nep-ene New Economics Papers
on Energy Economics
Issue of 2019‒11‒25
forty papers chosen by
Roger Fouquet
London School of Economics

  1. Economics of Nuclear Power Plant Investment: Monte Carlo Simulations of Generation III/III+ Investment Projects By Ben Wealer; Simon Bauer; Leonard Göke; Christian von Hirschhausen; Claudia Kemfert
  2. Nuclear Fusion: The Case for a High-Level Global External Independent Review By Draper, John
  3. Hydropower dependency and climate change in sub-Saharan Africa: A nexus framework and evidence-based review By Falchetta, Giacomo; Gernaat, David E.H.J.; Hunt, Julian; Sterl, Sebastian
  4. Heating with wind: Economics of heat pumps and variable renewables By Ruhnau, Oliver; Hirth, Lion; Praktiknjo, Aaron
  5. Pollution in a globalized world: Are debt transfers among countries a solution? By Marion Davin; Mouez Fodha; Thomas Seegmuller
  6. Green New Deal: policies to stop climate damage by 2025 By McGaughey, Ewan
  7. Accelerating the Arrival of Fusion Energy within a Quintuple Helix Innovation Ecosystem to Address Climate Change By Draper, John
  8. The Costs of Energy-related Linear Property on Local Governments in Canada and the Role of That Local Government Revenue Tool Can Play in Addressing these Costs By Tedds, Lindsay M.; Euper, Brock
  9. Does Electricity Drive Structural Transformation? Evidence from the United States By Paul Gaggl; Rowena Gray; Ioana Marinescu; Miguel Morin
  10. Supply fl exibility in the shale patch: Facts, no fiction By Hilde C. Bjørnland
  11. Optical Proof of Work By Michael Dubrovsky; Marshall Ball; Bogdan Penkovsky
  12. Climate Change, Operating Flexibility and Corporate Investment Decisions By Chen Lin; Thomas Schmid; Michael S. Weisbach
  13. Climate Policy, Stranded Assets, and Investors' Expectations By Suphi Sen; Marie-Theres von Schickfus
  14. Political Feasibility of Enhancing the Russian Emissions Reduction Target Under the Paris Agreement By Imtenan Al-Mubarak; Saleh Al Muhanna; Zlata Sergeeva
  15. Tracing the Genesis of Contagion in the Oil-Finance Nexus By Scott M. R. Mahadeo; Reinhold Heinlein; Gabriella Deborah Legrenzi
  16. Pricing Sovereign Debt in Resource-Rich Economies By Thomas McGregor
  17. A clean environmental week: Let the nature breathe! By Moustafa, Khaled
  18. Internal Combustion Engine Bans and Global Oil Use By Fulton, Lewis M; Jaffe, Amy; McDonald, Zane
  19. Digitalisierung der Industrie: Beitrag zur Energiewende und veränderte Arbeitsbedingungen By Beckamp, Marius; Schmitt, Martina; Flögel, Franz; Knobbe, Sonja; Paul, Hansjürgen
  20. Oil Driven Macroeconometric Model of Kuwait By Salih, Siddig A.; Branson, William H.; Ebraheem, Yusuf H. Al
  21. Combinación de un enfoque de gravedad y de bienestar para la evaluación de la transición solar en Chile. By Magaña, Diego
  22. No Man is an Island - Social coordination and the Environment By Nyborg, Karine
  23. Analyzing the Energy Intensity Trend in Indonesia, using Econometric and Decomposition Analysis By Muhammad Iqbal Nugraha
  24. Granger Predictability of Oil Prices After the Great Recession By Szilard Benk; Max Gillman
  25. A story of how a climate change sceptic politician changed their mind By Calyx, Cobi; Low, Jenny
  26. Incertitude macroéconomique canadienne : mesure, évaluation et effets sur l’investissement By Kevin Moran; Dalibor Stevanovic; Adam Kader Touré
  27. Effects of Mandatory Energy Efficiency Disclosure in Housing Markets By Erica Myers; Steven L. Puller; Jeremy D. West
  28. The Welfare Costs of Misaligned Incentives: Energy Inefficiency and the Principal-Agent Problem By Joshua Blonz
  29. The future of UK Carbon pricing: Artificial Intelligence and the Emissions Trading System By Ojo, Marianne
  30. Carbon pricing and competitiveness: Are they at odds? By Jane Ellis; Daniel Nachtigall; Frank Venmans
  31. Klimaschutz auf Kosten der Armen? Vorschläge für eine markt- und sozialverträgliche Umsetzung von CO2-Steuern und des Emissionshandels By Goldschmidt, Nils; Wolf, Stephan
  32. Mexico; 2019 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  33. Oil, Earth mass and gravitational force By Moustafa, Khaled
  34. Bidding in Smart Grid PDAs: Theory, Analysis and Strategy (Extended Version) By Susobhan Ghosh; Sujit Gujar; Praveen Paruchuri; Easwar Subramanian; Sanjay P. Bhat
  35. Wärmewende im Gebäudesektor: Lasst den CO2-Preis wirken By Achtnicht, Martin; Germeshausen, Robert; von Graevenitz, Kathrine
  36. The Tax Treatment of Non-Renewable Resource Exploration Expenditures in Canada: A Historical Review and a Way Forward By Tedds, Lindsay M.
