nep-ene New Economics Papers
on Energy Economics
Issue of 2019‒08‒12
thirty-two papers chosen by
Roger Fouquet
London School of Economics

  1. A Unit Commitment and Economic Dispatch Model of the GB Electricity Market – Formulation and Application to Hydro Pumped Storage By Chyong, C-K.; Newbery, D.; McCarty, T.
  2. Financing low-carbon generation in the UK: The hybrid RAB model By Newbery, D.; Pollitt, M.; Reiner, D.; Taylor, S.
  3. A Framework for Modeling the Dynamics of Power Markets – The EU-REGEN Model By Geoffrey J. Blanford; Christoph Weissbart
  4. Analysis and Projections of BEVs, Renewable Electricity, and GHG Reductions through 2050 By Dominguez-Faus, Rosa PhD; Kiani, Behdad PhD; Fulton, Lew PhD
  5. Prosumage of solar electricity: tariff design, capacity investments, and power system effects By Claudia G\"unther; Wolf-Peter Schill; Alexander Zerrahn
  6. Mobilising capital for sustainable infrastructure: the cases of AIIB and NDB By Griffith-Jones, Stephany; Leistner, Samuel
  7. Biogas plant optimization by increasing its exibility considering uncertain revenues By Fichtner, Stephan; Meyr, Herbert
  8. Impact of Crude Oil Price Changes on Household Consumption Expenditure in Oman (1990 -2016) By Abubakar El-Sidig A.A Mahdi
  9. The impact of air pollution and noise on the real estate market. The case of the 2013 European Green Capital: Nantes, France By LE BOENNEC, Rémy; SALLADARRE, Frédéric
  10. Investigation on Regional Decomposition Mechanism of Carbon Emission Control Target: China 2021-2030 By Shengbo FENG; Masashi TAKETANI; Yanmin HE; Tun-Yen WANG
  11. How Oil Supply Shocks Affect the Global Economy: Evidence from Local Projections By Olivier Gervais
  12. The effect of Demand Response and wind generation on electricity investment and operation By Devine, Mel; Nolan, Sheila; Lynch, Muireann Á.; O’Malley, Mark
  13. Uncertainty-Dependent and Sign-Dependent Effects of Oil Market Shocks By Bao H. NGUYEN; OKIMOTO Tatsuyoshi; Trung Duc TRAN
  14. Assessing supply security - A compound indicator By Abrell, Jan; Chavaz, Léo; Weigt, Hannes
  15. Mixed Causal-Noncausal Autoregressions: Bimodality Issues in Estimation and Unit Root Testing By Frédérique BEC; Heino BOHN NIELSEN; Sarra SAÏDI
  16. Smart and Green Buildings Features in the Decision-Making Hierarchy of Office Space Tenants: An Analytic Hierarchy Process Study By Głuszak, Michał; Gawlik, Remigiusz; Zięba, Małgorzata
  17. Does the short-term boost of renewable energies guarantee their stable long-term growth? Assessment of the dynamics of feed-in tariff policy By Milad Mousavian H.; Hamed Shakouri G.; Alinaghi Mashayekhi; Aliyeh Kazemi
  18. Disentangling the role of the exchange rate in oil-related scenarios for the European stock market By Ojea Ferreiro, Javier
  19. When Particulate Matter Strikes Cities. Social Disparities and Health Costs of Air Pollution By Matilde Giaccherini; Joanna Kopinska; Alessandro Palma
  20. How green is sugarcane ethanol? By Sant'Anna, Marcelo Castello Branco
  21. The Assessment of Impact of Competitiveness to Economic Development By Muradov, Adalat; Hasanli, Yadulla; Hajiyev, Nazim
  22. CO2-orientierte Bepreisung der Energieträger - Handlungsoptionen, Kompensationsmöglichkeiten und ihre rechtlichen Rahmenbedingungen By Steinbach, Armin; Valta, Matthias
  23. Multivariate Modeling of Natural Gas Spot Trading Hubs Incorporating Futures Market Realized Volatility By Michael Weylandt; Yu Han; Katherine B. Ensor
  24. The Greenium matters: evidence on the pricing of climate risk By Alessi, Lucia; Ossola, Elisa; Panzica, Roberto
  25. Eco-Innovation and Firm Growth in the Circular Economy: Evidence from European SMEs By Pelin Demirel; Gamze Ozturk Danisman
  26. Drop-in Ready Jet Biofuel from Carinata: A Real Options Analysis of Processing Plant Investments By Zhao, Chong; Colson, Gregory J.; Karali, Berna; Philippidis, George
  27. Corporate responses to public pressures and price increases:Evidence from Japan's electricity crisis By Hiroko Okajima; Shigeharu Okajima; Kenji Takeuchi
  28. Sustainable Business Models: A Review By Saeed Nosratabadi; Amir Mosavi; Shahaboddin Shamshirband; Edmundas Kazimieras Zavadskas; Andry Rakotonirainy; Kwok Wing Chau
  29. The accounting-and-finance of a solar photovoltaic plant: Economic efficiency of a replacement project By Magni, Carlo Alberto; Marchioni, Andrea
  30. Repeal of the Clean Power Plan: Who Gains and Who Loses? By Chen, Xiaoguang; Wang, Weiwei; Oliver, Anthony; Khanna, Madhu
  31. Optimal auctions for networked markets with externalities By Benjamin Heymann; Alejandro Jofr\'e
  32. Measuring liquidity in gas markets: The case of the UK National Balancing Point By de Menezes, Lilian M.; Russo, Marianna; Urga, Giovanni

