illinois, United States of America) |
| Abstract: | We estimate whether consumers respond to local energy costs when purchasing appliances. Using a dataset from an appliance retailer, we compare demand responsiveness to a measure of energy costs that varies with local energy prices versus purchase prices. We strongly reject that consumers are unresponsive to local energy costs under a wide range of assumptions. These findings run counter to the popular wisdom, which motivates energy standards, that energy costs are a shrouded attribute. Capital investments are an important channel for electricity demand response and may explain some of the large differences between short and long run electricity price elasticities. |
| Keywords: | inattention, shrouded attributes, energy efficiency gap, misperceptions, appliance efficiency standards |
| JEL: | Q41 Q50 L15 D12 D83 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-313&r=all |
| By: | Sergei Kulakov; Florian Ziel |
| Abstract: | The shift to renewable power is accelerating at a growing pace. Contemporary energy markets undergo profound structural changes. Forecasts as to the wind and solar supply become critically important. This paper studies the impact of these forecasts on electricity market prices. We develop an intraday price model based on day-ahead auction data and errors in wind and solar power prognostications. The model manipulates empirical supply and demand curves recorded in the German EPEX SPOT SE to produce the prices. The obtained results show that forecast errors exert a non-linear impact on intraday prices. Moreover, additional wind and solar power capacities induce non-linear changes in intraday price volatility. Economical and policy implications of these findings are elaborated upon. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.09641&r=all |
| By: | Ninpanit, Panittra |
| Abstract: | Traffic-related air pollution is a serious environmental concern in mega-cities worldwide. This study investigates the causal link between fuel prices and traffic-related air pollution using Bangkok and the surrounding areas as a case study. Bangkok has been ranked being as one of the world's most traffic-congested cities. Daily and monthly data for 1996–2017 are used to model three traffic-related air pollutants: CO, NO2, and PM10. Pollution data are collected from 25 monitoring stations. The findings provide evidence that higher fuel prices reduce air pollution from road vehicles. The fuel price elasticities of CO and PM10 pollution are found to be around –0.3 to –0.4 and –0.1 to –0.4, respectively. The estimates suggest a fuel price elasticity of NO2 pollution of –0.2 to –0.3 during 1996–2006. However, the effect of fuel prices on NO2 after 2006 is positive, potentially due to substitution of gasoline with gaseous fuels. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aare19:285055&r=all |
| By: | Marañón-Ledesma, Hector; Tomasgard, Asgeir |
| Abstract: | Short-term Electricity Demand Response (DR) is an emerging technology in Europe's Electricity markets that will introduce a new degree of exibility. The objective of this work is to analyze to what extent the untapped DR potential can facilitate an optimal transition to an European low emission power system. The beneffits of DR consists of a reduction in peak load consumption, which leads to reduction in capacity investments, production and consumption savings, reduced congestion phases, reliable integration of intermittent renewable resources and supply and demand exibility. The capabilities of DR are studied in the European Model for Power Investment with (High Shares of) Renewable Energy (EMPIRE), which is an electricity sector model with a time span of 30 years ending in 2050. The model is two-stage stochastic that includes uncertainty at the operational level and energy economics dynamics at a strategic level. The main contribution of this article is designing the investment-operation DR module within the EMPIRE framework. It models several classes of shiftable and curtailable loads in residential, commercial and industrial sectors, including exibility periods, operational costs and endogenous DR investments, for 31 European countries. The results show that DR capacity substitutes partially exible supply side capacity from peak gas plants and battery storage, in addition to enabling more solar PV production. |
| Keywords: | Demand Response; Flexibility; Linear Stochastic Optimization; Demand Side Management; European Power System; Energy Economics |
| JEL: | C61 L90 L97 |
| Date: | 2019–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92957&r=all |
| By: | Aimilia Pattakou (ETH Zurich, Switzerland); Aryestis Vlahakis (ETH Zurich, Switzerland) |
| Abstract: | Can subsidies to renewable energy effectively internalise CO2 costs in electricity production? Under current policy design it only matters that the replaced energy is dirty, but not how dirty it is. We use a modified peak-load pricing model, including variable renewable generators and the external costs of carbon, to examine the way in which a unit subsidy to variable renewables cannot restore first best optimum. In our model, electricity is generated using a combination of three technology types: two dispatchable, thermal, and CO2 emitting technologies, differing in their emission intensity, and a non-dispatchable renewable technology. We show that available wind capacity is never idle, and derive equations determining optimal installed capacities for all technologies. We then describe the mechanism by which a subsidy that does not discriminate between dirty energies fails to restore first best. Our analysis highlights the importance of a carbon price: even one below the social cost of carbon could have a corrective effect on the merit order of fossil fuels and improve the effectiveness of a subsidy. |
| Keywords: | Energy policy, Renewable energy, Environmental subsidy |
| JEL: | Q42 Q48 H23 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-295&r=all |
| By: | Zhang, ZhongXiang |
| Abstract: | Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme. |
| Keywords: | Environmental Economics and Policy, Resource /Energy Economics and Policy |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemcl:199336&r=all |
| By: | Chirakijja, Janjala; Jayachandran, Seema; Ong, Pinchuan |
| Abstract: | This paper examines how the price of home heating affects mortality in the US. Exposure to cold is one reason that mortality peaks in winter, and a higher heating price increases exposure to cold by reducing heating use. It also raises energy bills, which could affect health by decreasing other health-promoting spending. Our empirical approach combines spatial variation in the energy source used for home heating and temporal variation in the national prices of natural gas versus electricity. We find that a lower heating price reduces winter mortality, driven mostly by cardiovascular and respiratory causes. |
| Keywords: | energy poverty; energy prices; fuel poverty; weather-related mortality; winter mortality |
| JEL: | I1 J14 Q41 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13603&r=all |
| By: | Vo, D.H.; Nguyen, H.M.; Vo, A.T.; McAleer, M.J. |
| Abstract: | The paper investigates the role of consumption of both renewable and sustainable energy, as well as alternative and nuclear energy, in mitigating the effects of carbon dioxide (CO2) emissions, based on the Environmental Kuznets Curve (EKC). The papers introduces a novel variable to capture trade openness, which appears to be a crucial factor in inter-regional co-operation and development, in order to evaluate its effect on the environment, The empirical analysis is based on a sample of nine signatories to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) for the period 1971-2014, which is based on data availability. The empirical analysis is based on several time series econometric methods, such as the cointegration test, two long run estimators, namely the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) methods, as well as the Granger causality test. There are several noteworthy empirical findings: it is possible to confirm the U-shaped EKC hypothesis for six countries, namely Australia, Canada, Chile, New Zealand, Peru and Vietnam; there is no evidence of the EKC for Mexico; a reverse-shaped EKC is observed for Japan and Malaysia, there are long run relationships among the variables, the adoption of either renewable energy, or alternative energy and nuclear energy, mitigates CO2 emissions, trade openness leads to more beneficial than harmful impacts in the long run, the Granger causality tests show more bi-directional-relationships between the variables in the long run, and the Granger causality tests show more uni-directional-relationships between the variables in the short run. |
| Keywords: | Renewable and sustainable energy, alternative energy, nuclear energy, carbon, emissions, CPTPP, EKC hypothesis, DOLS, FMOLS, Granger causality, VECM |
| JEL: | C12 C52 Q42 Q43 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:115609&r=all |
| By: | Nesta, Lionel; Verdolini, Elena; Vona, Francesco |
| Abstract: | This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country's relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries. |
| Keywords: | Research and Development/Tech Change/Emerging Technologies |
| Date: | 2018–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:268731&r=all |
| By: | Alberini, Anna; Gans, Will; Towe, Charles |
| Abstract: | We use a unique dataset that combines the responses from an original survey of households, information about the structural characteristics of their homes, utility-provided longitudinal electricity usage records, plus utility program participation information, to study the uptake of energy efficiency incentives and their effect on residential electricity consumption. Attention is restricted to homes where heating and cooling are provided exclusively by heat pumps, which are common in our study area—four counties in Maryland—and were covered by federal, state and utility incentives during our study period (2007-2012). We deploy a difference-in-difference study design. We find that replacing an existing heat pump with a new one does reduce electricity usage: the average treatment effect is an 8% reduction. However, the effect differs dramatically across households based upon whether they receive an incentive towards the purchase of a new heat pump. Among those that receive the purchase incentive, the effect is small or nil, and indeed, the larger the incentive, the smaller the reduction in electricity usage. Those that do not receive incentives reduce usage by about 16%. Our results appear to be driven by the numerous free riders in our sample and by persons who—inferred from their responses to survey questions—might be exploiting the subsidy to purchase a larger system and increase usage, with no emissions reductions benefits to society. |
| Keywords: | Resource /Energy Economics and Policy |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemer:158739&r=all |
| By: | Kangni Kpodar (International Monetary Fund (IMF)); Kodjovi Eklou (International Monetary Fund (IMF)); Stefania Fabrizio (International Monetary Fund (IMF)) |
| Abstract: | This paper investigates the impact of domestic fuel price increases on export growth in a sample of 77 developing countries over the period 2000-2014. Using a fixed-effect estimator and the local projection approach, we find that an increase in domestic gasoline or diesel price adversely affects real non-fuel export growth, but only in the short run as the impact phases out within two years after the shock. The results also suggest that the negative effect of fuel price increase on exports is mainly noticeable in countries with a high-energy dependency ratio and countries where access to an alternative source of energy, such as electricity, is constrained, thus preventing producers from altering energy consumption mix in response to fuel price changes. |
