nep-ene New Economics Papers
on Energy Economics
Issue of 2020‒03‒30
forty-six papers chosen by
Roger Fouquet
London School of Economics

  1. The Effect on Total Electricity Consumption of Behavioral Changes in Response to Time-Varying Pricing in the Residential Sector By Capitán, Tabaré; Alpízar, Francisco; Madrigal-Ballestero, Róger; Pattanayak, Subhrendu
  2. Renewable electricity generation and transmission network developments in light of public opposition: Insights from Ireland By Tong Koecklin, Manuel; Fitiwi, Desta; de Carolis, Joseph F.; Curtis, John
  3. A Risk Aware Two-Stage Market Mechanism for Electricity with Renewable Generation By Nathan Dahlin; Rahul Jain
  4. Electricity Access and Structural Transformation : Evidence from Brazil's Electrification By Perez Sebastian,Fidel; Steinbuks,Jevgenijs; Feres,Jose Gustavo; Trotter,Ian Michael
  5. Electricity Market Integration, Decarbonisation and Security of Supply: Dynamic Volatility Connectedness in the Irish and Great Britain Markets By Do, Hung; Nepal, Rabindra; Jamasb, Tooraj
  6. Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2 By Jamasb, Tooraj
  7. Network Utilities Performance and Institutional Quality: Evidence from the Italian Electricity Sector By Soroush, Golnoush; Cambini, Carlo; Jamasb, Tooraj; Llorca, Manuel
  8. Energy Systems Integration: Implications for Public Policy By Cambini, Carlo; Congiu, Raffaele; Jamasb, Tooraj; Llorca, Manuel; Soroush, Golnoush
  9. Political Economy of Reform and Regulation in the Electricity Sector of Sub-Saharan Africa By Imam, Mahmud I.; Jamasb, Tooraj; Llorca, Manuel
  10. Preferences for demand side management—a review of choice experiment studies By Bernadeta Gołębiowska
  11. Utilising applied behavioural research to execute subsidy reform in Kuwait By Al-Ojayan, Hessah; Gaskell, George; Veltri, Giuseppe A.
  12. Coupling environmental transition and social prosperity: a scenario-analysis of the Italian case By André Gaspar Ciepliski; Simone D’Alessandro; Tiziano Distefano; Pietro Guarnieri
  13. Degrees of displacement: The impact of household PV battery prosumage on utility generation and storage By Kelvin Say; Wolf-Peter Schill; Michele John
  14. Regional climate policy under deep uncertainty: robust control and distributional concerns By William Brock; Anastasios Xepapadeas
  15. Pollution, Ability, and Gender-Specific Responses to Shocks By Teresa Molina
  16. Border Carbon Adjustments and Alternative Measures for the EU ETS: An Evaluation By Roland Ismer; Karsten Neuhoff; Alice Pirlot
  17. Trade, Transportation and the Environment By Forslid, Rikard
  18. Social Cost of Carbon under stochastic tipping points: when does risk play a role? By Nicolas Taconet; Céline Guivarch; Antonin Pottier
  19. Natural gas pricing GSA Bolivia – Brazil using virtual hub and expected monetary value instruments By Jorge L. Gumucio; Sergio M. Medinaceli
  20. Coronavirus and oil price crash: A note By Claudiu Albulescu
  21. Are Economists Getting Climate Dynamics Right and Does It Matter? By Simon Dietz; Rick van der Ploeg; Armon Rezai; Frank Venmans
  22. Household preferences for new heating systems: Insights from a multi-country discrete choice experiment By Schleich, Joachim; Faure, Corinne; Guetlein, Marie-Charlotte; Tu, Gengyang
  23. Part II: Why Do Banks Keep All That “Fracking” Money? By Matthew Plosser
  25. Low Emission Zones for Better Health: Evidence from German Hospitals By Nico Pestel; Florian Wozny
  26. Falling Short : A Global Survey of Electricity Tariff Design By Foster,Vivien; Witte,Samantha Helen
  27. Low-carbon transition risks for finance By Gregor Semieniuk; Emanuele Campiglio; Jean-Francois Mercure; Ulrich Volz; Neil R. Edwards
  28. The role of Globalization in Modulating the Effect of Environmental Degradation on Inclusive Human Development By Simplice A. Asongu; Nicholas M. Odhiambo