  1. By: Chyong, C-K.; Newbery, D.; McCarty, T.
    Abstract: We present a well calibrated unit commitment and economic dispatch model of the GB electricity market and applied it to the economic analysis of the four existing hydro pumped storage (PS) stations in GB. We found that with more wind on the system PS arbitrage revenue increases: with every percentage point (p.p) increase in wind capacity the total PS arbitrage profit increases by 0.21 p.p.. However, under a range of wind capacity, the PS’ modelled revenue from price arbitrage is not enough to cover their ongoing fixed costs. Analysing the 2015-18 GB balancing and ancillary services data suggests that PS stations were not active in managing transmission constraints and in fact about 60% of constraint payments went to gas-fired units. However, the PS stations are active in provision of ancillary services such as fast reserve, response and other reserve services with a combined market share of at least 30% in 2018. Stacking up the modelled revenue from price arbitrage with the 2018 balancing and ancillary services revenues against the ongoing fixed costs suggests that the four existing PS stations are profitable. Most of the revenue comes from balancing and ancillary services markets – about 75% – whereas only 25% comes from price arbitrage. However, the revenues will not be enough to cover capex and opex of a new 600 MW PS station. The gap in financing will have to come from balancing and ancillary services market opportunities and less so from purely price arbitrage. Finally, we found that the marginal contribution of most of the existing PS stations to gas and coal plant profitability is negative, while from the system point of view, PS stations do contribute to minimizing the total operating cost.
    Keywords: economic modelling, unit commitment, economic dispatch, electricity market modelling, hydro pumped energy storage, wind energy, solar energy, electrical energy storage investment
    JEL: C61 C63 L94 L98 Q40 Q41 Q48
    Date: 2019–07–16
  2. By: Newbery, D.; Pollitt, M.; Reiner, D.; Taylor, S.
    Abstract: Decarbonising electricity is a critical first step in mitigating climate damage but low/zero-carbon generation is very capital intensive. Its cost depends critically on the weighted average cost of capital (WACC). Three factors combine to make a low WACC both desirable and feasible in the UK. First, the Stern Report argues for a low social discount rate (1.4% real) for investments in climate mitigation. Second, global and UK real interest rates have been falling steadily - UK gilt index-linked 20-year rates have fallen from +4% in 1995 to -2% (negative) in 2019. CCS and nuclear have long lifetimes over which to recover their capital cost, longer than commercial finance would accept without guarantees, in contrast to renewables where off-take contracts have proven sufficient. Nuclear power faces the additional investment challenge of lengthy uncertain construction. No nuclear plant has ever been built privately without substantial regulatory guarantees. The Regulated Asset Base (RAB) model can address these financing problems for long-lived low-carbon assets. The benefits of placing risk on developers to motivate cost control are small compared to the extra costs of a higher weighted average cost of capital (WACC). A hybrid RAB model (like that used for the Thames Tideway Tunnel) – with excess cost sharing and a cost cap – can reduce risk to deliver an adequately low WACC by accessing infrastructure funds that do not require extensive specialised project knowledge. If the risk of excess costs is spread over the 27 million households and other customers taking two-thirds of electricity, each would bear minimal risk and the cumulative cost would be significantly lower. The levelised cost at the WACC (3.5% real) is £53/MWh (in £2018) if on time and budget, which should be compared with a counterfactual in which all the risk is placed on the company requiring a contract-for-difference with a strike price of £96/MWh for the life of the project (equal to the levelised cost).
    Keywords: Nuclear power, financing, RAB, WACC, risk
    JEL: C54 D53 E43 G11 H23 H54 L94 Q48
    Date: 2019–07–29
  3. By: Geoffrey J. Blanford; Christoph Weissbart
    Abstract: The long-run development of power markets will be deeply affected by the gradual substitution of fossil fuel-based generation technologies by renewable energy technologies (RES). However, the intermittent supply of RES, in combination with the temporal non-homogeneity of electricity demand, limits the competitiveness of renewable energies (Joskow, 2011). We develop a partial-equilibrium model of the European power market that contributes with a framework for capturing the temporal and spatial variability of RES. Furthermore, we differentiate wind and solar technologies by different quality classes and contribute with a routine for using meteorological data to approximate the temporal availability of renewable energy technologies. The composite of all these RES features allows then for a detailed representation of RES and their implicit substitution elasticity with fossil fuel-based technologies. Our results for the long-run electricity generation path of the European power market show that, under an 80% CO2 emissions reduction scenario until 2050, renewable energy technologies become the main technologies that will meet the demand. The 2050 generation share of wind and solar power combined is around 40%. However, with the detailed depiction of their temporal and spatial characteristics, we identify that gas power is necessary as a complement to compensate for their intermittent supply, which requires in turn the utilization of carbon capture and storage to adhere to the climate target.