| Keywords: | Retail fuel prices,Fuel Subsidies,Export growth,Developing countries |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02059517&r=all |
| By: | Kirill Borissov (European University at Saint Petersburg, Russia); Lucas Bretschger (ETH Zurich, Switzerland) |
| Abstract: | We derive the optimal contributions to global climate policy when countries differ with respect to income level and pollution intensity. Countries's growth rates are determined endogenously, and abatement effciency is improved by technical progress. We show that country heterogeneity has a crucial impact on optimal policy contributions: more developed countries have to make a larger effort while less developed countries are allowed to graduate under a less stringent environmental regime. The optimal allocation of pollution per- mits depends on international trade. In the absence of international permit trade, more developed countries should receive more permits than the less developed countries but permit prices are higher in the rich countries. With international permit trade, more developed countries receive less permits than the less developed. When global distribution of physical capital is uneven and the aggregate pollution ceiling is low, poor countries receive all the permits and incomes do not converge, even with free trade. |
| Keywords: | Climate policy, growth, abatement efficiency, policy convergence |
| JEL: | Q43 O47 Q56 O41 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18/297&r=all |
| By: | Adrien Fabre (PSE - Paris School of Economics); Mouez Fodhaz (PSE - Paris School of Economics); Francesco Ricci (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: | The production of energy from renewable sources is much more intensive in minerals than that from fossil resources. The scarcity of certain minerals limits the potential for substituting renewable energy for scarce fossil resources. However, minerals can be recycled, while fossils cannot. We develop an intertemporal model to study the dynamics of the optimal energy mix in the presence of mineral intensive renewable energy and fossil energy. We analyze energy production when both mineral and fossil resources are scarce, but minerals are recyclable. We show that the greater the recycling rate of minerals, the more the energy mix should rely on renewable energy, and the sooner should investment in renewable capacity take place. We confirm these results even in the presence of other better known factors that a ect the optimal schedule of resource use: growth in the productivity in the renewable sector, imperfect substitution between the two sources of energy, convex extraction costs for mineral resources and pollution from the use of fossil resources. |
| Keywords: | recycling,renewable and non-renewable natural resources,mineral resources,energy transition |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-02056348&r=all |
| By: | Hyeongwoo Kim; Ying Lin; Henry Thompson |
| Abstract: | A group of researchers has asserted that the rate of exchange rate pass-through (ERPT) to domestic prices has declined substantially over the last few decades. We revisit this claim of a downward trend in ERPT to the Consumer Price Index (CPI) in a vector autoregressive (VAR) model for US macroeconomic data under the current floating exchange rate regime. Our VAR approach nests the conventional single equation method, revealing very weak evidence of ERPT during the pre-1990 era, but statistically significant evidence of ERPT during the post-1990 era, sharply contrasting with previous findings. After statistically confirming a structural break in ERPT to total CPI via Hansen's (2001) test procedure, we seek the source of the structural break with disaggregated level CPIs, pinning down a key role of energy prices in the break. The dependency of US energy consumption on imports increased since the 1990s until the recent recession. This change magnifies effects of the exchange rate shocks on domestic energy prices, resulting in greater responses of the total CPI via this energy price channel. |
| Keywords: | Exchange Rate Pass Through; Disaggregated CPI; Structural Break; Oil Price Shock |
| JEL: | E31 F31 F41 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2019-01&r=all |
| By: | Jan Paul Baginski; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)) |
| Abstract: | The share of solar energy in German electricity generation has increased strongly over recent years. This is largely due to guaranteed feed-in tariffs together with decreasing prices for solar panels. Residential PV systems play a decisive part providing households with a possibility to contribute to the Energiewende and benefit from the use of renewable energy. Their regional distribution varies distinctly across Germany implying different requirements in distribution grids as well as uneven utilization of national policy measures. Our paper focusses on the spatial diffusion of roof mounted PV systems and the underlying drivers in Germany. We extend previous findings not only by including additional explanatory variables but also by considering cross-regional spillover using spatial econometric models. Estimation results show that spatial dependence is a relevant determinant for explaining regional clusters of PV adoption. Recurrent visual perception or peer-effects might explain spatial autocorrelation as potential adopters follow decisions by actors in the proximity. Another reason for spatial dependence might be a concentration of craft skills or solar initiatives, which leads to an accelerated diffusion in a region and its surroundings. Whereas the first explanation corresponds to the specification of a spatial lag model, the latter is in line with a spatial error specification. However, our results indicate that although spatial lag is present, spatial dependence in the residuals has higher explanatory power. Hence, we suppose that spatial spillover is not mainly driven by social imitation but by unobserved regional characteristics. Notably, high values for solar radiation, the share of detached houses, electricity demand and inverse population density of a region favour the PV uptake. |
| Keywords: | residential photovoltaic, spatial econometrics, spatial spillover |
| JEL: | C21 Q28 Q42 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1902&r=all |
| By: | Nguyen, H.M.; Bui, N.H.; Vo, D.H.; McAleer, M.J. |
| Abstract: | The importance of non-renewable, renewable and sustainable energy sources and energy consumption in the economic development strategy of a country is undeniable. The purpose of the paper is to investigate the impacts of energy consumption on the economic growth of Vietnam during the 1980-2014 period. By applying the Autoregressive Distributed Lag (ARDL) model of Pesaran et al. (2001), and the Granger causality test of Toda and Yamamoto (1995), the empirical results provide evidence that electricity consumption has positive impacts on Vietnam’s economic growth in both the short run and long run. For public policy prescriptions, the empirical evidence suggests that an exploration of new sources of renewable and sustainable energy is essential for long run economic development |
| Keywords: | Energy consumption, renewable and sustainable energy, economic growth, economic development, ARDL, Granger causality |
| JEL: | F43 O13 O47 Q42 Q43 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:115606&r=all |
| By: | Julia Blasch (Institute for Environmental Studies (IVM), VU University Amsterdam); Claudio Daminato (ETH Zurich, Switzerland) |
| Abstract: | The literature on the energy-efficiency gap discusses the status-quo bias as a behavioral anomaly that potentially increases the energy consumption of a household through at least three channels: (1) by making consumers keep their energy-using durables as long as possible, until wearout forces them to replace their equipment (2) by making consumers choose new energy-using durables that resemble the existent ones that need replacement, and (3) by making consumers overuse appliances in an attempt to mentally amortize the initial investment cost. The results presented in this study are an attempt to empirically investigate the extent to which the presence of a bias towards the status quo is linked to residential electricity consumption through two out of the above mentioned three channels: non-replacement of old appliances and overuse of appliances. Using data from a large household survey conducted in three European countries, we find that our measure of status-quo bias is a significant predictor of both the age of home appliances as well as the level of consumption of energy services of a household. The tendency of status-quo biased individuals to keep their appliances longer and to use them more intensely is also reflected in the total electricity consumption of their households, which is found to be around 5.7% higher than for households of non-biased individuals. This research thus provides some first empirical evidence that the status-quo bias has the potential to create a substantial barrier to increasing residential energy efficiency. Our findings prompt policy makers to design instruments that take this barrier into account. |
| Keywords: | status-quo bias; loss aversion; appliances replacement; residential energy consumption; energy-related financial literacy |
| JEL: | D12 D91 Q41 Q50 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-300&r=all |
| By: | Vo, D.H.; Vu, T.N.; Vo, A.T.; McAleer, M.J. |
| Abstract: | The food-energy nexus has attracted great attention from policymakers, practitioners and academia since the food price crisis during the 2007-2008 Global Financial Crisis (GFC), and new policies that aim to increase ethanol production. This paper incorporates aggregate demand and alternative oil shocks to investigate the causal relationship between agricultural products and oil markets, which is a novel contribution. For the period January 2000 - July 2018, monthly spot prices of 15 commodities are examined, including Brent crude oil, biofuel-related agricultural commodities, and other agricultural commodities. The sample is divided into three sub-periods, namely: (i) January 2000 - July 2006; (ii) August 2006 - April 2013; and (iii) May 2013 - July 2018. The Structural Vector Autoregressive (SVAR) model, impulse response functions, and variance decomposition technique are used to examine how the shocks to agricultural markets contribute to the variance of crude oil prices. The empirical findings from the paper indicate that not every oil shock contributes the same to agricultural price fluctuations, and similarly for the effects of aggregate demand shocks on the agricultural market. These results show that the crude oil market plays a major role in explaining fluctuations in the prices and associated volatility of agricultural commodities |
| Keywords: | Agricultural commodity prices, Volatility, Crude oil prices, Structural Vector Autoregressive model, Impulse response functions, Decomposition |
| JEL: | C32 C58 Q14 Q42 |
| Date: | 2018–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:115608&r=all |
| By: | Sebastian Rausch (ETH Zurich, Switzerland); Hidemichi Yonezawa (ETH Zurich, Switzerland) |