  37. Optimal Installation of Solar Panels with Price Impact: a Solvable Singular Stochastic Control Problem By Torben Koch; Tiziano Vargiolu
  38. Environmental Regulation and Export Product Quality: Evidence from Chinese Firms By Yuping Deng; Yanrui Wu; Helian Xu
  39. Decomposition Analysis of Air Pollutants During the Transition and Post-Transition Periods in the Czech Republic By Milan Scasny; Beng Wah Ang; Lukas Recka
  40. Análisis y descomposición sectorial de la energía solar incorporada en las exportaciones de Chile y el rol de las políticas energéticas By Muñoz, Katherine

  1. By: Ben Wealer; Simon Bauer; Leonard Göke; Christian von Hirschhausen; Claudia Kemfert
    Abstract: This paper analyzes nuclear power plant investments using Monte Carlo simulations of economic indicators such as net present value (NPV) and levelized cost of electricity (LCOE). In times of liberalized electricity markets, largescale decarbonization and climate change considerations, this topic is gaining momentum and requires fundamental analysis of cost drivers. We adopt the private investors’ perspective and ask: What are the investors’ economics of nuclear power, or - stated differently - would a private investor consider nuclear power as an investment option in the context of a competitive power market? By focusing on the perspective of an investor, we leave aside the public policy perspective, such as externalities, cost-benefit analysis, proliferation issues, etc. Instead, we apply a conventional economic perspective, such as proposed by Rothwell (2016) to calculate NPV and LCOE. We base our analysis on a stochastic Monte Carlo simulation to nuclear power plant investments of generation III/III+, i.e. available technologies with some experience and an extensive scrutiny of cost data. We define and estimate the main drivers of our model, i.e. overnight construction costs, wholesale electricity prices, and weighted average cost of capital, and discuss reasonable ranges and distributions of those parameters. We apply the model to recent and ongoing investment projects in the Western world, i.e. Europe and the United States; cases in non-market economies such as China and Russia, and other non-established technologies (Generation IV reactors and small modular reactors) are excluded from the analysis due to data issues. Model runs suggest that investing in nuclear power plants is not profitable, i.e. expected net present values are highly negative, mainly driven by high construction costs, including capital costs, and uncertain and low revenues. Even extending reactor lifetimes from currently 40 years to 60 years does not improve the results significantly. We conclude that the economics of nuclear power plants are not favorable to future investments, even though additional costs (decommissioning, long-term storage) and the social costs of accidents are not even considered.
    Keywords: nuclear power; nuclear financing; investment; levelized cost of electricity; monte carlo simulation; uncertainty
    JEL: Q40 D24 G00
    Date: 2019
  2. By: Draper, John
    Abstract: Fusion energy has the potential to address long-term energy requirements and, again over the long term, climate change. However, the development of fusion energy is characterized by a ‘development divide’ between International Thermonuclear Experimental Reactor (ITER) consortium members and non-ITER ‘Global South’ states. As such, it is beset with problems, which can be divided into geopolitical, geo-economic, geo-sociocultural, and geo-technological (GEO-PEST), and analyzed via this framework. Geopolitical problems include cooperation on fusion energy development between ITER members, as well as cooperation between the Global North and Global South on fusion development. Geo-economic problems include the cost of funding ITER and the development of business cases by ITER-successor ‘DEMO’ machines and business models by newly emerging private-sector fusion companies, in a market presently characterized by information asymmetries and potentially threatened by price-limiting resembling behavior by fossil fuel economies. Geo-sociocultural problems include the requirement to maintain the peace-building tradition of nuclear energy, from the initial founding of the United Nations (UN) itself, especially the UN Atomic Energy Commission, through the Cold War-era ‘Atoms for Peace’ initiative, through to the ITER approach and the present era, as well as public perceptions of radiation. Geo-technological problems include tokamak lock-in, fuel type, the viability of ‘compact reactors’, and disruptive technology events. We outline these problems and discuss how to address them in a timely fashion via an external independent review mechanism, modelled on the International Energy Agency’s ‘Global Commission for Urgent Action on Energy Efficiency’, established in 2019 and due to deliver recommendations in 2020.
    Date: 2019–11–06
  3. By: Falchetta, Giacomo; Gernaat, David E.H.J.; Hunt, Julian; Sterl, Sebastian
    Abstract: In sub-Saharan Africa, 160 million grid-connected electricity consumers live in countries where hydropower accounts for over 50% of total power supply. A warmer climate with more frequent and intense extremes could result in supply reliability issues. Here, (i) a robust framework to highlight the interdependencies between hydropower, water availability, and climate change is proposed, (ii) the state-of-the art literature on the projected impacts of climate change on hydropower in sub-Saharan Africa is reviewed, and (iii) supporting evidence on past trends and current pathways of power mix diversification, drought incidence, and climate change projections is provided. We find that only few countries have pursued a diversification strategy away from hydropower over the last three decades, while others' expansion plans will reinforce the dependency. This will occur irrespective of the fact that some of the largest river basins have experienced a significant drying during the last century. Agreement is found on likely positive impacts of climate change on East Africa's hydropower potential, negative impacts in West and Southern Africa, and substantial uncertainty in Central Africa. Irrespective of the absolute change in gross technical potential, more frequent and intense extremes are projected. One possible paradigm to increase resilience and fulfil the pledges of the Paris Agreement is a synergetic planning and management of hydropower and variable renewables.
    Date: 2019–06–05
  4. By: Ruhnau, Oliver; Hirth, Lion; Praktiknjo, Aaron
    Abstract: The electrification of heat is discussed as a promising option to integrate a growing share of variable renewable electricity and to decarbonize heating. Wind power potentially benefits from the positive seasonal correlation with heat demand and from thermal storages providing low-cost flexibility. However, intrinsic fluctuations in electric heating may also challenge the power system. This study assesses the impacts of building heat pumps on the economics of wind energy, and vice versa. Using a numerical electricity market model, we estimate the marginal economic value of wind energy and its counterpart, the marginal cost of heat pump load. We find that, just as increasing the wind energy market share depresses its market value, the diffusion of heat pumps implies a rise in their load cost. This rise can be mitigated by synergistic effects with wind power, “system-friendly” heat pump technology, and thermal storage. Additional heat pumps raise the wind value, but this effect vanishes as additional wind energy is needed to serve their load. Thermal storage facilitates wind integration but competes with other flexibility options. We argue that efficient heat pump tariffs should reflect the economic cost of their load.