  29. Yellow Vests, Carbon Tax Aversion, and Biased Beliefs By Thomas Douenne; Adrien Fabre
  30. Lower Income Households’ Vulnerability to the Recent Commodity Price Surge By Jonathan McCarthy
  31. The Impact of Declining Oil Rents on Tax Revenues: Does the Shadow Economy Matter? By Phoebe W. Ishak; Mohammad Reza Farzanegan
  32. Integrating Water-Food-Energy Nexus with Climate Services: Modelling and Assessment for a case study in Africa By Phoebe Koundouri; Lydia Papadaki
  33. Complementarity between mechanization and human capital: How did machines and educated white-collar workers enhance labor productivity in prewar Japanese coal mines ? By Tetsuji OKAZAKI
  34. Decarbonizing Trade Policy. Options towards a European Decarbonized Trade Policy By Mehdi Abbas
  35. What Caused Racial Disparities in Particulate Exposure to Fall? New Evidence from the Clean Air Act and Satellite-Based Measures of Air Quality By Janet Currie; John Voorheis; Reed Walker
  36. Fueling the Engines of Liberation with Cleaner Cooking Fuel By Tushar Bharati; Yiwei Qian; Jeonghwan Yun
  37. Long-term growth impact of climate change and policies: the Advanced Climate Change Long-term (ACCL) scenario building model By Claire Alestra; Gilbert Cette; Valérie Chouard; Rémy Lecat
  38. Traffic, Air Pollution, and Distributional Impacts in Dar es Salaam : A Spatial Analysis with New Satellite Data By Dasgupta,Susmita; Lall,Somik V.; Wheeler,David
  39. Understanding the Economic Impacts of Greenhouse Gas Mitigation Policies on Shipping : What Is the State of the Art of Current Modeling Approaches ? By Halim,Ronald Apriliyanto; Smith,Tristan; Englert,Dominik Paul
  40. Dynamics of biofuel prices on the European market: Impact of the EU environmental policy on the resources markets By Francis Declerck; Jean-Pierre Indjehagopian; Frédéric Lantz
  41. Environmental Implications of Increased US Oil Production and Liberal Growth Agenda in Post -Paris Agreement Era By Shahbaz, Muhammad; Kablan, Sandrine; Hammoudeh, Shawkat; Nasir, Muhammad Ali; Kontoleon, Andreas
  42. Urban Air Mobility: Viability of Hub-Door and Door-Door Movement by Air By Bulusu, Vishwanath; Sengupta, Raja
  43. The Effectiveness of Revenue-Neutral Carbon Taxes By Younes Ahmadi; Akio Yamazaki
  44. Overlapping Efforts in the EU Emission Trading System By Fabian Herweg
  45. Natural Resources and Total Factor Productivity Growth in Developing Countries : Testing A New Methodology By Hamilton,Kirk E.; Naikal,Esther G.; Lange,Glenn-Marie
  46. The Econometrics of Oil Market VAR Models By Lutz Kilian; Xiaoqing Zhou

  1. By: Capitán, Tabaré; Alpízar, Francisco; Madrigal-Ballestero, Róger; Pattanayak, Subhrendu
    Abstract: We study the implementation of a time-varying pricing (TVP) program by a major electric utility in Costa Rica. Similar to previous research, we find that the program reduces consumption during peak-hours. However, in contrast with previous research, we find that the program increases total consumption. To explain the differences between our results and the typical finding of reduced total consumption, we note that previous research used data from rich countries in which the use of heating and cooling devices drives electricity consumption. In our context – common to many non-rich tropical countries – very few households have heating or cooling devices. In the near absence of room for technological changes – since there is no heating or air conditioner in most households – behavioral changes to reduce consumption hours are not enough to offset the increased consumption during peak hours. Our results serve as a cautionary piece of evidence for policy makers interested in reducing consumption during peak hours – the goal can potentially be achieved with TVP, but the cost is increased total consumption.