    Keywords: European power market, investment planning, energy modeling, renewable energies
    JEL: C61 L94 Q41 Q42
    Date: 2019
  4. By: Dominguez-Faus, Rosa PhD; Kiani, Behdad PhD; Fulton, Lew PhD
    Abstract: This report makes an initial investigation into the potential for combining very high penetration levels of electric vehicles with similarly very high penetration of variable renewable electricity (VRE) in California. A literature review is performed regarding the potential for high levels of EV sales and VRE penetration at both the U.S. and California level. Such scenarios have been developed by a number of researchers, such as U.S. national laboratories for the White House (under the Obama Administration), and by Energy and Environmental Economics, Inc. (E3) for the California Energy Commission. Such studies indicate that both of these “extreme” futures are entirely plausible and have the potential to coexist. However, none of the reviewed studies has undertaken detailed analysis of how large numbers of EVs could interact with and support a VRE-dominated system, and how these might interact in a useful way. This could include grid-to-vehicle (G2V) and vehicle- to-grid (V2G) movement of electricity, with vehicle batteries providing large scale electricity storage. We undertake our own preliminary simulation for a 2030 and 2050 scenario for California, using an 8760 hours (full year) electricity demand profile and VRE generation example. We assume a ramp- up of VRE to 60% of all electricity generation by 2030 and 100% by 2050, with a similar increase in the EV share of new LDV sales, creating a significant stock (about 7 million) by 2030 and nearly complete transition (to over 20 million vehicles) by 2050. Using an “averages, peaks and valleys” analysis on the electric side, and a typical spare battery storage potential on the vehicle side, our simulation shows that by 2030 a large share of excess VRE electricity generation could be stored, and a large share of electricity shortfall from VRE could be provided, by electric vehicle batteries throughout the year, though there would be many cases where they cannot provide full coverage of these situations. However by 2050, if nearly 100% of the fleet were EVs, only about half of their available, spare capacity is needed to store the excess electricity from a full VRE system on the highest generation day and only about 40% would be needed to store and supply the shortage from lack of VRE generation on the highest shortfall day. While these results are encouraging, a deeper simulation is needed to provide a true hour-by-hour assessment of battery use and the incidence of storage need compared to driving need. Management of charging times that could not be assessed here may also play a critical role. In addition, our initial assessment only covers a single day shortfall. Shortfalls could occur for longer periods, particularly if the VRE electricity system were sized to take better advantage of seasonal storage options. Vehicle batteries are best suited to very short duration storage and may not be adequate to keep the electricity reliable for many consecutive days of shortfall. Hydrogen (H2) has the potential to be a longer-term energy storage option and could be stored in fuel cell vehicle tanks (and the H2 system associated with generating, storing and distributing H2 to those tanks). The next stage of our research will involve running a full simulation using our (ITS-Davis) California ZEV power model (“CALZEV”), a version of the larger Message model, applied to consider both electricity and hydrogen (with large numbers of both of these types of vehicles) in order to: 1) gauge the relative storage potential and cost over a range of time frames and VRE scenarios, and 2) estimate the relative value and possible synergies in a system with both types of vehicles and fuels.
    Keywords: Engineering, energy modeling, distributed storage, V2G, G2V, renewable energy, EV, FCV, Hydrogen, Electricity
    Date: 2019–07–31
  5. By: Claudia G\"unther; Wolf-Peter Schill; Alexander Zerrahn
    Abstract: We analyze how tariff design incentivizes households to invest in residential photovoltaic and battery systems, and explore selected power sector effects. To this end, we apply an open-source power system model featuring prosumage agents to German 2030 scenarios. Results show that lower feed-in tariffs substantially reduce investments in photovoltaics, yet optimal battery sizing and self-generation are relatively robust. With increasing fixed parts of retail tariffs, optimal battery capacities and self-generation are smaller, and households contribute more to non-energy power sector costs. When choosing tariff designs, policy makers should not aim to (dis-)incentivize prosumage as such, but balance effects on renewable capacity expansion and system cost contribution.