| Abstract: | We examine the lifetime incidence and intergenerational distributional effects of an economywide carbon tax swap using a numerical dynamic general equilibrium model with overlapping generations of the U.S. economy. We highlight various fundamental choices in policy design including (1) the level of the initial carbon tax, (2) the growth rate of the carbon tax trajectory of over time, and (3) alternative ways for revenue recycling. Without revenue recycling, we find that generations born before the tax is introduced experience smaller welfare losses, or even gain, relative to future generations. For suffciently low growth rates of the tax trajectory, the impacts for distant future generations decrease over time. For future generations born after the introduction of the tax, the negative welfare impacts are the smallest (largest) when revenues are recycled through lowering pre-existing capital income taxes (through per-capita lump-sum rebates). For generations born before the tax is introduced, we find that lump-sum rebates favor very old generations and labor (capital) income tax recycling favors very young generations (generations of intermediate age). |
| Keywords: | Carbon tax, Green Tax Reform, Intergenerational Incidence, Distributional Impacts, Overlapping Generations, Climate Policy |
| JEL: | H23 Q52 D91 Q43 C68 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-287&r=all |
| By: | Rösemann, Claus; Haenel, Hans-Dieter; Dämmgen, Ulrich; Döring, Ulrike; Wulf, Sebastian; Eurich-Menden, Brigitte; Freibauer, Annette; Döhler, Helmut; Schreiner, Carsten; Osterburg, Bernhard; Fuß, Roland |
| Abstract: | The report at hand (including a comprehensive annex of data) serves as additional document to the National Inventory Report (NIR) on the German green house gas emissions and the Informative Inventory Report (IIR) on the German emissions of air pollutants (especially ammonia). The report documents the calculation methods used in the German agricultural inventory model GAS-EM as well as input data, emission results and uncertainties of the emission reporting submission 2018 for the years 1990 - 2017. In this context the sector Agriculture comprises the emissions from animal husbandry, the use of agricultural soils and anaerobic digestion of energy crops. As required by the guidelines, emissions from activities preceding agriculture, from the use of energy and from land use change are reported elsewhere in the national inventories. The report at hand (including a comprehensive annex of data) serves as additional document to the National Inventory Report (NIR) on the German green house gas emissions and the Informative Inventory Report (IIR) on the German emissions of air pollutants (especially ammonia). The report documents the calculation methods used in the German agricultural inventory model GAS-EM as well as input data, emission results and uncertainties of the emission reporting submission 2018 for the years 1990 - 2017. In this context the sector Agriculture comprises the emissions from animal husbandry, the use of agricultural soils and anaerobic digestion of energy crops. As required by the guidelines, emissions from activities preceding agriculture, from the use of energy and from land use change are reported elsewhere in the national inventories.The report at hand (including a comprehensive annex of data) serves as additional document to the National Inventory Report (NIR) on the German green house gas emissions and the Informative Inventory Report (IIR) on the German emissions of air pollutants (especially ammonia). The report documents the calculation methods used in the German agricultural inventory model GAS-EM as well as input data, emission results and uncertainties of the emission reporting submission 2018 for the years 1990 - 2017. In this context the sector Agriculture comprises the emissions from animal husbandry, the use of agricultural soils and anaerobic digestion of energy crops. As required by the guidelines, emissions from activities preceding agriculture, from the use of energy and from land use change are reported elsewhere in the national inventories. The calculation methods are based in principle on the international guidelines for emission reporting and have been continuingly improved during the past years by the Thünen Institute working group on agricultural emission inventories, partly in cooperation with KTBL. In particular, these improvements concern the calculation of energy requirements, feeding and the N balance of the most important animal categories. In addition, technical measures such as air scrubbing (mitigation of ammonia emissions) and digestion of animal manures (mitigation of emissions of methane and laughing gas) have been taken into account. For the calculation of emissions from anaerobic digestion of animal manures and energy crops (including spreading of the digestate), the aforementioned working group developed, in cooperation with KTBL, a national methodology. |
| Keywords: | Environmental Economics and Policy, Farm Management |
| Date: | 2019–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:ags:jhimwo:285071&r=all |
| By: | Enrico Botta |
| Abstract: | The paper discusses the implications of the low-carbon transition for workers and the relevant lessons-learnt in previous industrial restructuring experiences. The evidence suggests that, while climate policies are likely to have a modest impact on aggregate employment, workers in certain regions and industries can be more severely affected. The transition may also have gender-differentiated impacts: men represent the largest share of the workforce of most negatively affected industries (e.g. coal-mining) while the growth of the renewable power generation sector, which exhibits a relatively more gender-balanced workforce, suggests that female employment may increase in the traditionally male-dominated energy sector. Lessons from the case-studies underline that a suite of polices is necessary to manage the structural adjustment process, including structural reforms and skills policies. Importantly, the low-carbon transition differentiates itself from previous restructuring experiences because of its policy-driven nature and the possibility to finance structural adjustment measures through carbon-pricing revenues. |
| Date: | 2019–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envddd:2019/04-en&r=all |
| By: | Janjala Chirakijja; Seema Jayachandran; Pinchuan Ong |
| Abstract: | This paper examines how the price of home heating affects mortality in the US. Exposure to cold is one reason that mortality peaks in winter, and a higher heating price increases exposure to cold by reducing heating use. It also raises energy bills, which could affect health by decreasing other health-promoting spending. Our empirical approach combines spatial variation in the energy source used for home heating and temporal variation in the national prices of natural gas versus electricity. We find that a lower heating price reduces winter mortality, driven mostly by cardiovascular and respiratory causes. |
| JEL: | I1 J14 Q41 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25681&r=all |
| By: | Didier Grouset (RAPSODEE - Centre de recherche d'Albi en génie des procédés des solides divisés, de l'énergie et de l'environnement - IMT Mines Albi - IMT École nationale supérieure des Mines d'Albi-Carmaux - CNRS - Centre National de la Recherche Scientifique); Cyrille Ridart (ALBHYON Technopole Innoprod ALBI) |
| Abstract: | This chapter is dedicated to the optimization of cost and energy consumption for compression, transportation, and storage of hydrogen for vehicle refueling in the current hydrogen emerging market. Thus, it considers only small refueling stations (20–200 kg/day) and current costs. It considers two cases: the case of a refueling station on the site of the hydrogen production and the case of a production unit supplying hydrogen to several distant refueling stations. In the case of production and distribution located on the same site, no transportation has to be considered, and the energy consumption is mainly due to hydrogen compression and cooling. In a reference case corresponding to good current practice, the study calculates an energy need of 3.5 or 4.4 kWh per kg of hydrogen transferred to a car tank at 35 or 70 MPa, respectively. It then shows that this need can be reduced by > 25% through judicious use of four or five stages of buffers organized in a pressure cascade for the filling of a tank at 70 MPa. Whereas the total volume of the staged buffers is higher than the volume of a single very-high-pressure buffer (VHPB), the investment cost is only slightly higher; then the energy saving results in short payback times for the extra investment in staged buffers. In the case of a production unit supplying hydrogen to several distant hydrogen refueling stations, energy for transportation by truck and for re-compression on the distribution site must be added. Current off-site distribution practices are used as a reference case; it considers the transportation of hydrogen in 20 MPa steel bottle bundles or trailer tubes and the re-compression of all the hydrogen to the VHPB. To lower the energy spend, solutions are proposed and quantified, such as using small transportable containers of higher pressure light composite bottles and bypassing the compressor as much as possible. Energy needs and CO2 emissions are estimated and compared for the reference case and the innovative cases. The study shows that, even if the investment in composite bottles is high, the resulting overall cost is definitely lower and CO2 emissions can largely be decreased. The size effect appears very important; cost decreases by 60% from 20 to 200 kg/day. |
| Keywords: | Hydrogen,CO2 emissions,compression,storage,transportation,energy,costs |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01877835&r=all |
| By: | Massimo Filippini (ETH Zurich, Switzerland); Nilkanth Kumar (ETH Zurich, Switzerland); Suchita Srinivasan (ETH Zurich, Switzerland) |
| Abstract: | Bounded rationality is an example of an important behavioral failure responsible for the energy-efficiency gap, whereby agents under-invest in energy-efficient technologies. One means of addressing this is by improving the energy-related financial literacy of households, which is defined as the combination of energy knowledge and cognitive abilities that are needed in order for agents to take sound decisions with respect to investment in durables. This has been found to improve the ability of agents to calculate the lifetime costs of technologies. The objective of this paper is to evaluate the determinants of energy-related financial literacy of respondents from about 2000 urban households in the Terai region of Nepal, and to analyze whether this ability has an effect on replacement attitudes of households regarding inefficient technologies. Using a novel household survey data, we find that respondents have low levels of energy-related financial literacy. While we find differences in the role of some socio-economic determinants of energy-related financial literacy compared to previous studies from developed countries, we also find certain common results, such as female respondents having lower scores. Additionally, we find that higher levels of energy-related financial literacy, especially stronger computational abilities, lead to more rational attitudes with regards to replacement of old appliances. As development has brought, and continues to bring, more households in low and middle-income countries (LMICs) closer to technologies of their liking, ensuring the adoption of energy-efficient technologies may be critical for ensuring sustainable development in the decades to come, and higher energy-related financial literacy may be one means of achieving that. |
| Keywords: | Bounded rationality, Energy literacy, Financial literacy, Households, Nepal |
| JEL: | D12 D80 Q41 Q48 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-315&r=all |
| By: | Foroni, Claudia; Ravazzolo, Francesco; Rossini, Luca |