    Date: 2020–03–16
  2. By: Tong Koecklin, Manuel; Fitiwi, Desta; de Carolis, Joseph F.; Curtis, John
    Date: 2020
  3. By: Nathan Dahlin; Rahul Jain
    Abstract: Over the last few decades, electricity markets around the world have adopted multi-settlement structures, allowing for balancing of supply and demand as more accurate forecast information becomes available. Given increasing uncertainty due to adoption of renewables, more recent market design work has focused on optimization of expectation of some quantity, e.g. social welfare. However, social planners and policy makers are often risk averse, so that such risk neutral formulations do not adequately reflect prevailing attitudes towards risk, nor explain the decisions that follow. Hence we incorporate the commonly used risk measure conditional value at risk (CVaR) into the central planning objective, and study how a two-stage market operates when the individual generators are risk neutral. Our primary result is to show existence (by construction) of a sequential competitive equilibrium (SCEq) in this risk-aware two-stage market. Given equilibrium prices, we design a market mechanism which achieves social cost minimization assuming that agents are non strategic.
    Date: 2020–03
  4. By: Perez Sebastian,Fidel; Steinbuks,Jevgenijs; Feres,Jose Gustavo; Trotter,Ian Michael
    Abstract: This study proposes a novel supply-side mechanism driving economic structural transformation: grid electrification. Increasing electricity availability affects the reallocation of inputs to more productive activities through generating higher returns and lowering entry costs in sectors with greater infrastructure intensity. The results of modeling and econometric analysis based on Brazil's historical data over the period 1970-2006 confirm that the manufacturing sector benefits the most in these two dimensions, followed by services and agriculture. The expansion of electricity infrastructure explains about 17 percent of this process and 32 percent of the observed increase in GDP per capita. Simulations of a multisector neoclassical growth model with heterogeneous firms help assessing the effectiveness of different electrification policies.
    Keywords: Energy Policies&Economics,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing,Plastics&Rubber Industry,Food Security,Electric Power,Economic Theory&Research,Industrial Economics,Economic Growth
    Date: 2020–03–13
  5. By: Do, Hung (School of Economics and Finance, Massey University, New Zealand); Nepal, Rabindra (School of Accounting, Economics and Finance & Centre for Contemporary Australasian Business and Economics Studies (CCABES), University of Wollongong); Jamasb, Tooraj (Department of Economics, Copenhagen Business School)
    Abstract: This study investigates the volatility connectedness between the Irish and Great Britain electricity markets and how it is driven by changes in energy policy, institutional structures and political ideologies. We assess various aspects of this volatility connectedness including static (unconditional) vs dynamic (conditional), symmetric vs asymmetric characteristics between 2009 and 2018. We find that volatility connectedness is time varying and is significantly affected by important events, policy reforms or market redesigns such as Brexit, oil price slump, increasing share of renewables, and fluctuations in the exchange rates. Our asymmetric analysis shows that the magnitude of the good volatility connectedness is marginally larger than that of the bad volatility connectedness. Our result suggests that good volatility levels would be even higher once the Irish market adopts the carbon price floor. Therefore, supporting renewable generation by setting an appropriate carbon price in interconnected wholesale electricity markets will improve market integration.
    Keywords: market integration; electricity; renewable; energy policy; volatility
    JEL: D40 L94 Q20 Q40
    Date: 2020–02–01
  6. By: Jamasb, Tooraj (Department of Economics, Copenhagen Business School)
    Abstract: The regulatory and operating context of energy networks is dynamic and constantly evolving. Achieving a multitude of economic, environmental, social and policy objectives is a challenging task for the sector regulators. In 2010, the UK energy regulator Ofgem replaced its approach to energy network price control and incentive regulation with a Revenue-Incentive-Innovation-Output (RIIO-1) model. This paper reviews the incentive areas that influence the performance of the next version of the model (RIIO-2). Guided by the principals of regulatory economics and evidence in the literature, we discuss key aspects of the regulation model that be revised by the regulator. The lessons of experience from the RIIO models are also relevant for regulators in other countries and can inform their design of incentive regulation of energy networks.