    Date: 2019–07
  6. By: Griffith-Jones, Stephany; Leistner, Samuel
    Abstract: This discussion paper examines how private capital can be mobilised for sustainable infrastructure, with particular reference to the newly created Asia Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), also known as the BRICS Bank. These banks are an important addition to the development finance architecture. The paper provides an overview of how development banks can mitigate the global investment gap in the area of sustainable infrastructure through targeted lending and various financial instruments. The paper builds on the experiences of the European Investment Bank – as well as multilateral and other regional and national development banks – to draw possible lessons for the AIIB and the NDB. In particular, various instruments for mobilising private capital that complement the traditional credit financing of ecologically sustainable infrastructure are examined. Although environmentally sustainable infrastructure is currently not always the most cost-effective option in many countries, it is important to make the right investment decisions now, as investments in infrastructure projects are locked-in for the long term; this applies, in particular, to renewable energy projects with their long lifecycles. Targeted financing by development banks allows for the realisation of projects that are currently not attractive enough for financing from private investors alone, and helps to avoid a long-term commitment of capital to non-sustainable infrastructure. Mechanisms presented to support environmentally sustainable infrastructure investments include the application of shadow carbon prices, the European Investment Bank’s Global Energy Efficiency and Renewable Energy Fund, and the Co-Lending Portfolio Programme, which is managed by the International Finance Corporation. This discussion paper is based not only on the authors’ literature and experiences to date, but also on a large number of personal interviews with senior executives held in Luxembourg, Washington, DC, London and (by telephone) Paris.
    Keywords: Handel und Investitionen,Internationales Finanzsystem
    Date: 2018
  7. By: Fichtner, Stephan; Meyr, Herbert
    Abstract: Increasing shares of volatile energy resources like wind and solar energy will require flexibly schedulable energy resources to compensate for their volatility. Biogas plants can produce their energy flexibly and on demand, if their design is adjusted adequately. By doing so, the biogas plant operator has the opportunity to generate more earnings by producing and selling electricity in higher price periods. In order to achieve a flexibly schedulable biogas plant, the design of this plant has to be adjusted to decouple the biogas and electricity production. Therefore, biogas storage possibilities and additional electrical capacity are necessary. The investment decision about the size of the biogas storage and the additional electrical capacity depends on the fluctuation of energy market prices and the availability of governmental subsidies. This work presents an approach supporting investment decisions to increase the flexibility of a biogas plant by installing gas storages and additional electrical capacities under consideration of revenues out of direct marketing at the day-ahead market. In order to support the strategic, long-term investment decisions, an operative plant schedule for the future, considering different plant designs given as investment strategies, using a mixed-integer linear programming (MILP) model in an uncertain environment is optimized. The different designs can be evaluated by calculating the net present value (NPV). Moreover, an analysis concerning current dynamics and uncertainties within spot market prices is executed. Furthermore, the influences concerning the variation of spot market prices compared to the influence of governmental subsidies, in particular, the flexibility premium, are revealed by computational results for a fictional case example, which is based on a biogas plant in southern Germany. In addition, the robustness of the determined solution is analyzed with respect to uncertainties.
    Date: 2019
  8. By: Abubakar El-Sidig A.A Mahdi (Al-Buraimi University College – Sultanate of Oman Author-2-Name: Author-2-Workplace-Name: 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 preceding three years (2014, 2015, and 2016) saw a drop in the price of oil which has impacted all parts of Omani macroeconomic life. This study aims to identify the association between oil price changes and aggregate household consumption expenditure in the Sultanate by analyzing the long term relationship between the variables of interest. Methodology/Technique - The (ARDL) Autoregressive Distributed Lag bound test of co- integration is used with 27 annual observations obtained between 1990 and 2016. Finding - The statistical results show that there is a long term, positive relationship between the two variables. Novelty – As Oman is heavily dependent on oil, any fluctuation in the price of oil will undoubtedly cause instability in the economy (macroeconomic variables) demonstrating the presence of a robust correlation between consumption and oil prices. The bound test of the ARDL approach demonstrates this relationship. This study is therefore useful for Muscat officials to identify ways to reduce the dependency on oil.
    Keywords: Total Household Consumption Expenditure; Crude Oil Price; Autoregressive Distributed Lag (ARDL); Omani Economy.
    JEL: D1 D13 D19 E30
    Date: 2019–06–19
  9. By: LE BOENNEC, Rémy; SALLADARRE, Frédéric
    Abstract: In this paper, we aim to demonstrate the way air pollution and noise may affect the well-being of the inhabitants of Nantes, France, designated the European Green Capital in 2013. We use a database compiling certain attributes of the houses that exchanged hands and their price. In order to understand the complex relationships that can exist between explanatory variables and housing price, we consider not only the direct effects of air pollution and noise on the price of around 3,000 houses sold in Nantes and its metropolitan area from 2002 to 2008, but also the way some location attributes of the dwellings may affect air pollution and noise. We demonstrate that even if air pollution may be affected by some location characteristics of the house, this variable has no significant impact on the price, in the end. Noise is affected by the location of the house and exerts some significant effect on housing price. However, whilst air pollution does not impact at a global level, people who have lived in an air polluted county before coming to Nantes are sensitive to air quality, whereas those who come from a low air polluted county tend to choose low noise exposure dwellings.