| Abstract: | We analyse the importance of macroeconomic information, such as industrial production index and oil price, for forecasting daily electricity prices in two of the main European markets, Germany and Italy. We do that by means of mixed-frequency models, introducing a Bayesian approach to reverse unrestricted MIDAS models (RU-MIDAS). We study the forecasting accuracy for different horizons (from 1 day ahead to 28 days ahead) and by considering different specifications of the models. We find gains around 20% at short horizons and around 10% at long horizons. Therefore, it turns out that the macroeconomic low frequency variables are more important for short horizons than for longer horizons. The benchmark is almost never included in the model confidence set. JEL Classification: C11, C53, Q43, Q47 |
| Keywords: | density forecasting, electricity prices, forecasting, MIDAS models, mixed-frequency VAR models |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192250&r=all |
| By: | Andreas Schäfer (University of Bath, UK); Anna Stünzi (ETH Zurich, Switzerland) |
| Abstract: | In an OLG model with multiple steady states we analyse the impact of endogenous environmental policies on the relevance of history and expectations for the equilibrium selection. In a polluting regime environmental preferences cause an increasing energy tax which raises the risk that the economy transits to the inferior equilibrium under pessimistic expectations. However, higher environmental preferences imply an earlier switch to the clean energy regime. Then, the conflict between production and environmental preferences is resolved and the prospects to select the superior equilibrium improve, since positive expectations become more relevant. In an empirical analysis we find that people with environmental preferences tend to have more optimistic expectations about economic development. Using these findings to analyse the steady state dynamics implies that agents with environmental preferences support higher energy taxes and switch faster to clean production. Due to their optimism, the likelihood to reach the superior stable steady state increases. |
| Keywords: | Expectations, Multiple Equilibria, Endogenous Taxation, Green Preferences |
| JEL: | Q43 O44 Q50 O11 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-305&r=all |
| By: | Don Fullerton; Chi L. Ta |
| Abstract: | Improvements in energy efficiency can reduce costs of consuming services from cars and appliances and result in positive rebound that offsets part of the direct energy reduction. Our analytical general equilibrium model decomposes rebound into direct and indirect effects. A costless technology shock has positive rebound as in prior literature, but a pre-existing energy efficiency standard can negate direct energy savings from that shock. For increased stringency of energy efficiency standards, however, we show how income effects reduce energy use for both services and other goods. We show exactly when those increased costs imply negative total rebound. |
| JEL: | Q48 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7550&r=all |
| By: | Sebastian Rausch (ETH Zurich, Switzerland); Hagen Schwerin (ETH Zurich, Switzerland) |
| Abstract: | We develop a general equilibrium growth model with capital and energy use to examine the hypothesis that economy-wide energy use increases with energy efficiency. To obtain energy use that would have occurred in the absence of energy efficiency changes, chosen energy efficiency is induced by technological change. Viewing technological change in form of changes in the cost of capital and energy producing energy services enables us to control for the sources of energy efficiency improvements in a counterfactual setting. Calibrating the model to the post-WWII U.S. economy, we find that higher energy efficiency increased rather than reduced energy use, because lower capital cost enhanced energy use by more than the increase in energy cost reduced it. This casts strong doubts on the view that energy-saving technological change has lowered fossil energy use. |
| Keywords: | energy use, energy efficiency, energy rebound, efficiency paradox, Jevons paradox, energy-saving technological change, investment-specific technological change, general equilibrium, putty clay |
| JEL: | D13 E23 O30 O41 Q43 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-299&r=all |
| By: | Caspar Sauter; Jean-Marie Grether; Nicole A. Mathys |
| Abstract: | We construct the world’s centers of gravity for human population, GDP and CO2 emissions by taking the best out of five recognized data sources covering the last two centuries. On the basis of a novel distorsion-free representation of these centers of gravity, we find a radical Western shift of GDP and CO2 emissions centers in the 19th century, in sharp contrast with the stability of the demographic center of gravity. Both GDP and emissions trends are reversed in the first half of the 20th century, after World War I for CO2 emissions, after World War II for GDP. Since then, both centers are moving eastward at an accelerating speed. These patterns are perfectly consistent with the lead of Western countries starting the industrial revolution, the gradual replacement of coal by oil and gas as alternative sources of energy, and the progressive catch up of Asian countries in the recent past. |
| Keywords: | center of gravity, growth, CO2 emissions, GDP, population, great divergence |
| JEL: | Q56 Q59 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7557&r=all |
| By: | Bataille, Marc; Bodnar, Olivia; Steinmetz, Alexander; Thorwarth, Susanne |
| Abstract: | While markets have been liberalized all over the world, incumbents often still hold a dominant position, e.g. on energy markets. Thus, wholesale electricity markets are subject to market surveillance. Nevertheless, consolidated findings on abusive practices of market power and their cause and effect in these markets are scarce and non-controversial market monitoring practices fail to exist. Right now, the Residual Supply Index (RSI) is the most important instrument for market monitoring. However, a major drawback of this index is its focus on just one specific aspect of market power in wholesale electricity markets whereas different consequences of market power are possible. Hence, markets could be distorted in several ways and we propose the 'Return on Withholding Capacity Index' (RWC) as a complementary index to the RSI. The index is a measure of the firms' incentive to withhold capacity. The benefits and practicability of the RWC is shown by an application on data for the German-Austrian electricity wholesale market in 2016. |
| Keywords: | Market Power,Electric Power Markets,Residual Supply Index |
| JEL: | L11 L43 L94 K23 C13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:311&r=all |
| By: | Bodansky, Daniel M.; Hoedl, Seth A.; Metcalf, Gilbert E.; Stavins, Robert N. |
| Abstract: | Negotiations pursuant to the Durban Platform for Enhanced Action appear likely to lead to a 2015 Paris agreement that embodies a hybrid climate policy architecture, combining top-down elements, such as for monitoring, reporting, and verification, with bottom-up elements, including “nationally determined contributions” from each participating country, detailing what it intends to do to reduce emissions, based on its national circumstances. For such a system to be cost-effective—and thus more likely to achieve significant global emissions reductions—a key feature will be linkages among regional, national, and sub-national climate policies. By linkage, we mean a formal recognition by a greenhouse gas mitigation program in one jurisdiction (a regional, national, or sub-national government) of emission reductions undertaken in another jurisdiction for purposes of complying with the first jurisdiction’s mitigation program. We examine how a future international policy architecture could help facilitate the growth and operation of a robust system of international linkages of regional, national, and sub-national policies. Several design elements merit serious consideration for inclusion in the Paris agreement, either directly or by establishing a process for subsequent international elaboration. At the same time, including detailed linkage rules in the core agreement is not desirable because this could make it difficult for rules to evolve in light of experience. |
| Keywords: | Environmental Economics and Policy |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemcl:202114&r=all |
| By: | Seuk Wai, Phoong (Faculty of Business and Accountancy, University of Malaya, Malaysia Author-2-Name: Seuk Yen, Phoong Author-2-Workplace-Name: Department of Mathematics, Faculty Science and Mathematics, Sultan Idris Education University, 35900 Tanjung Malim, Perak, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | Objective – The removal of fuel subsidies by the Malaysian government in 2014 has been implement with the managed float system for fuel prices. Methodology/Technique – This study investigates the impact of the managed floating system of crude oil prices on the Malaysian economy using ARDL approach by looking at macroeconomic variables such as inflation, economic growth and unemployment rates. Findings – The results show that all of the variables have short lived relationship with oil prices whereby inflation and economic growth are positively related to oil prices. However, unemployment rate has a negative relationship with the changes of WTI crude oil prices. Novelty – The major input in the economy of Malaysia contributes to a positive relationship between inflation and oil prices, whilst the contribution of Malaysia being an oil-producing country results in the positive relationship of economic growth and oil price. Likewise, as oil prices are high, the increase in demand results in increase in job opportunities. Lastly, the correlation test shows that inflation and economic growth have a high positive correlation while unemployment rate has a low negative correlation with oil price. Type of Paper: Empirical. |
| Keywords: | ARDL; Crude Oil Price; GDP; Inflation; Unemployment. |
| JEL: | E10 E30 E39 |
| Date: | 2019–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jber171&r=all |
| By: | Lucas Bretschger (ETH Zurich, Switzerland); Alexandra Vinogradova (ETH Zurich, Switzerland) |
| Abstract: | Climate economics has been criticized for ignoring uncertainty, catastrophic changes, and tipping points (Stern 2016). The present paper addresses these issues. We consider multiple climate shocks which are recurring, random, uninsurable, and potentially large. The associated damages and the hazard rate are endogenously driven by the stock of greenhouse gases. We provide closed-form solutions for the optimal climate policy and the growth rate of the economy. The optimal path is characterized by a constant growth rate of consumption and of the capital stock until a shock arrives, triggering a downward jump in both variables. The mitigation policy consists of a simple and intuitive rule which requires spending a constant fraction of output on emissions abatement. In a quantitative assessment we show that under favorable conditions the abatement expenditure represents 0.5% of output, equivalent to $37 per ton carbon. Under less favorable conditions with respect to abatement technology and damages, coupled with a relative risk aversion which exceeds unity, the abatement propensity increases to 2.9%, equivalent to $212 per ton carbon, and it jumps to a striking 10% in the pessimistic scenario involving severe shocks and a possible crossing of a tipping point. |
| Keywords: | Climate policy, uncertainty, natural disasters, endogenous growth |
| JEL: | O10 Q52 Q54 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18/2891&r=all |
| By: | Hans Gersbach (ETH Zurich, Switzerland); Marie-Catherine Riekhof (ETH Zurich, Switzerland) |
| Abstract: | Innovation clusters combining public and private effort to develop breakthrough technologies promise greater technological advances to slow down climate change. We use a multi-country model with emissions permit trade to examine how international climate policy can incentivize countries to create such clusters. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in complementary research infrastructure. We construct a mechanism that leads to innovation clusters. It is a combination of low permit endowments for the country with the lowest costs to build the needed infrastructure, compensation for this country by profits from permit trade, and maximal possible permit endowments for the remaining countries. |