    Keywords: energy network; incentive regulation; rate of return; cost of capital; benefit sharing; menu of options
    JEL: K23 L51 L52
    Date: 2020–02–06
  7. By: Soroush, Golnoush (Department of Management, Politecnico di Torino, Italy); Cambini, Carlo (Department of Management, Politecnico di Torino, Italy); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School)
    Abstract: It is generally accepted that institutions are important for economic development. However, whether the performance of regulated utilities within a country is affected by the quality of institutions is yet to be investigated thoroughly. We analyse how the quality of regional institutions impact performance of Italian electricity distribution utilities. We use a stochastic frontier analysis approach to estimate cost functions and examine the performance of 108 electricity distribution utilities from 2011 to 2015. This unique dataset was constructed with the help of the Italian Regulator for Energy, Networks, and Environment. In addition, we use a recent dataset on regional institutional quality in Italy. We present evidence that utilities in regions with better government effectiveness, responsiveness towards citizens, control of corruption, and rule of law, also tend to be more cost efficient. The results suggest that national regulators should take regional institutional diversity into account in incentive regulation and efficiency benchmarking of utilities.
    Keywords: institutional quality; stochastic frontier analysis; electricity distribution in Italy; cost efficiency; inefficiency determinants
    JEL: D22 L51 L94 O43
    Date: 2020–02–01
  8. By: Cambini, Carlo (Department of Management, Politecnico di Torino, Italy); Congiu, Raffaele (Department of Management, Politecnico di Torino, Italy); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School); Soroush, Golnoush (Department of Management, Politecnico di Torino, Italy)
    Abstract: Energy Systems Integration (ESI) is an emerging paradigm and at the centre of the EU energy debate. ESI takes a holistic view of the electricity, gas and heat sectors to deliver a clean, reliable and affordable energy system. By identifying and exploiting the synergies within and between the sectors, ESI aims to increase flexibility in the energy system, maximize the integration of renewable energy and distributed generation, and reduce environmental impact. While ESI-enabling technologies have been studied from a technical perspective, the economic, regulatory and policy dimensions of ESI are yet to be analysed. This paper discusses ESI in a multi-step approach. We first focus on the economics of ESI-enabling technologies. We briefly discuss how the EU national regulators incentivise their adoption. We identify major economic and policy barriers to ESI and propose policy solutions to overcome these barriers. We conclude that current regulatory frameworks in the EU do not stimulate sufficient ESI investments and only through proper design of incentives the ESI paradigm could be achieved.
    Keywords: energy systems integration; sector coupling; regulation; innovation; research and development; economic and policy barriers
    JEL: L51 L94 Q40
    Date: 2020–02–01
  9. By: Imam, Mahmud I. (Durham University Business School, Durham University, UK); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School)
    Abstract: As part of electricity sector reforms, Sub-Saharan African countries have established independent regulatory agencies to signal legal and political commitment to end selfregulation and provision of service by the state. The reforms aimed to encourage private investments, improve efficiency, and extend the service to the millions who lacked the service. However, after nearly two and half decades of reforms, these expectations have not been met and the electricity sectors of these countries remain undeveloped. There are anecdotes that these outcomes are due to poor design, non-credible, unpredictable regulations, and political interference. This paper studies the performance of the reforms in the context of government political ideology. We use a dynamic panel estimator and data from 45 Sub-Saharan African countries to investigate ideological differences in the effect of independent sector regulation on access to electricity and installed capacity. We find negative impact from independent regulation on installed capacity in countries with leftwing governments while we find a positive effect in countries with right-wing governments. Moreover, we find negative impact on electricity access in countries with left-wing governments. These results have interesting policy implications for attracting private sector participation to increase generation capacity and access rates especially in countries with left-wing governments.