    Keywords: air pollution, noise pollution, housing location, housing price
    JEL: D62 Q51 Q53 R31
    Date: 2017–08
  10. By: Shengbo FENG (Energy Research Institute, China Academy of Macroeconomic Research, The National Development and Reform Commission); Masashi TAKETANI (Institute of Economic Research, Kyoto University); Yanmin HE (Faculty of economics, Otemon Gakuin University); Tun-Yen WANG (Institute of Economic Research, Kyoto University)
    Abstract: China already set up national target for carbon emission control before 2030. Based on experience of former target allocation, the way of both local voluntary commitments and negotiation between the central government and local governments to allocate the targets would help local governments set up energy conservation and carbon emission control initiatives. A target decomposition scheme is thus developed in this study. Combining the anticipation for the economic and social development situation during 2021-2030, the initial idea of decomposition mechanism of carbon emission control target is suggested.
    Keywords: carbon emission control, target decomposition, index evaluation system, clustering analysis
    JEL: O13 O38
    Date: 2019–07
  11. By: Olivier Gervais
    Abstract: We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature. Impulse response functions are then estimated using local projections. This technique has recently been used to estimate the effect of monetary policy and government spending shocks. To our knowledge, however, this is the first time it is used to analyze the effect of oil supply shocks on global aggregates. While there is a high level of uncertainty around our estimates, results can be summarized with three main takeaways. Following a supply-driven decline in oil prices: (1) US business investment usually decreases, highlighting the importance of the shale oil industry, while the reaction of US gross domestic product (GDP) is often not statistically significant; (2) domestic demand in the euro area usually increases strongly; and (3) GDP among commodity exporters declines in the short term, reflecting the importance of the terms-of-trade channel, but increases in the longer term, reflecting the aggregate benefits of increased oil production.
    Keywords: Business fluctuations and cycles; International topics
    JEL: C22 C5 E37 Q43
    Date: 2019–07
  12. By: Devine, Mel; Nolan, Sheila; Lynch, Muireann Á.; O’Malley, Mark
    Date: 2019
  13. By: Bao H. NGUYEN; OKIMOTO Tatsuyoshi; Trung Duc TRAN
    Abstract: This paper investigates the uncertainty-dependent and sign-dependent effects of the oil market fundamental shocks, namely supply, aggregate demand and oil-specific demand shocks. We do so by first proposing a novel oil uncertainty index that is measured by the stochastic volatility of the unpredictable component of oil prices. Second, we employ a nonlinear model to show that the structural oil market shocks have distinguishable effects in regimes that are characterized by high versus low oil price uncertainty. Finally, the model is extended to accommodate positive and negative oil market shocks to examine the possible asymmetric effects. In relation to real economic activity, we find that both supply shocks and oil-specific demand shocks have negligible impacts in periods of low oil price uncertainty, but they have sizeable effects in a high-oil-price-uncertainty regime. The effects of oil supply shocks are asymmetric, but oil-specific demand shocks are not, indicating that the (a)symmetric reaction of the real economic activity depends on the underlying oil market shocks.
    Date: 2019–06
  14. By: Abrell, Jan (University of Basel); Chavaz, Léo (University of Basel); Weigt, Hannes (University of Basel)
    Abstract: Supply security is a prominent and crucial notion which nds application in various economic sectors (energy security, food security, supply chain risks). Yet, it remains particularly dicult to dene and measure. Currently used indicators of supply security focus on narrow approaches and oer limited guidance to policy makers. Considering this, we propose a novel indicator assessing the supply security of industries, conceptually or physically, based on a network structure. The indicator is based on a simulation methodology and evaluates the reaction of the market to disruptions of its network services, thereby capturing the various dimensions of supply security. Subsequently, we perform an exemplary application onto the European natural gas market, and evaluate the impact of currently debated network extensions projects and policy measures.
    Keywords: Supply security, natural gas
    Date: 2019–07
  15. By: Frédérique BEC (CREST; Thema, University of Cergy-Pontoise.); Heino BOHN NIELSEN (Department of Economics, University of Copenhagen.); Sarra SAÏDI (Thema, University of Cergy-Pontoise.)
    Abstract: This paper stresses the bimodality of the widely used Student's t likelihood function applied in modelling Mixed causal-noncausal AutoRegressions (MAR). It first shows that a local maximum is very often to be found in addition to the global Maximum Likelihood Estimator (MLE), and that standard estimation algorithms could end up in this local maximum. It then shows that the issue becomes more salient as the causal root of the process approaches unity from below. The consequences are important as the local maximum estimated roots are typically interchanged, attributing the noncausal one to the causal component and vice-versa, which severely changes the interpretation of the results. The properties of unit root tests based on this Student's t MLE of the backward root are obviously a ected as well. To circumvent this issues, this paper proposes an estimation strategy which i) increases noticeably the probability to end up in the global MLE and ii) retains the maximum relevant for the unit root test against a MAR stationary alternative. An application to Brent crude oil price illustrates the relevance of the proposed approach.
    Keywords: Mixed autoregression, non-causal autoregression, maximum likelihood estimation, unit root test, Brent crude oil price.