    Keywords: Heat electrification,Renewable integration,Decarbonization,Flexible electricity demand,Electric heat pumps,Thermal storage,Wind energy,Power system modeling
    JEL: Q41 Q42
    Date: 2019
  5. By: Marion Davin (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); Mouez Fodha (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article analyzes the impacts of debt relief on production and pollution. We develop a two-country overlapping generations model with environmental externalities, public debts and perfect mobility of assets. Pollutant emissions arise from production, but agents may invest in pollution mitigation. Could debt relief be an efficient tool to encourage less developed countries to engage in the fight against climate change? We consider a decrease of the debt of the poor country balanced by an increase of the richer country's debt. We show that debt relief makes it possible to engage poor countries in the process of pollution abatement. Capital, environmental quality and welfare can increase in both countries. This result relies on the environmental sensitivity and the discount factor in the poor country relative to the rich one: the greater they are the more beneficial the debt relief is.
    Keywords: Capital market integration,Pollution,Abatement,Overlapping generations,Public debt
    Date: 2019–10
  6. By: McGaughey, Ewan (King's College, London)
    Abstract: How can law and policy reform stop climate damage, and reach a carbon neutral economy by 2025? Numerous groups around the world, from activists, to academics, to elected representatives, are drafting policies to stop the planet burning and drowning. The House of Commons in the UK, as well as 308 local and regional governments, have declared a ‘climate emergency’. A total of 935 jurisdictions worldwide have done the same, while the US House of Representatives has passed a resolution calling for a Green New Deal. In light of these declarations and principles, it is necessary to understand which legal reforms are needed. This paper enumerates key legal reforms under the banner of a ‘Green New Deal’, setting out policies that can be immediately adopted by local and central government in the UK, in European Union law, and by international organisations. The same policies are also adaptable to other jurisdictions.
    Date: 2019–08–22
  7. By: Draper, John
    Abstract: In July 2019, the IEA established an independent Global Commission for Urgent Action on Energy Efficiency. In the world of fusion, in November 2018, a U.S. National Academies’ report on US fusion research recommended a national ‘burning plasma’ fusion energy facility but also emphasized the private sector’s role in fusion innovation. In the same month, the Fusion Industry Association publicly announced its launch, indicating a level of private-sector maturity. Multiple FIA members boldly aim to accelerate fusion’s commercial deployment to approximately one decade, yet none are fully funded. Nonetheless, introducing fusion as a new primary energy source in this timeframe could replace fossil fuels within this century and thereby contribute significantly to addressing the global warming ‘super wicked problem’. This article applies the Quadruple and Quintuple Innovation Helix inter-disciplinary and trans-disciplinary analytical frameworks to this issue. We apply these frameworks to consider how Global South funding for entrepreneurship and innovation, via petrostates’ sovereign wealth funds, can accelerate the development and commercialization of fusion, through funding continuous operations. We thus promote a multi-modal and multi-lateral approach to accelerate fusion innovation, increase quality of democracy, and protect the natural environment, via a managed co-opetive global solution like the IEA’s energy efficiency approach.
    Date: 2019–09–04
  8. By: Tedds, Lindsay M.; Euper, Brock
    Abstract: This chapter focuses solely on the various costs that ERLP brings to local governments, the evidence regarding these costs, and the tools that a local government can employ to recover these costs. Given that local governments across Canada are generally constrained to raising revenues through property taxes and various user levies, including those associated with regulation, this paper will focus on the application of local property taxes on ERLP as well as discuss the likelihood of charges that can be levied pursuant to local government regulatory powers, via rights-of-way by-laws, and fees pursuant to local government powers to enter bilateral rights agreements. Overall, the chapter finds that there are options available to local governments to not only take actions to minimize the costs imposed by ERLP but also to recoup the identified costs. Each option not only to minimize costs but also to recoup costs has areas of strengths and weaknesses, suggesting that no only a multipronged approach will be necessary, conditional on the specific jurisdictional characteristics, but also that these tools may not be able to minimize or recoup all the specific costs incurred.
    Keywords: Energy related linear Property, Local Government Authorities, Local Government Revenue, Property Tax, User Fees, Regulatory Charges
    JEL: H24 H27 H71 H77
    Date: 2019–06
  9. By: Paul Gaggl; Rowena Gray; Ioana Marinescu; Miguel Morin
    Abstract: Electricity is a general purpose technology and the catalyst for the second industrial revolution. Developing countries are currently making huge investments in electrification, with a view to achieving structural change. What does history say about its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydroelectric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy.
    Keywords: technological change, electrification, structural change
    JEL: E25 E22 J24 J31 N32 N72 O33
    Date: 2019
  10. By: Hilde C. Bjørnland
    Abstract: In two recent papers, Kilian and Zhou (2019) and Kilian (2019) have criticized Bjørnland, Nordvik, and Rohrer (2017), arguing that our finding of a large price elasticity of output for shale producers is not credible. We welcome a discussion of our methods and findings, but the criticisms made in these two papers are inaccurate and mischaracterize our analysis and results. In this note I address the criticism that has been made, arguing that our findings support the notion that the degree of output fl exibility is dependent on the production technology in question. Furthermore, I argue that knowledge that shale producers are more price elastic than conventional oil producers could have far reaching implications for the industry, for macroeconomic outcomes, and for policy analysis.
  11. By: Michael Dubrovsky; Marshall Ball; Bogdan Penkovsky
    Abstract: Most cryptocurrencies rely on Proof-of-Work (PoW) "mining" for resistance to Sybil and double-spending attacks, as well as a mechanism for currency issuance. Hashcash PoW has successfully secured the Bitcoin network since its inception, however, as the network has expanded to take on additional value storage and transaction volume, Bitcoin PoW's heavy reliance on electricity has created scalability issues, environmental concerns, and systemic risks. Mining efforts have concentrated in areas with low electricity costs, creating single points of failure. Although PoW security properties rely on imposing a trivially verifiable economic cost on miners, there is no fundamental reason for it to consist primarily of electricity cost. The authors propose a novel PoW algorithm, Optical Proof of Work (oPoW), to eliminate energy as the primary cost of mining. Proposed algorithm imposes economic difficulty on the miners, however, the cost is concentrated in hardware (capital expense-CAPEX) rather than electricity (operating expenses-OPEX). The oPoW scheme involves minimal modifications to Hashcash-like PoW schemes, inheriting safety/security properties from such schemes. Rapid growth and improvement in silicon photonics over the last two decades has led to the commercialization of silicon photonic co-processors (integrated circuits that use photons instead of electrons to perform specialized computing tasks) for low-energy deep learning. oPoW is optimized for this technology such that miners are incentivized to use specialized, energy-efficient photonics for computation. Beyond providing energy savings, oPoW has the potential to improve network scalability, enable decentralized mining outside of low electricity cost areas, and democratize issuance. Due to the CAPEX dominance of mining costs, oPoW hashrate will be significantly less sensitive to underlying coin price declines.