| Keywords: | International permit markets, Carbon prices, Innovation clusters, Research infrastructure, Applied R&D, Climate change mitigation, Externalities |
| JEL: | H23 Q54 O32 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-303&r=all |
| By: | Vo, D.H.; Tran, N.P.; Duong, T.N.-T.; McAleer, M.J. |
| Abstract: | The purpose of the paper is to estimate market risk for the ten major industries in Vietnam. The focus is on the Energy sector, which has been designated as one of the four key industries, together with Services, Food, and Telecommunications, targeted for economic development by the Vietnam Government through to 2020. Oil and Gas is a separate energy-related major industry. The data set is from 2009 to 2017, which is decomposed into two distinct sub-periods after the Global Financial Crisis (GFC), namely the immediate post-GFC (2009-2011) period and the normal (2012-2017) period, in order to identify the behaviour of market risk for Vietnam major industries. Two widely-used approaches to measure and analyze risk are used in the empirical analysis, namely Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR). The empirical findings indicate that Energy and Pharmaceuticals are the least risky industries, whereas Oil and Gas and Securities have the greatest risk. In general, there is strong empirical evidence that the four key industries display relatively low risk. For public policy, the Vietnam Government’s pro-active emphasis on the targeted industries, including Energy, to achieve sustainable economic growth and national economic development, seems to be working effectively |
| Keywords: | Market risk, Energy, Industries, Value-at-Risk, Conditional Value-at-Risk, Sustainable growth, Economic development, Vietnam |
| JEL: | C10 G10 E32 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:115616&r=all |
| By: | Shayegh, Soheil; Bosetti, Valentina; Dietz, Simon; Emmerling, Johannes; Hambel, Christoph; Jensen, Svenn; Kraft, Holger; Tavoni, Massimo; Traeger, Christian; Van der Ploeg, Rick |
| Abstract: | Over the last few decades, integrated assessment models (IAM) have provided insight into the relationship between climate change, economy, and climate policies. The limitations of these models in capturing uncertainty in climate parameters, heterogeneity in damages and policies, have given rise to skepticism about the relevance of these models for policy making. IAM community needs to respond to these critics and to the new challenges posed by developments in the policy arena. New climate targets emerging from the Paris Agreement and the uncertainty about the signatories’ commitment to Nationally Determined Contributions (NDCs) are prime examples of challenges that need to be addressed in the next generation of IAMs. Given these challenges, calculating the social cost of carbon requires a new framework. This can be done by computing marginal abatement cost in cost-effective settings which provides different results than those calculated using constrained cost-benefit analysis. Here we focus on the areas where IAMs can be deployed to asses uncertainty and risk management, learning, and regional heterogeneity in climate change impacts. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:273369&r=all |
| By: | Sergei Kulakov; Florian Ziel |
| Abstract: | The main focus of researchers in energy markets is typically placed on the analysis of the supply side. The demand side, despite its critical importance, still requires a more profound academic investigation. In particular, the number of studies on the demand elasticity in a wholesale market is limited to merely several pieces. In this paper we extend this field of study and propose a new method for determining the demand elasticity. More specifically, we decompose the data observed in the wholesale market into individual supply and demand schedules of the market participants. These schedules are then used to construct a fundamental model of an electricity market. The main feature of our fundamental model is that our demand curve is not perfectly inelastic and is a better approximation of the true demand curve. Hence, our approach allows us to precisely compute the elasticity of the demand curve in an electricity market. Moreover, we obtain a deeper understanding of the bidding behavior of the market participants and hence can make more thorough inferences about the functioning of an electricity market or produce more accurate forecasts. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.11383&r=all |
| By: | William Brock; Anastasios Xepapadeas |
| Abstract: | We study climate change policies using the novel pattern scaling approach of regional transient climate response, to develop a regional economy-climate model under conditions of deep uncertainty associated with: (i) temperature dynamics, (ii) regional climate change damages, and (iii) policy in the form of carbon taxes. We analyze cooperative and noncooperative outcomes. Under deep uncertainty, robust control policies are more conservative regarding emissions, the higher the aversion to ambiguity is, while damage uncertainty seems to produce more conservative behavior than climate dynamics uncertainty. As concerns about uncertainty increase, cooperative and noncooperative policies tend to move close together. Asymmetries in concerns about uncertainty tend to produce large deviations in regional emissions policy at the noncooperative solution. We calculate the cost of robustness in terms of welfare. If aversion to ambiguity is suciently high, optimal regulation might not be possible. The result is associated with the existence of regional hot spots and temperature spillovers across regions, a situation which emerges in the real world. In such cases, deep uncertainty about the impacts of climate change makes robust regulation infeasible. We show that, if resources are devoted to learning, which reduces uncertainty concerns, robust regulation is facilitated. |
| Keywords: | Regional temperature anomalies, Deep uncertainty, Cooperative solution solutions, Robust Open Loop Nash Equilibrium, Cost of Robustness, Learning |
| JEL: | Q54 Q58 D81 |
| Date: | 2019–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:aue:wpaper:1903&r=all |
| By: | Leitão, Nuno Carlos |
| Abstract: | The climate change has inspired the interest of the academic community in the most diverse areas of knowledge. This study tests and revisited the environmental Kuznets curve assumptions for Portugal. The econometric strategy used in this research is time series (ARIMA model, OLS estimator, ARCH regression, VAR model, and Granger causality) for the time period 1980-2013.The econometric results show that the income per capita and squared income per capita are according to the expected signs, i.e. a positive impact of income per capita on carbon dioxide emissions, and a negative effect of squared income per capita on carbon dioxide emissions. The empirical study also demonstrates that Portugal presents a dependence on energy consumption. The openness trade and foreign direct investment are negatively correlated with carbon dioxide emissions. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:273122&r=all |
| By: | Hirth, Lion; Schlecht, Ingmar |
| Abstract: | In zonal electricity markets, such as Europe’s, system operators relieve congested power lines within bidding zones using out-of-market measures. One such measure is “redispatching” power plants, i.e. increasing the output of one power station while decreasing the output of another. Traditionally, generators have often been legally obliged to participate in redispatch and were subsequently compensated by the system operator for costs in-curred. In recent years, with increasing pressure on power grids, numerous proposals have been made, including one by the European Commission, to organize redispatch through voluntary markets. In this paper, we introduce a simple graphical model of a zonal spot market with a locational, voluntary redispatch market to show that such a market-based solution should not be used in this setting. We solve the model explicitly by determining optimal bidding strategies and Nash equilibrium prices. We show that market parties anticipate the redispatch market and bid strategically in the spot market – the so-called increase-decrease game. As a result, grid congestion is aggravat-ed, producers extract windfall profits, financial markets are distorted, and perverse investment incentives emerge. Despite claims to the contrary, we show that such gaming is possible absent market power, i.e. if all generators ultimately bid marginal cost. At the root of the problem is inconsistent power market design: combining a regional with a locational market yields undue arbitrage opportunities that rational firms exploit. We conclude that such inconsistent market design should be avoided. |
| Keywords: | Redispatch,Inc-Dec |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:194292&r=all |
| By: | Lucas Bretschger (ETH Zurich, Switzerland); Christos Karydas (ETH Zurich, Switzerland) |
| Abstract: | The paper develops the Basic Climate Economic (BCE) model featuring the core elements of climate economics and climate policy. The BCE model incorpo- rates fossil stock depletion, pollution stock accumulation, endogenous growth, and climate-induced capital depreciation. We first use graphical analysis to show the effects of climate change and climate policy on economic growth. In- tuition for the different model mechanisms, the functional forms, and the effects of different climate policies is provided. We then show the model equations in mathematical terms to derive closed-form solutions and to run model simula- tions relating to the graphical part. Finally, we compare our setup to other models of climate economics. |
| Keywords: | Climate change, endogenous growth, climate policy, resource use, stock pollution |
| JEL: | Q43 O47 Q56 O41 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-296&r=all |
| By: | Sebastien Houde (ETH Zurich, Switzerland); Erica Myers (University of Illinois, United States of America) |
| Abstract: | Quantifying heterogeneity in consumers’ misperceptions of product costs is crucial for policy design. We illustrate this point in the energy context and the design of Pigouvian policies. We estimate non-parametric distributions of perceptions of energy costs in the U.S. appliance market using a revealed preference approach. We show that the average degree of misperception is misleading— while the largest share of consumers correctly perceives energy costs, a significant share undervalues them, and smaller shares either significantly overvalues or completely ignores them. We show that setting a tax based on mean misperception deviates substantially from the optimal tax that accounts for heterogeneous misperceptions. While correctly characterizing misperception is crucial for setting optimal Pigouvian taxes for externalities, it is less important for setting optimal standards. We find that standards can largely outperform taxes. Standards’ advantage is they reduce variance in energy operating costs relative to taxes, which internalizes distortionary effects from misperceptions. |
| Keywords: | demand estimation, misperceptions, energy efficiency gap, behavioral welfare economics |
| JEL: | Q41 Q50 L15 D12 D83 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-314&r=all |
| By: | Mala Raghavan |