    JEL: C12 C22 Q41
    Date: 2019–06–16
  16. By: Głuszak, Michał; Gawlik, Remigiusz; Zięba, Małgorzata
    Abstract: In the paper, we investigate the role of smart building or green building innovations on the Polish real estate market using the Analytic Hierarchy Process (AHP) method on the group of experts (consultants, managers, brokers) that are active on the office market in Krakow (study area). The findings point towards the highest relevance of the localisation factor, but also at the relatively low importance of the features of a sustainable building: building automation and information technology systems, as well as energy efficiency or certification. The findings suggest that despite the growing interest in sustainability and technological advancement amongst office market participants in Krakow, the relative importance of smart and green building features in their decision-making processes is relatively low. The study has some interesting practical implications. The knowledge regarding the relative importance of decision criteria can be valuable for developers and investors because the anticipation of tenants’ expectations is directly linked with return on investment and innovation premiums.
    Keywords: sustainable real estate; office market; smart building; green building; Industry 4.0; analytic hierarchy process; MCDM;
    JEL: C44 O33 R33
    Date: 2019–07–19
  17. By: Milad Mousavian H. (School of Industrial and Systems Engineering, University of Tehran, Iran); Hamed Shakouri G. (School of Industrial and Systems Engineering, University of Tehran, Iran); Alinaghi Mashayekhi (Graduate School of Management and Economics, Sharif University of Technology, Iran); Aliyeh Kazemi (Department of Industrial Management, University of Tehran, Iran)
    Abstract: Feed in tariff (FiT) is one of the most efficient ways that many governments throughout the world use to stimulate investment in renewable energies (REs) technology. For governments, financial management of the policy is very challenging as that it needs a considerable amount of budget to support RE producers during the long remuneration period. In this paper, we illuminate that the early growth of REs capacity could be a temporary boost and the system elements would backlash the policy if financial circumstances are not handled well. To show this, we chose Iran as the case, which is in the infancy period of FiT implementation. Iran started the implementation of FiT policy in 2015 aiming to achieve 5 GW of renewable capacity until 2021. Analyses show that the probable financial crisis will not only lead to inefficient REs development after the target time (2021), but may also cause the existing plants to fail. Social tolerance for paying REs tax and potential investors trust emanated from budget related mechanisms are taken into consideration in the system dynamics model developed in this research to reflect those financial effects, which have rarely been considered in the previous researches. To prevent the financial crisis of the FiT funding and to maintain the stable growth in long term, three policy scenarios are analyzed: continuation of the current program with higher FiT rates, adjusting the FiT rates based on the budget status, and adjusting the tax on electricity consumption for the development of REs based on the budget status. The results demonstrate that adjusting the tax on electricity consumption for the development of REs based on budget status leads to the best policy result for a desired installed capacity development without any negative social effects and financial crises.
    Date: 2019–07
  18. By: Ojea Ferreiro, Javier
    Abstract: Until now, stock market responses to a distress scenario for oil prices have been analysed considering prices in domestic currency. This assumption implies merging the commodity risk with the exchange rate risk when oil and stocks are traded in different currencies. This article proposes incorporating explicitly the exchange rate, using the convolution concept, to assess how could change the stock market response depending on the source of risk that moves oil prices. I apply this framework to study the change in the 10th lowest percentile of the European stock market under an oil-related stress scenario, without overlooking the role of the exchange rate. The empirical exercise shows that the same stress oil-related scenario in euros could generate an opposite impact in the European stock market depending on the source of risk. The source of risk is not incorporated when performing a bivariate analysis, which suggests ambiguous estimates of the stock response. This framework can improve our understanding of how the exchange rate interacts in global markets. Also, it contributes to reduce the inaccuracy in the impact assessment of foreign shocks where the exchange rate plays a relevant role. JEL Classification: E30, E37, E44, G10
    Keywords: convolution, exchange rate, spillover analysis, stress test
    Date: 2019–07
  19. By: Matilde Giaccherini (CEIS, University of Rome "Tor Vergata"); Joanna Kopinska (CEIS, University of Rome "Tor Vergata"); Alessandro Palma (University of Naples Parthenope & CEIS University of Rome "Tor Vergata")
    Abstract: We investigate unequal effects of daily particulate matter (PM) concentrations on Italian hospitalizations by exploiting daily episodes of public transportation strikes as an instrumental variable for pollution exposure. We find that higher PM concentrations increase the number of urgent respiratory admissions, with a larger penalty for the young, the elderly, the less educated and migrants from low income countries. Moreover, we show that hospitalizations resulting from higher PM concentrations are not only more likely to occur, but in the case of asthma and COPD, they are also more complex. In order to appreciate the heterogeneity of our results, we show how municipalities with different age structures and PM exposure levels face a similar hospitalization burden. Our study suggests that effective mitigation policies should account for the socio-economic gradient in the health effects of air pollution.
    Keywords: health effects of air pollution, environmental inequality, public transportation strikes, hospitalization costs
    JEL: I14 I18 J45 J52 L91 Q53 R41
    Date: 2019–08–01
  20. By: Sant'Anna, Marcelo Castello Branco
    Abstract: Biofuels offer one approach for reducing carbon emissions in transportation. However, the agricultural expansion needed to produce biofuels may endanger tropical forests. I use a dynamic model of land use to disentangle the roles played by agricultural expansion and yield increases in the supply of sugarcane ethanol in Brazil. The model is estimated using remote sensing (satellite) information of sugarcane activities. Estimates imply that, at the margin, 92% of new ethanol comes from increases in area and only 8% from increases in yield. Direct deforestation accounts for 12% of area expansion. I further assess carbon emissions and deforestation implications from ethanol policies.