    Date: 2019–11
  12. By: Chen Lin; Thomas Schmid; Michael S. Weisbach
    Abstract: Extreme temperatures lead to large fluctuations in electricity demand and wholesale prices of electricity, which in turn affects the optimal production process for firms to use. Using a large international sample of planned power plant projects, we measure the way that electric utilities’ investment decisions depend on the frequency of extreme temperatures. We find that they invest more in regions with more extreme temperatures. These investments are mostly in flexible gas and oil-fired power plants that can easily adjust their output, to improve their operating flexibility. Our results suggest that climate change is becoming a meaningful factor affecting firms’ behavior.
    JEL: G30 G31
    Date: 2019–11
  13. By: Suphi Sen; Marie-Theres von Schickfus
    Abstract: Climate policies to keep global warming below 2℃ might render some of the world’s fossil fuels and related infrastructure worthless prior to the end of their economic life time. Therefore, some energy-sector assets are at risk of becoming stranded. This paper investigates whether and how investors price in this risk of asset stranding. We exploit the gradual development of a German climate policy proposal aimed at reducing electricity production from coal and analyze its effect on the valuation of energy utilities. We find that investors take stranded asset risk into consideration, but that they also expect a financial compensation for their stranded assets.
    Keywords: stranded assets, climate policy, expectations, utilities, event study
    JEL: Q35 Q38 G14
    Date: 2019
  14. By: Imtenan Al-Mubarak; Saleh Al Muhanna; Zlata Sergeeva (King Abdullah Petroleum Studies and Research Center)
    Abstract: It is widely recognized that the commitments set out in the Paris Agreement fall short of achieving the 2 degrees Celsius global warming target, agreed as the central goal of the agreement and its parties. Given this, KAPSARC has set out to explore the political feasibility of enhancing nationally determined contributions by utilizing the KAPSARC Toolkit for Behavioral Analysis (KTAB).
    Keywords: Climate Change, Geopolitics, Nationally determined contributions, Paris Agreement, KAPSARC toolkit for behavioral analysis (KTAB)
    Date: 2019–11–13
  15. By: Scott M. R. Mahadeo; Reinhold Heinlein; Gabriella Deborah Legrenzi
    Abstract: A new procedure to trace the sources of contagion in the oil-finance nexus is proposed. We do this by consolidating veteran rules derived from the empirical oil literature to filter oil supply, global demand, and oil demand shocks into discrete typical and extreme conditions. We show how these identified conditions can then be used to determine the stable and extreme sub-samples for comparing market relationships in the construction of contagion tests. Our original approach is useful for systemic risk assessment in countries vulnerable to oil market shocks. We illustrate the procedure using the dynamic relationships between the international crude oil market and the financial markets of a small oil-exporter.
    Keywords: contagion, correlation, exchange rate, oil, stock market
    JEL: C32 E37 Q43
    Date: 2019
  16. By: Thomas McGregor
    Abstract: How do oil price movements affect sovereign spreads in an oil-dependent economy? I develop a stochastic general equilibrium model of an economy exposed to co-moving oil price and output processes, with endogenous sovereign default risk. The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies, particularly the countercyclicallity of interest rate spreads and oil prices. Higher risk-aversion, more impatient governments, larger oil shares and a stronger correlation between domestic output and oil price shocks all lead to stronger co-movements between risk premiums and the oil price.
    Date: 2019–11–08
  17. By: Moustafa, Khaled
    Abstract: High levels of CO2 emissions in the atmosphere and toxic pollutants in the air, water and food have serious repercussions on all life's systems, including living beings, environment and economy. Everyone on the Earth is concerned by pollution in some way or another, no matter where and how the pollution is produced as airborne and foodborne pollutants could circulate around the world in different ways, through for example climate components (wind, rain) and/or import and export of foodstuffs. Similarly to living beings that take advantage of day-night circadian rhythms to recover after diurnal hardships, the environment in its entirety could also be seen as a complex living system that needs regular breaks to assimilate or ingest toxic pollutants produced during intensive and continuous industrial processes. If greenhouses gas emissions and pollution rates continue to increase at the same rates as they are nowadays, uncontrollable climate effects might be inevitable and the air quality in some crowded cities in the world might be hardly respirable in the future. A global "Clean Environmental Week" is discussed as an attempt toward reducing air pollution and CO2 emissions through the interruption or reduction of industrial polluting activities regularly, for a week or so per year, to let the nature 'breathe' and recover from environmentally challenging pollutions. A clean environmental period of 10 days per year could reduce CO2 emissions by about one billion tons of CO2 per annum
    Date: 2018–02–01
  18. By: Fulton, Lewis M; Jaffe, Amy; McDonald, Zane
    Abstract: Automotive transport represents one of the highest contributing sources of oil use, local air pollution, and greenhouse gas emissions. Several countries, notably including several European countries and China, have proposed bans on the sale of automotive internal combustion engine (ICE) vehicles as a means to abate these negative effects from the sector. Some cities and regions have already instituted restrictions on ICE vehicles. Larger, national bans have been discussed as a policy to begin in 2040. We consider the literature on proposed policies to ban ICE vehicles and develop scenarios to estimate the potential impacts of these proposed bans, to contribute to a peaking in oil demand and eventual reductions in CO2 emissions. We find that national level ICE car bans in key markets such as China and Europe in 2040 could reduce oil use by five million barrels a day (b/d) by 2050, under five percent of projected global oil use. A global ban would eliminate three times that level of oil use but would likely take several decades for its full impact is realized. Our findings suggest that other supporting policies beyond the bans alone might be necessary to trigger more rapid changes in markets and purchase behavior.