| Abstract: | The paper analyses the importance of supply versus demand shocks on the global oil market from 1974 to 2017, using a parsimonious structural vector autoregressive moving average (SVARMA) model. The superior out-of-sample forecasting performance of the reduced form VARMA compared to VAR alternatives advocates the suitability of this framework. We specifically account for the changes in the oil market over three distinctive sub-periods - pre moderation, great moderation and post moderation periods, to provide a means of identifying the changing nature of shock transmission mechanism across times. The findings shed some light on the effects of supply versus demand related oil shocks under different economic environment. Oil supply shocks explain large fraction of the movements in the global oil market in the pre and post moderation periods, i.e. during the slower economic growth periods. The importance of global activity shock on oil price movements is obvious during the 2003-2008 boom period. The oil specific shock has an interesting transmission path on the global economic activity, where the global activity responded positively and negatively during the global economic expansion and contraction respectively, emphasising the precautionary nature of the shock. |
| Keywords: | VARMA models, Oil price shocks, Global oil market, Impulse responses, Forecasting |
| JEL: | C32 E32 Q43 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2019-25&r=all |
| By: | Christos Karydas (ETH Zurich, Switzerland); Anastasios Xepapadeas (Athens University of Economics and Business, Greece) |
| Abstract: | There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with rare disasters related to climate change. The novelty of this paper lies in linking carbon emissions and portfolio composition with the stochastically-varying probability of these events. Using theory and simulations we study the implications of the imminent threat of climate change on different market measures and on the participation of carbon-intensive assets in the aggregate portfolio, as well as the conditions that lead to these assets becoming stranded. Our result suggest that climate change implies a positive and increasing risk premium, with the overall equity premium depending on the volatility of the stochastic process that governs climate change risk. Transition risks lower substantially the participation of carbon intensive assets in the market portfolio, which should be fully de-carbonized by the end of the century for the worst IPCC emissions scenario. |
| Keywords: | Renewable Climate change, Equity premium, Rare events, Fat tails, Stranded assets |
| JEL: | E43 G11 G12 Q51 Q54 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-311&r=all |
| By: | Besstremyannaya, Galina; Dasher, Richard; Golovan, Sergei |
| Abstract: | A considerable amount of research has shown that a carbon tax combined with research subsidies may be regarded as optimal policy for encouraging the spread of low-carbon technologies for the benefit of society. The paper exploits the macroeconomic approach of endogenous growth models with technological change in order to make a comparative assessment of the impact of such policy measures on economic growth in the US and Japan in the medium and long term. Our estimates reveal several important differences between Japanese and US energy firms: lower elasticity of the innovation production function in R&D expenditure, lower probability of radical innovation, and predominance of dirty technologies in Japan. This may explain our quantitative findings of stronger reliance on carbon tax in Japan as opposed to research subsidies in the US. |
| Keywords: | endogenous growth,technological change,innovation,carbon tax,energy |
| JEL: | O11 O13 O47 Q43 Q49 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:797&r=all |
| By: | Davide Cerruti (ETH Zurich, Switzerland); Claudio Daminato (ETH Zurich, Switzerland); Massimo Filippini (ETH Zurich, Switzerland) |
| Abstract: | Isolating the role of limited knowledge, psychological frictions and policy characteristics is key when evaluating a public program and designing future policies. This paper explores the role of awareness about the presence of fiscal programs in determining their impact on individual choices. Our identification strategy exploits quasi-experimental variation in the introduction of fiscal incentives aimed at promoting the purchase of energy efficient vehicles, and a direct measure of policy awareness at the individual level. We find an important impact of awareness on consumers’ vehicle choices, highlighting that limited awareness may represent a critical barrier to the effectiveness of public programs. |
| Keywords: | Policy awareness, Fiscal programs, Environmental taxation, Vehicle choices |
| JEL: | D12 D83 H23 H31 Q48 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:19-316&r=all |
| By: | d’Adda , Giovanna; Gao , Yu; Golman, Russell; Tavoni, Massimo |
| Abstract: | Environmental policies based on information provision are widespread, but have often proven ineffective. One possible explanation for information’s low effectiveness is that people actively avoid it. We conduct an online field experiment on air conditioning usage to test the theory of moral wiggle room, according to which people avoid information that would compel them to act morally, against the standard theory of information acquisition, and identify conditions under which each theory applies. In the experiment, we observe how exogenously imposing a feeling of moral obligation to reduce air conditioning usage and exploiting natural variation in the cost of doing so, given by outside temperature, influences subjects’ avoidance of information about their energy use impacts on the environment. Moral obligation increases information avoidance when it is hot outside, consistent with the moral wiggle room theory, but decreases it when outside temperature is low. Avoiding information positively correlates with air conditioning usage. These findings provide guidance about tailoring the use of nudges and informational tools to the decision environment. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:269535&r=all |
| By: | Sebastien Houde (ETH Zurich, Switzerland) |
| Abstract: | This paper shows that firms respond strategically to ENERGY STAR, a voluntary certification program for energy-efficient products. Firms offer products that bunch at the certification requirement, differentiate certified products in energy and non-energy dimensions, and charge a price premium on certified products. In the US refrigerator market, the magnitude of the price premium corresponds exactly to the average willingness to pay consumers have for certified products. This suggests that firms have the ability to extract most of the consumer surplus associated with certified products. If firms had to pay a fee to use the certification, a policy recently suggested, most of the cost should then be borne by consumers. I illustrate how such policy would impact the adoption of energy-efficient appliances. |
| Keywords: | environmental certification, firm behavior, energy efficiency, imperfect competition |
| JEL: | L13 L15 Q48 Q58 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-292&r=all |
| By: | Ceccarelli, Marco; Ramelli, Stefano; Wagner, Alexander F |
| Abstract: | In April 2018, the investment platform and financial advisor Morningstar introduced a new eco-label for mutual funds, the Low Carbon Designation (LCD). The unexpected release of this label induced responses by (1) investors and (2) mutual funds. First, investors flocked to funds labeled as Low Carbon. Through the end of 2018, such funds enjoyed a 3.1% increase in assets compared to otherwise similar funds. This effect was distinct from that of more generic sustainability ratings ("Globes"), and it reversed for funds that lost the label in August or November 2018. Second, managers of just-missing funds adjusted their holdings towards lower carbon risk and lower fossil fuel involvement, the two criteria used to assign the LCD. Both the rewards-for-LCD and the moving-towards-LCD effects are stronger for European funds, retail funds, funds with weak financial performance, and low-sustainability funds. Overall, the findings suggest that as investors become more sensitive to the topic of climate change, financial intermediaries also use existing investment vehicles to respond to the increasing demand for climate-conscious investment products. |
| Keywords: | behavioral finance; climate change; eco-labels; investor preferences; Mutual funds; Sustainable Finance |
| JEL: | D03 G02 G12 G23 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13599&r=all |
| By: | David Csercsik (Faculty of Information Technology and Bionics, Pázmány Péter Catholic University); Franz Hubert (School of Business and Economics Humboldt-Universität zu Berlin, Germany); Balazs R. Sziklai (Centre for Economic and Regional Studies Hungarian Academy of Sciences, and Faculty of Economics, Corvinus University Budapest); Laszlo A. Koczy (Centre for Economic and Regional Studies Hungarian Academy of Sciences, and Faculty of Economic and Social Sciences, Budapest University of Technology and Economics) |
| Abstract: | Existing cooperative game theoretic studies of bargaining power in gas pipeline systems are based on the so called characteristic function form (CFF). This approach is potentially misleading if some pipelines fall under regulated third party access (TPA). TPA, which is by now the norm in the EU, obliges the owner of a pipeline to transport gas for others, provided they pay a regulated transport fee. From a game theoretic perspective, this institutional setting creates so called "externalities", the description of which requires partition function form (PFF) games. In this paper we propose a method to compute payoffs, reflecting the power structure, for a pipeline system with regulated TPA. The method is based on an iterative flow mechanism to determine gas flows and transport fees for individual players and uses the recursive core and the minimal claim function to convert the PPF game back into a CFF game, which can be solved by standard methods. We illustrate the approach with a simple stylized numerical example of the gas network in Central Eastern Europe with a focus on Ukraine’s power index as a major transit country. |
| Keywords: | externalities, networks, natural gas, cooperative game theory, recursive core |
| JEL: | C61 C71 Q40 Q48 D86 L14 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1904&r=all |
| By: | Alexander Mackie; Ivan Haščič |
| Abstract: | This paper reviews the empirical evidence on the socioeconomic distribution of exposure to a selection of common environmental risks such as air and noise pollution and natural hazards, and of access to amenities such as green space. It finds that there are many examples where disadvantaged groups within countries, regions or cities are exposed to greater environmental risks, and ultimately greater potential harm or damages, or have poorer access to amenities than more advantaged groups. However, this pattern is not ubiquitous, there are examples in the literature where no difference, or the opposite difference is observed. Next, the paper reviews the empirical literature on the distributional effects of environmental policies. It concludes that although the evidence on the direct effects of environmental policy varies by policy instrument type, the general lesson is that well-designed environmental policy reforms incorporating appropriately targeted compensation schemes (e.g. within existing social welfare systems) can neutralise direct negative distributional outcomes and generate progressive outcomes overall. |
| Date: | 2019–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envddd:2019/02-en&r=all |
| By: | Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania |
| Abstract: | This paper examines the stability of International Environmental Agreements (IEAs) in an economy with trade. We extent the basic model of the IEAs by letting countries choose emission taxes and import tariffs as their policy instruments in order to manage climate change and control trade. We define the equilibrium of a three-stage emission game. In the first stage, each country decides whether or not to join the agreement. In the second stage, countries choose simultaneously - cooperatively or non-cooperatively - tariff and tax levels. In the third stage, taking countries’ decisions as given, firms compete a la Cournot in the product markets. Numerical analysis illustrates that the interaction between trade and environment policies is essential in enhancing cooperation. Contrary to the IEA model, stable agreements are larger and more efficient in reducing aggregate emissions and improving welfare. Moreover, the analysis shows that the size of a stable agreement increases in the number of countries affected by the externalities. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:274851&r=all |
| By: | Cattaneo, Cristina |
| Abstract: | This paper has two objectives. First it provides a correlation between internal and external barriers to energy efficiency and consumer behaviour related to two domains. It evaluates behaviour related to energy curtailment, which represents routine, repetitive effort to decrease consumption on a day-to-day basis. It also considers behaviour related to investments, which are one time actions such as purchasing new energy efficiency technologies.. Second, it assesses the effectiveness of the different interventions and programs in addressing the two types of barriers (internal and external) with the aim of informing the policy debate. By assessing the value of a large number of interventions, this paper is one of the first that combines in a unified framework the main findings of different disciplines, from economics to psychology. |
| Keywords: | Resource /Energy Economics and Policy |
| Date: | 2018–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:269536&r=all |
| By: | Bošković, Branko; Chakravorty, Ujjayant; Pelli, Martino; Risch, Anna |
| Abstract: | Fuelwood collection is often cited as the most important cause of deforestation in developing countries. Use of fuelwood in cooking is a leading cause of indoor air pollution. Using household data from India, we show that households located farther away from the forest spend more time collecting. Distant households are likely to sell more fuelwood and buy less. That is, lower access to forests increases fuelwood collection and sale. This counter-intuitive behavior is triggered by two factors: lower access to forests (a) increases the fixed costs of collecting, which in turn leads to more collection; and (b) drives up local fuelwood prices, which makes collection and sale more profitable. We quantify both these effects. Using our estimates we show that a fifth of the fuelwood collected is consumed outside of rural areas, in nearby towns and cities. Our results imply that at the margin, fuelwood scarcity may lead to increased collection and sale, and exacerbate forest degradation. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemci:274849&r=all |
| By: | Adrien Nguyen-Huu (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); Antonin Pottier (EHESS - École des hautes études en sciences sociales) |
| Abstract: | In this article, we analyze the transition dynamics, what Hicks called the traverse, from one equilibrium toward another one, and the conditions for such a transfer in a bi-sectoral economy under technological shocks. To this end, we revisit the Hick Traverse model and add to it inter-sectoral relations in the form of intersectoral consumption of energy for both the energy and the manufacturing sector. We investigate two distinct assumptions about consumption behavior of manufactured goods. We show that our model extends Hicks' one and leads to the same condition for a good traverse path, independently from the net energy return. We highlight that energy production technologies nevertheless provide constrains on viable states of the economy and its maximal growth rate, and that energy consumption technologies impact investment and prices crucially. |
| Keywords: | energy economy,traverse analysis,Hicks Traverse,fixed production technology,equilibrium analysis,sectoral economy |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-01966173&r=all |
| By: | Hagen Schwerin (ETH Zurich, Switzerland) |
| Abstract: | This paper develops a mechanism to correct production externalities between several parties, such as externalities motivating environmental policy between countries, using asset ownership. Efficiency can be obtained if each party retains less than the full share of their own gain from resource use materialized in gross product. The remainder of the product can be earned by other parties - in a reciprocal way. The resulting swaps can be enforced by using bonds or stocks or with balanced trade of shares, hindering free-riding. The best international climate policy thus may be swap contracts. |
| Keywords: | Free-rider behavior, Privately provided public good, Lindahl prices, Property rights, Climate agreement, General equilibrium. |
| JEL: | D62 H23 Q58 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-293&r=all |
| By: | Fabrizio Ferriani (Bank of Italy); Giovanni Veronese (Bank of Italy) |
| Abstract: | Using more than a decade of firm-level data on U.S. oil producers' hedging portfolios, we document for the first time a strong positive link between net worth and hedging in the oil producing sector. We exploit as quasi-natural experiments two similarly dramatic oil price slumps, in 2008 and in 2014-2015, and we show how a shock to net worth differently affects risk management practices among E\&P firms depending on their initial financial positions. The link between net worth and hedging decisions holds in both episodes, but in the second oil slump we also find a significant role of leverage and credit constraints in reducing the hedging activity, a result that we attribute to the marked increase in leverage following the diffusion of the shale technology. Finally, we test if collateral constraints also impinge the extensive margin of risk management. Though in this case the effect is less apparent, our results generally points to a more limited use of linear derivative contracts when firms' net worth increases. |
| Keywords: | dynamic risk management, hedging, derivatives, shale revolution, oil price collapse |
| JEL: | D22 G00 G32 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1211_19&r=all |
| By: | Liyang Han; Thomas Morstyn; Malcolm McCulloch |
| Abstract: | Various peer-to-peer energy markets have emerged in recent years in an attempt to manage distributed energy resources in a more efficient way. One of the main challenges these models face is how to create and allocate incentives to participants. Cooperative game theory offers a methodology to financially reward prosumers based on their contributions made to the local energy coalition using the Shapley value, but its high computational complexity limits the size of the game. This paper explores a stratified sampling method proposed in existing literature for Shapley value estimation, and modifies the method for a peer-to-peer cooperative game to improve its scalability. Finally, selected case studies verify the effectiveness of the proposed coalitional stratified random sampling method and demonstrate results from large games. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.11047&r=all |
| By: | Liu, Xinghua; Li, Qiang; Chand, Satish |
| Abstract: | Estimating the economic value of clean air is of significance to both policymakers and private individuals but its quantification has proved difficult. Of the different valuation approaches used, the classic hedonic theory predicts a negative relationship between air quality and housing prices. Existing attempts to quantify this nexus is plagued by problems of endogeneity, mainly arising from omitted variables that confound air pollution with other determinants of housing prices. We employ a regression discontinuity (RD) design to estimate the impact of air pollution on house prices across a river that demarcates regions with and without coal-fired heating emanating from the Huai River Policy. This policy was decreed by the Chinese government in the 1950s that allowed burning of coal at subsidised prices for indoor heating to only the north of the Huai River. Employing quasi-experimental variation in particulate matter of 10 micrometres or less in aerodynamic diameter (PM10) generated by this arbitrary policy and regression discontinuity (RD) design based on distance from Huai River, we estimate the local average treatment effect (LATE) to provide new evidence on the capitalization of PM10 air pollution into housing values. By using panel data of 30 large cities on either side of the river for the period 2006 to 2015, we found that 1 μg/m3 reduction in average PM10 results in an approximately 1 percent increase in housing prices. The results are robust to using parametric and nonparametric estimation methods and adjustment to a rich set of covariates. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aare19:285038&r=all |
| By: | Alcorta, Ludovico; Bazilian, Morgan; De Simone, Giuseppe; Pedersen, Ascha |
| Abstract: | Energy efficiency is a foundation of any good energy policy. The economic, security, and environmental benefits of energy efficiency have been recognized for decades. We explore energy efficiency policy insights derived from survey work in developing countries in 119 projects across nine manufacturing sub-sectors. The methodology utilises financial return calculations to highlight gaps and opportunities for meeting the potential of energy efficiency projects in the manufacturing sector. We find a generally very high level of internal rates of return at a project level - with payback periods ranging from 0.9 to 2.9 years; but note that these metrics do not always appropriately influence corporate decision-making for a number of well-understood reasons. |
| Keywords: | Resource /Energy Economics and Policy |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemer:128203&r=all |
| By: | Liyang Han; Thomas Morstyn; Constance Crozier; Malcolm McCulloch |
| Abstract: | Among the various market structures under peer-to-peer energy sharing, one model based on cooperative game theory provides clear incentives for prosumers to collaboratively schedule their energy resources. The computational complexity of this model, however, increases exponentially with the number of participants. To address this issue, this paper proposes the application of K-means clustering to the energy profiles following the grand coalition optimization. The cooperative model is run with the "clustered players" to compute their payoff allocations, which are then further distributed among the prosumers within each cluster. Case studies show that the proposed method can significantly improve the scalability of the cooperative scheme while maintaining a high level of financial incentives for the prosumers. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.10965&r=all |
| By: | Julia Blasch (Institute for Environmental Studies (IVM), VU University Amsterdam); Nina Boogen (ETH Zurich, Switzerland); Claudio Daminato (ETH Zurich, Switzerland); Massimo Filippini (ETH Zurich, Switzerland) |