    Date: 2019–07–25
  21. By: Muradov, Adalat; Hasanli, Yadulla; Hajiyev, Nazim
    Abstract: Competition plays key driving force for economic development in the efficient market economy. To achieve competitive advantage at the international level, each country needs to improve competitiveness on different economic indicators at the national level. The Global Competitiveness Report 2018 of World Economic Forum calculated the competitiveness index of countries under 98 sub-indexes. The goal of the research is econometric assessment of the impact of competitiveness to economic development in the oil rich countries, such as Azerbaijan. For the purposes of this research, the global rating of Azerbaijan was determined through calculating the volume of GDP, as well as, oil and non-oil GDP. The research was conducted by applying systematic and statistical analysis and running Excell and Eviews8 calculations. As a result, the impact of competitiveness index to the GDP (oil and non-oil GDP) at the oil rich countries, such as Azerbaijan was calculated and following outcomes were achieved: The semi-elasticity coefficient is above 1 on the volume of non-oil GDP on the competitiveness index. That means, if the competitiveness of Azerbaijan increases on the global rating then the next year non-oil GDP increases more than 1%. The improvement of the competitiveness indicators in the current year in Azerbaijan increases non-oil sector the following year. It takes time to attract investments to a country, so this outcome is expected. The semi-elasticity coefficient of the GDP volume on the competitiveness index is smaller than the semi-elasticity coefficient of the non-oil GDP at the oil rich countries. The practical importance of the research: this study can motivate other scholars to conduct reseach on the area. The innovativeness and uniqueness of the research: the impact of the competitiveness indicators on the economic growth has been assesed in Azerbaijan.
    Keywords: Competition, Competitiveness Index, Economic Growth, Econometric Assessment, Oil Rich Countries
    JEL: A10
    Date: 2019–02
  22. By: Steinbach, Armin; Valta, Matthias
    Abstract: Der klimapolitische Handlungsdruck hat eine Instrumentendiskussion entfacht. So plausibel die Forderung nach CO2-Bepreisung der Energieträger zu sein scheint, so heterogen ist das Spektrum möglicher Regelungsansätze. Die Vielzahl wirtschaftspolitischer Empfehlungen hat den Rechtsrahmen, in dem sich die Instrumentendiskussion bewegt, bislang kaum in den Blick genommen. Dieser Beitrag diskutiert Möglichkeiten und Grenzen der Instrumente nach Maßgabe der steuer-, haushalts-, finanzverfassungs- und europarechtlichen Vorgaben. Es zeigt sich, dass die aktuell diskutierten Reformschritte zur CO2-Bepreisung überwiegend im Einklang mit den Rechtsrahmen ausgestaltet werden könnten. Bei den Kompensationsmaßnahmen verengen sich die zur Verfügung stehenden Optionen unter rechtlichen und praktischen Gesichtspunkten.
    Keywords: CO2-Bepreisung,Kompensation,Rechtsrahmen,Klimaschutz
    JEL: H23 K32 K34 Q48 Q58
    Date: 2019
  23. By: Michael Weylandt; Yu Han; Katherine B. Ensor
    Abstract: Financial markets for Liquified Natural Gas (LNG) are an important and rapidly-growing segment of commodities markets. Like other commodities markets, there is an inherent spatial structure to LNG markets, with different price dynamics for different points of delivery hubs. Certain hubs support highly liquid markets, allowing efficient and robust price discovery, while others are highly illiquid, limiting the effectiveness of standard risk management techniques. We propose a joint modeling strategy, which uses high-frequency information from thickly-traded hubs to improve volatility estimation and risk management at thinly traded hubs. The resulting model has superior in- and out-of-sample predictive performance, particularly for several commonly used risk management metrics, demonstrating that joint modeling is indeed possible and useful. To improve estimation, a Bayesian estimation strategy is employed and data-driven weakly informative priors are suggested. Our model is robust to sparse data and can be effectively used in any market with similar irregular patterns of data availability.