    Keywords: Social and Behavioral Sciences, internal combustion engines, environmental policy, transportation policy, petroleum industry
    Date: 2019–11–01
  19. By: Beckamp, Marius; Schmitt, Martina; Flögel, Franz; Knobbe, Sonja; Paul, Hansjürgen
    Abstract: * Die energieintensive Industrie kann zum Ausgleich volatiler Stromeinspeisungen und somit zum Gelingen der Energiewende beitragen. * Digitalisierungsprozesse ermoglichen die Flexibilisierung der Produktion, wodurch die Stromnachfrage steuerbarer wird. * Gegenwartig sind die Anreize zur Flexibilisierung jedoch fur die meisten Unternehmen aufgrund von Investitionsunsicherheiten und der Konkurrenz durch konventionelle Kraftwerke gering. * Im Rahmen der Transformation des Energiesystems und zunehmender Digitalisierung der Produktion wird die Flexibilisierung fur Industrieunternehmen perspektivisch attraktiver. * Digitalisierung und Flexibilisierung haben Auswirkungen auf Beschaftigte. So werden bereits jetzt Tatigkeiten an eine Abschaltung von Anlagen zur Stabilisierung des Stromsystems angepasst. * Im Hinblick auf Digitalisierungsprozesse gilt es, Mitarbeiter fruhzeitig zu beteiligen und Angste sowie Anregungen der Beschaftigten ernst zu nehmen. * Die Akzeptanz von Veranderungsprozessen kann durch eine fruhzeitige Einbindung der Beschaftigten und ihrer Vertretung gefordert werden. * Ein den Digitalisierungsaktivitaten entsprechendes Personalkonzept stellt sicher, dass Beschaftigte mit notwendigem Know-how ausgestattet werden.
    Date: 2019
  20. By: Salih, Siddig A.; Branson, William H.; Ebraheem, Yusuf H. Al
    Abstract: Kuwait is a well endowed, small and open economy. In this economy the Government is the owner of the bulk of the wealth. Its wealth comes basically from underground oil and oil-accumulated assets. Since there is virtually no tax, the government influences economic activity through its expenditure and expenditure is determined by returns from its wealth. Moreover, the country depends heavily on imports. The structure of the model contains these features and the inherent dichotomy of Oil vs. Non-oil, and Kuwaiti vs. Non-Kuwaiti.jf The empirical analysis of the 1970-1986 data confirmed the dominance of the Government in the economy and the characteristics of a small and open economy. More importantly, the simulation exercise emphasizes the leading role of oil prices in overall economic activities and various accounts to the extent that a modest rise in oil prices is likely to turn the budget deficit into huge public savings and foreign accounts into mounting surpluses.
    Keywords: International Development
  21. By: Magaña, Diego
    Abstract: This work links a gravity model and a welfare analysis through an empirical application to the solar energy transition in Chile. First of all, an econometric estimation is made using a gravity equation of the commercial flows of photovoltaic parts and components required in the solar industry to a group of countries with the most active economies in solar industry, which allows to determine the type of financing what that are using to transform their matrix energy. Secondly, a welfare analysis is carried out that combines the information provided by the gravity equation in a partial equilibrium model to quantify the welfare generated by the situations that are projected in the medium term in the solar energy industry in Chile, considering the financing cost. The gravity equation indicates that both tariff and non-tariff measures have a different impact on the commercial flows of the industry and, on the other hand, both foreign direct investment and other investments are influencing positively and with high statistics significance on solar energy development. Then, the welfare analysis applied to the energy transition in Chile, indicates that, by opting for a specific financing, there will be a positive welfare, not just for the applicant (Chile), but also for the offered (China), allowing the exception in case of Chile's demand could not be satisfied. Finally, we conclude that the proposed energy transition is beneficial in terms of national and international welfare, but we believe that the extension of such analysis should include the savings generated by the reduction in fossil fuel imports, as well as the quantification of the additional environmental and health benefits generated by opting for the development of solar energy.
    Keywords: Ecuación de gravedad, Análisis de bienestar, Modelo gravitatorio, Econometría, Energía Solar, Transición solar, Chile.
    JEL: D6 D60 F10 F14 F18 Q4
    Date: 2019–10–18
  22. By: Nyborg, Karine (Dept. of Economics, University of Oslo)
    Abstract: Humans are fundamentally social. Social activities require coordination, which may yield multiple equilibria in the form of stable, self-reinforcing patterns of herd behavior. Since environmental impacts can differ substantially between alternative equilibria, such self-reinforcing behaviors may, from an environmental perspective, be viewed as representing virtuous or vicious cycles. Environmental policies can help break the self-fulfilling expectations of vicious cycles, tipping the economy to more environment-friendly equilibria.
    Keywords: Environmental policy; multiple equilibria; social interaction; tipping points
    JEL: D10 D62 D91 Q01 Q50 Q58
    Date: 2019–06–17
  23. By: Muhammad Iqbal Nugraha (Master of Applied Economics, Padjadjaran University)
    Abstract: The need for energy efficiency comes with energy security. High energy consumption rates with the scarcity of fossil-based energy promote the energy-saving awareness. Meanwhile, one of the most used indicators for energy efficiency is energy intensity, a ratio of energy consumed divided by output produced. In this regard, the decrease in energy intensity reflects an improvement in energy efficiency. This study discusses the trend and the impact of several factors determining energy intensity in Indonesia, using both econometric and decomposition analyses. Using the fully modified ordinary least square (FMOLS) for the econometric, this study found that economic growth and energy price negatively impacted energy intensity while industrialization and energy mix affected energy intensity positively. On the other hand, the decomposition results illustrated that efficiency mattered more in influencing energy intensity rather than the structural effects. Several policy implications, including energy conversion promotion, were then derived from the findings of this study.