| Abstract: | To be aware of the potential for energy savings in their homes, individuals need specific energy-related and financial knowledge. In addition, they also need the cognitive skills to apply this knowledge, for example when it comes to the calculation of the lifetime cost of household appliances or energy-efficient renovations. This set of knowledge and skills is related to two literacy concepts, i.e. energy and financial literacy. In this paper, we propose a new concept of literacy that we call “energy-related financial literacy”. Further, we present information on the level of financial literacy as well as on the level of energy-related financial literacy for a sample of European households. In the empirical part of the paper we estimate several ordered probit models in order to analyse the determinants of the level of energy-related financial literacy, with a particular interest to understanding the role of gender. Our results show that the level of energy-related financial literacy is relatively low and heterogeneous across the European countries. Moreover, the results confirm previous findings about the gender gap in financial literacy, with males being associated with higher levels of the index. We also identify such a gender gap for energy-related financial literacy. |
| Keywords: | Energy literacy, financial literacy, energy-related financial literacy, consumer awareness, energy knowledge |
| JEL: | D12 D91 Q40 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-289&r=all |
| By: | Gillingham, Kenneth; Wagner, Gernot; Rapson, David |
| Abstract: | What do we know about the size of the rebound effect? Should we believe claims that energy efficiency improvements lead to an increase in energy use? This paper clarifies what the rebound effect is, and provides a guide for economists and policymakers interested in its magnitude. We describe how some papers in the literature consider the rebound effect from a costless exogenous increase in energy efficiency, while others examine the effects of a particular energy efficiency policy—a distinction that leads to very different welfare and policy implications. We present the most reliable evidence available quantifying the energy efficiency rebound, and discuss areas where estimation is extraordinarily difficult. Along these lines, we offer a new way of thinking about the macroeconomic rebound effect. Overall, the existing research provides little support for the so-called “backfire” hypothesis. Still, much remains to be understood, particularly relating to induced innovation and productivity growth. |
| Keywords: | Political Economy |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemer:196916&r=all |
| By: | Lucas Bretschger (ETH Zurich, Switzerland); Susanne Soretz (University of Greifswald, Germany) |
| Abstract: | Standard environmental economics prescribes policies which are optimal and implemented immediately. The paper argues that, in reality, environmental policy often deviates from the optimum and implementation is not deterministic but subject to major uncertainty and frequent change. We present a model with a stochastic policy process that affects investors’ decisions and the composition of capital. We assume that pollution is reduced by private green services and public abatement. The government subsidizes green services and taxes dirty capital albeit at a rate which may become random, causing unexpected capital write-offs. Tax jumps depend on environmental degradation and the share of green services. We show how policy uncertainty affects capital valuation and how it alters individual portfolios, green services, and economic growth. |
| Keywords: | Policy uncertainty; stranded assets; private abatement; stochastic growth |
| JEL: | Q52 Q54 O10 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18/288&r=all |
| By: | Christopher R. Knittel; Elizabeth Murphy |
| Abstract: | Anecdotes that Millennials fundamentally differ from prior generations are numerous in the popular press. One claim is that Millennials, happy to rely on public transit or ride-hailing, are less likely to own vehicles and travel less in personal vehicles than previous generations. However, in this discussion it is unclear whether these perceived differences are driven by changes in preferences or the impact of forces beyond the control of Millennials, such as the Great Recession. We empirically test whether Millennials' vehicle ownership and use preferences differ from those of previous generations using data from the US National Household Travel Survey, Census, and American Community Survey. We estimate both regression and nearest-neighbor matching models to control for the confounding effect of demographic and macroeconomic variables. We find little difference in preferences for vehicle ownership between Millennials and prior generations once we control for confounding variables. In contrast to the anecdotes, we find higher usage in terms of vehicle miles traveled (VMT) compared to Baby Boomers. Next we test whether Millennials are altering endogenous life choices that may, themselves, affect vehicles ownership and use. We find that Millennials are more likely to live in urban settings and less likely to marry by age 35, but tend to have larger families, controlling for age. On net, these other choices have a small effect on vehicle ownership, reducing the number of vehicles per household by less than one percent. |
| JEL: | L9 O18 R2 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25674&r=all |
| By: | Daniel Poh; Stephen Roberts; Martin Tegn\'er |
| Abstract: | The non-storability of electricity makes it unique among commodity assets, and it is an important driver of its price behaviour in secondary financial markets. The instantaneous and continuous matching of power supply with demand is a key factor explaining its volatility. During periods of high demand, costlier generation capabilities are utilised since electricity cannot be stored---this has the impact of driving prices up very quickly. Furthermore, the non-storability also complicates physical hedging. Owing to this, the problem of joint price-quantity risk in electricity markets is a commonly studied theme. To this end, we investigate the use of coregionalized (or multi-task) sparse Gaussian processes (GPs) for risk management in the context of power markets. GPs provide a versatile and elegant non-parametric approach for regression and time-series modelling. However, GPs scale poorly with the amount of training data due to a cubic complexity. These considerations suggest that knowledge transfer between price and load is vital for effective hedging, and that a computationally efficient method is required. To gauge the performance of our model, we use an average-load strategy as comparator. The latter is a robust approach commonly used by industry. If the spot and load are uncorrelated and Gaussian, then hedging with the expected load will result in the minimum variance position. The main contribution of our work is twofold. Firstly, in developing a multi-task sparse GP-based approach for hedging. Secondly, in demonstrating that our model-based strategy outperforms the comparator, and can thus be employed for effective hedging in electricity markets. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.09536&r=all |
| By: | NA |
| Abstract: | Over the past decades ambient concentrations of suspended particulate matter (SPM) have dramatically reduced in metropolitan areas in Japan. This paper analyzes a property-level panel dataset for 1992-2015 to measure the extent to which the improved air quality was capitalized into residential land prices. Single-equation estimates show no evidence of the capitalization. To address potential endogeneity biases, I instrument SPM concentrations with municipalities’ designation status under the Automobile NOx/PM Law (ANPL), and find that the elasticity of residential land prices with respect to SPM concentration is -0.57. Using IV approach, I also find that the improvements in SPM concentrations increased inflows of migrations. These results are confirmed with a battery of robustness checks. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aare19:285086&r=all |
| By: | Sebastien Houde (ETH Zurich, Switzerland) |
| Abstract: | A coarse certification provides simple, but incomplete information about quality. Its main rationale is to help consumers trade off dimensions of quality that are complex and lack salience. In imperfectly competitive markets, it may induce excess bunching at the certification requirement, crowd out high quality, and facilitate price discrimination. Who will ultimately benefit from a coarse certification thus depends on the degree of market power firms can exercise as well as on consumers’ sophistication in responding to such information. This paper illustrates these insights using the ENERGY STAR certification program as a case study. I investigate the incidence of the program with a structural econometric model of the U.S. appliance market. I find that the certification can crowd out energy efficiency, make consumers worst off, and have small, but heterogenous impacts on firms’ profits. In this context, the certification tends to not be welfare-improving. This conclusion, however, crucially depends on the market environment and the design of the policy - in scenarios where energy prices are low, or the certification requirement is very stringent, the ES program can be welfare-improving. |
| Keywords: | Coarse certification, consumer attention, differentiated markets, structural estimation, energy efficiency |
| JEL: | D43 L13 L15 L68 Q48 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18-290&r=all |
| By: | Asai, M.; Gupta, R.; McAleer, M.J. |
| Abstract: | The paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects. We modify the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results for daily crude oil and gold futures show that the co-jumps of the two futures have significant impacts on future co-volatility, but that the impact is negligible in forecasting weekly and monthly horizons |
| Keywords: | Commodity Markets, Co-volatility, Forecasting, Jump, Leverage Effects, Realized, Covariance, Threshold Estimation. |
| JEL: | C32 C33 C58 Q02 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:115614&r=all |
| By: | Kirill Borissov (European University at Saint Petersburg, Russia); Lucas Bretschger (ETH Zurich, Switzerland); Alexandra Vinogradova (ETH Zurich, Switzerland) |
| Abstract: | We analyze the impact of carbon prices on human capital accumulation, sectoral change, and economic growth. In our framework output is produced with dirty and/or clean technologies using skilled and unskilled labor as inputs. Carbon policy affects technology selection which transmits incentives for human capital formation. We show that a temporary policy may be sufficient for a transition to a clean economy and that such a policy also stimulates economic growth. Moreover, in the presence of inter-country knowledge spillovers, a carbon policy in the North helps human capital formation in the South and induces South’s transition to the clean steady state. |
| Keywords: | Carbon pricing, education, clean and dirty technologies, temporary policies |
| JEL: | Q43 O47 Q56 O41 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:18/285&r=all |
| By: | Jean-Claude Berthelemy (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Université Paris 1 Panthéon-Sorbonne); Vincent Nossek (FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | Les pays membres et les institutions communautaires de l'UEMOA se trouvent face à un défi de taille s'agissant d'atteindre l'objectif d'accès universel à l'électricité dans le cadre des objectifs de développement durable. L'une des principales difficultés réside dans la faible électrification des zones rurales, qui nécessite la mise en oeuvre d'une politique innovante d'électrification décentralisée. Cette note définit le cadre dans lequel une telle politique devrait être construite et fait un bilan des initiatives réalisées à ce jour. Elle formule des recommandations sur l'architecture institutionnelle à mettre en place, qui doit reposer sur un cadre de régulation et d'incitation favorable aux initiatives locales, et sur le renforcement des instruments de financement créés dans ce secteur par la Commission de l'UEMOA et la BOAD. |
| Date: | 2018–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02059466&r=all |