    Date: 2019–07
  24. By: Alessi, Lucia (European Commission); Ossola, Elisa (European Commission); Panzica, Roberto (European Commission)
    Abstract: This study provides evidence on the existence of a negative Greenium, i.e. a green risk premium, based on European individual stock returns and portfolios. By defining a green factor which is priced by the market, we offer a tool to assess a portfolio exposure to climate risk and hedge against it. We estimate that even in a rather benign scenario, there would be losses at the global level, including for European large banks, should they fail to price the Greenium. By halving the exposure to carbon-intensive sectors, losses would be reduced by 30%. These results call for the introduction of carbon stress tests for systemically important institutions
    Keywords: climate risk, ESG disclosure, factor models, asset pricing, stress test
    JEL: G01 G11 G12 Q01
    Date: 2019–07
  25. By: Pelin Demirel (Dyson School of Design Engineering, Imperial College London, UK.); Gamze Ozturk Danisman (Faculty of Economics Administrative and Social Sciences, Bahcesehir University, Istanbul,Turkey)
    Abstract: As the circular economy (CE) concept gains growing popularity among consumers and producers, small and medium-sized enterprises (SME) increasingly look for ways to reorganize their offering and operations to integrate into the CE. This study examines the impact of (1) circular eco-innovations and (2) external funding available for CE activities on the growth of European SMEs using a dataset of 5100 SMEs across 28 European countries in 2016. Findings reveal that a significant threshold investment (i.e. higher than 10% of revenues) into circular eco-innovations is required for SMEs to benefit from investing into the CE. Moreover, the majority of circular eco-innovations fail to boost the growth rates of SMEs, with the exception of investments into eco-design innovations. While traditional forms of debt and grant finance targeted to CE activities are found to have no or negative impact on the growth of SMEs, equity finance (i.e. angel and venture capital investments) contributes positively to their growth. The study offers insights into the lower levels of SME engagement in the CE as well as policy implications for improving engagement.
    Keywords: Circular Economy, Eco-Innovation, Eco-design, Entrepreneurship, Finance, Growth, SMEs.
    Date: 2019–06
  26. By: Zhao, Chong; Colson, Gregory J.; Karali, Berna; Philippidis, George
    Keywords: Agribusiness
    Date: 2019–06–25
  27. By: Hiroko Okajima (Towson University); Shigeharu Okajima (Osaka University of Economics); Kenji Takeuchi (Graduate School of Economics, Kobe University)
    Date: 2019–05
  28. By: Saeed Nosratabadi; Amir Mosavi; Shahaboddin Shamshirband; Edmundas Kazimieras Zavadskas; Andry Rakotonirainy; Kwok Wing Chau
    Abstract: The concept of the sustainable business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural, or other contexts, in a sustainable way. The process of sustainable business model construction forms an innovative part of a business strategy. Different industries and businesses have utilized sustainable business models concept to satisfy their economic, environmental, and social goals simultaneously. However, the success, popularity, and progress of sustainable business models in different application domains are not clear. To explore this issue, this research provides a comprehensive review of sustainable business models literature in various application areas. Notable sustainable business models are identified and further classified in fourteen unique categories, and in every category, the progress -- either failure or success -- has been reviewed, and the research gaps are discussed. Taxonomy of the applications includes innovation, management and marketing, entrepreneurship, energy, fashion, healthcare, agri-food, supply chain management, circular economy, developing countries, engineering, construction and real estate, mobility and transportation, and hospitality. The key contribution of this study is that it provides an insight into the state of the art of sustainable business models in the various application areas and future research directions. This paper concludes that popularity and the success rate of sustainable business models in all application domains have been increased along with the increasing use of advanced technologies.
    Date: 2019–07
  29. By: Magni, Carlo Alberto; Marchioni, Andrea
    Abstract: In this work we illustrate a simple logical framework serving the purpose of assessing the economic profitability and measuring value creation in a solar photovoltaic (PhV) project and, in general, in a replacement project where the cash-flow stream is nonnegative, with some strictly positive cash flows. We use the projected accounting data to compute the average ROI, building upon Magni (2011, 2019) (see also Magni and Marchioni 2018), which enables retrieving information on the role of the project’s economic efficiency and the role of the project scale on increasing shareholders’ wealth. The average ROI is a genuinely internal measure and does not suffer from the pitfalls of the internal rate of return (IRR), which may be particularly critical in replacement projects such as the purchase of a PhV plant aimed at replacing conventional retail supplies of electricity.
    Keywords: Energy project analysis, investment evaluation, value creation.
    JEL: C02 C67 G31
    Date: 2019–05–16
  30. By: Chen, Xiaoguang; Wang, Weiwei; Oliver, Anthony; Khanna, Madhu
    Keywords: Resource/ Energy Economics and Policy
    Date: 2019–06–25
  31. By: Benjamin Heymann; Alejandro Jofr\'e
    Abstract: Motivated by the problem of market power in electricity markets, we introduced in previous works a mechanism for simplified markets of two agents with linear cost. In standard procurement auctions, the market power resulting from the quadratic transmission losses allows the producers to bid above their true values, which are their production cost. The mechanism proposed in the previous paper optimally reduces the producers' margin to the society's benefit. In this paper, we extend those results to a more general market made of a finite number of agents with piecewise linear cost functions, which makes the problem more difficult, but simultaneously more realistic. We show that the methodology works for a large class of externalities. We also provide an algorithm to solve the principal allocation problem. Our contribution provides a benchmark to assess the sub-optimality of the mechanisms used in practice.
    Date: 2019–07
  32. By: de Menezes, Lilian M.; Russo, Marianna; Urga, Giovanni
    Date: 2019

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