    Keywords: energy intensity, energy efficiency, fully modified ordinary least square
    JEL: O1
    Date: 2019–11
  24. By: Szilard Benk; Max Gillman
    Abstract: Real oil prices surged from 2009 through 2014, comparable to the 1970’s oil shock period. Standard explanations based on monopoly markup fall short since inflation remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.
    Date: 2019–11–01
  25. By: Calyx, Cobi; Low, Jenny
    Abstract: Inherent in deliberative democracy is the possibility of individuals changing their position on an issue in response to persuasive communication. This is a case study of how a person in a position of power changed their mind about climate change in response to deliberations, then used their position to put on record their thought processes in changing mind. Reactions to the public announcement are explored, as are factors contributing to the change of mind and decision to publicly speak about it. Power dynamics that enabled the public discussion of changing mind are also discussed.
    Date: 2019–09–06
  26. By: Kevin Moran; Dalibor Stevanovic; Adam Kader Touré
    Abstract: Nous développons une mesure de l’incertitude macroéconomique canadienne, basée sur la méthodologie proposée par Jurado, Ludvigson et Ng (2015) et utilisant la base de données canadienne développée par Fortin-Gagnon et collab. (2019). Nous montrons que, dans l’ensemble, l’incertitude macroéconomique canadienne est corrélée avec sa contrepartie américaine mais qu’elle affiche toutefois des comportements distincts de celle-ci durant certains épisodes spécifiques de l’histoire macroéconomique récente, notamment la période de forte volatilité dans le prix du pétrole entre 2014 et 2015. Nous utilisons notre mesure pour identifier les effets dynamiques des chocs d’incertitude sur l’activité macroéconomique canadienne. Cette analyse démontre qu’une hausse de l’incertitude canadienne cause une baisse prononcée et persistante dans les dépenses d’investissement au Canada. Cet effet est distinct et s’ajoute à celui –également négatif– causé par une hausse de l’incertitude américaine.
    Date: 2019–11–18
  27. By: Erica Myers; Steven L. Puller; Jeremy D. West
    Abstract: Mandatory disclosure policies are increasingly prevalent despite sparse evidence that they improve market outcomes. We study the effects of requiring home sellers to provide buyers with certified audits of residential energy efficiency. Using similar nearby homes as a comparison group, we find this requirement increases price capitalization of energy efficiency and encourages energy-saving residential investments. We present additional evidence characterizing the market failure as symmetrically incomplete information, which is ameliorated by government intervention. More generally, we formalize and provide empirical support for seller ignorance as a motivation for disclosure policies in markets with bilaterally incomplete information about quality.
    JEL: D83 K32 L15 Q48 R31
    Date: 2019–11
  28. By: Joshua Blonz
    Abstract: In many settings, misaligned incentives and inadequate monitoring lead employees to take self-interested actions contrary to their employer's wishes, giving rise to the classic principal-agent problem. In this paper, I identify and quantify the costs of misaligned incentives in the context of an energy efficiency appliance replacement program. I show that contractors (agents) hired by the electric utility (the principal) increase their compensation by intentionally misreporting program data to deliberately authorize replacement of non-qualified refrigerators. I provide empirical estimates of the impacts of misaligned incentives on (1) the effectiveness of energy efficiency retrofits and (2) welfare. I estimate that unqualified replacements reduce welfare by an average of $106 and save only half as much electricity as replacements that follow program guidelines. The same program without a principal-agent distortion would increase welfare by $60 per replacement. The resul ts provide novel evidence of how principal-agent distortions in the implementation of a potentially beneficial program can undermine its value.
    Keywords: Energy efficiency ; Firm behavior ; Principal-agent problem
    JEL: D22 H32 Q48 Q5
    Date: 2019–09–20
  29. By: Ojo, Marianne
    Abstract: As well as highlighting factors which should be taken into consideration in the Design of a UK Emissions Trading System, This paper aims to address particularly, the question relating to how “in the absence of historical emissions data, the regulator is able to make an environmentally robust assessment of the eligibility and emissions target of a new entrant for the Small Emitter Opt-Out or the Ultra-Small Emitters Exemption, without undermining the environmental integrity of the system”.
    Keywords: Emissions Trading System; Artificial Intelligence; Vertical Integration; Block chain systems; Sustainable Development; energy; climate, environment; Ultra-Small Emitters Exemption; trade relationships; transparency; information disclosure
    JEL: E6 E62 F1 F17 F18 G3 G38 K2 M4
    Date: 2019–07
  30. By: Jane Ellis (OECD); Daniel Nachtigall (OECD); Frank Venmans
    Abstract: This paper reviews ex-post empirical assessments on the impact of carbon pricing on competitiveness in OECD and G20 countries in the electricity and industrial sectors. Most of these assessments find no statistically significant effects of carbon pricing or energy prices on different dimensions of competitiveness, including net imports, foreign direct investments, turnover, value added, employment, profits, productivity, and innovation. When statistically significant results have been found, the magnitude of such effects tends to be small - either positive or negative. Thus, concerns about negative short-term effects of carbon pricing on firms’ or sectors’ international competitiveness have not come to pass, at least to date. These findings are in part because carbon price levels have been low and because of exemptions to carbon taxes for industry, or generous levels of free allowances to firms covered by emissions trading schemes.
    Keywords: carbon markets, carbon pricing, competitiveness, environmental regulation
    JEL: H23 Q54 Q56 Q58
    Date: 2019–11–21
  31. By: Goldschmidt, Nils; Wolf, Stephan
    Date: 2019
  32. By: International Monetary Fund
    Abstract: The authorities are committed to very strong policies and policy frameworks. However, policy uncertainty and new priorities have created challenges and have clouded the growth outlook. Large-scale investment projects and social transfers—and a commitment to not raise taxes until after 2021—are yet to be reconciled with the administration’s fiscal targets and the objective of putting public debt on a downward path. Meanwhile, drastic budget cuts for some institutions have raised concern about their impact on human capital. A state-centered energy policy that limits the role of the private sector—putting the onus of stabilizing Pemex (the state-owned oil and gas company) squarely on the government—has imposed further pressure on the budget and has weakened prospects for oil production. Promises to tackle some of Mexico’s salient structural challenges—including corruption, informality and crime—have yet to be followed by concrete policy action.
    Date: 2019–11–05
  33. By: Moustafa, Khaled
    Abstract: Fossil fuels are intensively extracted from around the world faster than they are renewed. Regardless of direct and indirect effects of such extractions on climate change and biosphere, another issue relating to Earth's internal structure and Earth mass should receive at least some interest. According to the Energy Information Administration (EIA), about 34 billion barrels of oil (~4.7 trillion metric tons) and 9 billion tons of coal have been extracted in 2014 worldwide. Converting the amounts of oil and coal extracted over the last 3 decades and their respective reserves, intended to be extracted in the future, into mass values suggests that about 355 trillion tons, or ~5.86∗10(-9) (~0.0000000058)% of the Earth mass, would be 'lost'. Although this is a tiny percentage, modeling the potential loss of Earth mass may help figuring out a critical threshold of mass loss that should not be exceeded. Here, I briefly discuss whether such loss would have any potential consequences on the Earth's internal structure and on its gravitational force based on the Newton's law of gravitation that links the attraction force between planets to their respective masses and the distance that separate them.
    Date: 2018–02–01
  34. By: Susobhan Ghosh; Sujit Gujar; Praveen Paruchuri; Easwar Subramanian; Sanjay P. Bhat
    Abstract: Periodic Double Auctions (PDAs) are commonly used in the real world for trading, e.g. in stock markets to determine stock opening prices, and energy markets to trade energy in order to balance net demand in smart grids, involving trillions of dollars in the process. A bidder, participating in such PDAs, has to plan for bids in the current auction as well as for the future auctions, which highlights the necessity of good bidding strategies. In this paper, we perform an equilibrium analysis of single unit single-shot double auctions with a certain clearing price and payment rule, which we refer to as ACPR, and find it intractable to analyze as number of participating agents increase. We further derive the best response for a bidder with complete information in a single-shot double auction with ACPR. Leveraging the theory developed for single-shot double auction and taking the PowerTAC wholesale market PDA as our testbed, we proceed by modeling the PDA of PowerTAC as an MDP. We propose a novel bidding strategy, namely MDPLCPBS. We empirically show that MDPLCPBS follows the equilibrium strategy for double auctions that we previously analyze. In addition, we benchmark our strategy against the baseline and the state-of-the-art bidding strategies for the PowerTAC wholesale market PDAs, and show that MDPLCPBS outperforms most of them consistently.
    Date: 2019–11
  35. By: Achtnicht, Martin; Germeshausen, Robert; von Graevenitz, Kathrine
    Abstract: Über 80 Prozent des Endenergieverbrauchs der Haushalte in Deutschland wird für Raumwärme und Warmwasser verwendet. Da die Mehrheit der installierten Heizsysteme nach wie vor auf fossilen Energieträgern basiert, trägt der Gebäudesektor substanziell zu den nationalen Treibhausgasemissionen bei. Im vergangenen Jahr waren es rund 117 Mio. t CO2-Äquivalente. Bis zum Jahr 2030 soll der Ausstoß laut Klimaschutzplan 2050 auf 72 Mio. t CO2 reduziert werden, 2050 soll der Gebäudesektor nahezu klimaneutral sein. Angesichts sehr langer Investitionszyklen bei Gebäuden sind das ambitionierte Ziele. Um diese zu erreichen, setzt die Bundesregierung in ihrem neuen Klimaschutzprogramm auf eine Kombination von Förderprogrammen, Ordnungsrecht, einer CO2-Bepreisung sowie Information und Beratung. Das einzig wirklich Neue in diesem Maßnahmenpaket ist die Einführung einer expliziten Bepreisung von CO2-Emissionen, die nicht unter dem EU Emissionshandelssystem (EHS) reguliert werden - ein Schritt, der von Ökonomen lange gefordert wurde. Leider lassen es die Pläne der Bundesregierung nicht zu, dass die CO2-Bepreisung kurzfristig ihr volles Potenzial entfalten kann. Dieses ZEW policy brief liefert eine kritische Einordnung des Klimaschutzprogramms im Gebäudesektor. Anhand aktueller Erkenntnisse der Wirtschaftsforschung diskutiert es Nachteile von Förderprogrammen und ordnungsrechtlichen Maßnahmen und zeigt zugleich künftigen Forschungsbedarf auf.
    Keywords: Energieverbrauch,Treibhausgasemissionen,Gebäudesektor,CO2,Klimaschutz
    Date: 2019
  36. By: Tedds, Lindsay M.
    Abstract: The Canadian Income Tax Act recognizes three main types of expenses incurred in Canada by firms principally engaged in mineral, metal, petroleum, and natural gas. These are Canadian Exploration Expenses (CEEs), Canadian Development Expenses (CDEs), and Canadian Oil and Gas Property Expenses (COPGE). The Income Tax Act permits these expenses to be deductible from income for tax purposes to varying degrees of generosity. CEEs are 100% deductible from income while CDEs and CPOGEs are generally deductible at a declining balance rate of 30% or 10% per year respectively., Canada’s new federal government has proposed to change the deductibility of CEEs, a change that potentially has wide-reaching implications for Canada’s energy and resources sector. In particular, the government has committed to phasing out subsidies for the fossil fuel industry, the first step of which is to only allow the use of the CEE deduction for unsuccessful exploration. The Liberal proposal raises important considerations about the tax treatment of exploration expenses. First, what is the background of and justification for the current tax treatment of these expenses? Second, in what way could the CEE expense be considered a subsidy? Third, what are some of the real implications of the proposal? To analyze this issue, I first lay out the history regarding the tax deductibility of resource expenses in Canada, detailing how the existing tax treatment can be considered preferential. The preferential tax treatment for exploration and development expenses then laid the ground work for the flow-through share regime, which flows the deduction through to investor’s in exchange for equity investment. The second section details the history of the flow-through share regime, showing how the FTS regime is not only based on a tax preference but also is itself preferential tax treatment. The third section lays out the justifications for the tax preferences for both exploration and development expenses and the FTS regime. The paper then addresses the evidence for the justifications for the preferential tax treatments. Finally, the paper considers the outstanding questions from the Liberal proposal as well as the implications the proposal has. Poignantly, the proposal as it stands will lead to the demise of the FTS regime and the implications of this will need to be addressed by the government if it proceeds with its proposal. The paper ends with some concluding remarks.
    Keywords: Canadian Exploration Expenses, Canadian Development Expenses, Flow-through shares, tax deductibility, non-renewable resources expenses
    JEL: H23 H24 H25 Q38
    Date: 2017–12–17
  37. By: Torben Koch; Tiziano Vargiolu
    Abstract: We consider a price-maker company which generates electricity and sells it in the spot market. The company can increase its level of installed power by irreversible installations of solar panels. In absence of the company's economic activities, the spot electricity price evolves as an Ornstein-Uhlenbeck process, and therefore it has a mean-reverting behavior. The current level of the company's installed power has a permanent impact on the electricity price and affects its mean-reversion level. The company aims at maximizing the total expected profits from selling electricity in the market, net of the total expected proportional costs of installation. This problem is modeled as a two-dimensional degenerate singular stochastic control problem in which the installation strategy is identified as the company's control variable. We follow a guess-and-verify approach to solve the problem. We find that the optimal installation strategy is triggered by a curve which separates the waiting region, where it is not optimal to install additional panels, and the installation region, where it is. Such a curve depends on the current level of the company's installed power, and is the unique strictly increasing function which solves a first-order ordinary differential equation (ODE). Finally, our study is complemented by a numerical analysis of the dependency of the optimal installation strategy on the model's parameters.
    Date: 2019–11
  38. By: Yuping Deng (School of Economics and Trade, Hunan University, Changsha, P.R. China); Yanrui Wu (Business School, The University of Western Australia); Helian Xu (School of Economics and Trade, Hunan University, Changsha, P.R. China)
    Abstract: The Chinese government adopted a series of pollution reduction targets in its eleventh five-year (2006-2010) economic development program. Whether this program can achieve its goal of pollution reduction and quality improvement for exports is of vital importance for China’s sustainable development. This paper aims to investigate the effects of these environmental regulation policies on export product quality by using the quasi-difference-in-difference method. Empirical results show that the implementation of these pollution reduction targets significantly reduces export product quality. This negative impact is more profound in western regions, capital-intensive sectors and privately-owned firms. Moreover, the negative effect is only observed among firms exporting to non-OECD countries, whereas the export quality of firms exporting to OECD countries is positively affected by the new policy. Lastly, our extended analysis shows that the negative effects can be mitigated through product switching within the firms.
    Keywords: Environmental regulation; Export product quality; Product switching; China
    JEL: F10 F18 Q56
    Date: 2019
  39. By: Milan Scasny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; Charles University Environment Centre, Jose Martiho 407/2, 162 00, Prague, Czech Republic); Beng Wah Ang (Department of Industrial and Systems Engineering, National University of Singapore, 10 Kent Ridge Crescent, 119260, Singapore); Lukas Recka (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: It is common in index decomposition studies to decompose an aggregate into five or more factors. This applies to energy-related carbon emissions since carbon emission coefficient by fuel type is relatively easy to derive. However, it is extremely demanding to derive the air pollutant emission coefficient by fuel type and by sector. As a result, air pollutant emissions have typically been decomposed into three factors — the scale, the structure and the intensity factor. Using a unique facility-level dataset, this is the first study that decomposes air pollutant emissions into five factors, i.e. by decomposing the emission intensity effect further into the fuel-intensity, the fuel-mix, and the emission-fuel intensity factors. Specifically, we use a 5-factor Logarithmic Mean Divisia Index (LMDI) method to decompose annual changes in the emissions of four types of air quality pollutants (SO2, NOx, CO and particulate matters) stemming from large stationary emission sources in the Czech Republic. Our analysis covers the period 1990 to 2016, during which the Czech economy transited towards a market economy. It also implemented strict environmental regulation to become a full member of the European Union in 2004. The emissions decreased cumulatively by 74% or more in the 1990s, remained at stable levels during the 2000s and declined again thereafter. We examine how the results differ if one relies on the ‘standard’ 3-factor and the 4-factor decompositions.
    Keywords: LMDI, 5-factors IDA, air quality pollutants, emission per fuel type, economic transition
    JEL: P28 Q43 Q53 Q56
    Date: 2019–11
  40. By: Muñoz, Katherine
    Abstract: The objective of this paper is to examine how the solar energy that sectors use to produce goods exported in Chile during the years 2014-2016 has evolved, and how factors underlying economic growth such as intensity, technology and changes demand have influenced this evolution. In addition, the consequences of the energy policy “Energy 2050” are evaluated, which increases the level of solar energy in Chile´s electricity matrix, examining the level of energy substitution, changes in the trade balance of fossil fuels and emissions of Greenhouse gases (GHG), and the compatibility of this energy substitution with the “Electric Matrix Decarbonization Plan” proposed in 2019. The results show that the increase in the intensity of consumption would have been the main factor behind the increase of almost four times in the solar energy incorporated, with the copper mining sector being key, while the demand for exports would have contributed in the opposite direction. “Energy 2050” will play a key role, generating a 5.6-fold increase in the level of solar energy incorporated in 2028, allowing a significant decrease in the import requirements of fossil fuels such as coal and natural gas, and GHG emissions. In addition, this energy substitution would play a key role in the closure of the thermoelectric plants contemplated in the “Decarbonization Plan”.
    Keywords: Modelo Input-output, Análisis de Descomposición Estructural, Energía Solar, Políticas Energéticas, Chile
    JEL: F18 Q42 Q53
    Date: 2019–10–15

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