    Keywords: independent regulation; electricity sector reform; government ideology; dynamic GMM; Sub-Saharan Africa
    JEL: D73 L51 L94 O55 P16 Q48
    Date: 2020–02–01
  10. By: Bernadeta Gołębiowska (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This review of choice experiment (CE) studies deals with the valuation of electricity supply attributes in the residential sector. We consider the willingness to pay and the willingness to accept changes in the electricity supply. The results could be used to determine consumers’ preferences for demand-side management (DSM) programs and could serve as a reference for formulating policies. DSM is an option for constructing a low-carbon electricity system, improving energy efficiency, and achieving the sustainable development of an economy. The results from CEs justify investment in new solutions. The research shows that consumers are open to DSM, but they prefer simple programs to complex ones. Decision-makers could introduce DSM programs that enable power outages and provide compensation for households. The societal advantages of DSM are not obvious to consumers, so the implementation of DSM requires communication and more research on peoples’ preferences.
    Keywords: choice experiments, demand-side management, energy, households, review
    JEL: C25 D19 Q41 Q48
    Date: 2020
  11. By: Al-Ojayan, Hessah; Gaskell, George; Veltri, Giuseppe A.
    Abstract: The Kuwait government is highly dependent on oil revenues; its fiscal position is exposed to fluctuations in crude oil prices. Reducing expenditures will make Kuwait’s government more fiscally robust in the context of volatile oil markets. Reforming subsides is one way by which the government can reduce expenditures. Electricity and water subsidies in Kuwait represent about 11–20 percent of fiscal expenditures. The goal of this paper is to identify behavioural interventions, ‘nudges’, that could help save electricity in the household sector, which consumes 50 percent of electricity produced. We developed the nudges by first, reviewing relevant behavioural literature; second, conducting focus group interviews; third, comparing Kuwait to other Gulf Cooperation Council countries; and last, testing the cultural appropriateness of the nudges. The first nudge we propose is making the government subsidy more salient for citizens. The second is activating social norms. The third is framing, adding a message that makes subscribers care for future generations. Lastly, there is the recognition of saving efforts through a reward system.
    JEL: E6 R14 J01
    Date: 2020–02–01
  12. By: André Gaspar Ciepliski; Simone D’Alessandro; Tiziano Distefano; Pietro Guarnieri
    Abstract: This paper investigates the social and structural conditions grounding the feasibility of green growth policies. It takes the proposal of a Green New Deal as a reference and assesses i) whether green investments and innovation will be able to ensure the promised social prosperity and ii) what kind of social policies are able to compensate for the risk of increasing inequality. For this purpose, we develop a dynamic macrosimulation model of the Italian economy which explores the social and structural effects of the Italian integrated policy plan for energy and climate. We find that green growth alone will not result in better societal conditions and needs to be compensated with social policies to reduce inequality. Hence, we select two social policies, namely a basic income programme and a working time reduction policy, that are expected to deliver similar results in terms of redistribution and compare their environmental outcomes in terms of CO2 emissions. Our scenario analysis shows that working time reduction leads to an increase in employment and a parallel decrease in aggregate demand that cause both a reduction in emissions and inequality. On the other hand, the basic income programme reduces inequality by sustaining aggregate demand, which in turn reduces the positive environmental effects of the energy plan.
    Keywords: Green New Deal, Green Growth, Working Time Reduction, Basic Income
    JEL: Q52 Q58 Q57
    Date: 2020–03–01
  13. By: Kelvin Say; Wolf-Peter Schill; Michele John
    Abstract: Reductions in the cost of PV and batteries encourage households to invest in PV battery prosumage. We explore the implications for the rest of the power sector by applying two open-source techno-economic models to scenarios in Western Australia for the year 2030. Household PV capacity generally substitutes utility PV, but slightly less so as additional household batteries are installed. Wind power is less affected, especially in scenarios with higher shares of renewables. With household batteries operating to maximise self-consumption, utility battery capacities are hardly substituted. Wholesale prices to supply households, including those not engaging in prosumage, slightly decrease, while prices for other consumers slightly increase. We conclude that the growth of prosumage has implications on the various elements of the power sector and should be more thoroughly considered by investors, regulators, and power sector planners.
    Date: 2020–03
  14. By: William Brock; Anastasios Xepapadeas
    Abstract: We study climate change policies using the novel pattern scaling approach of regional transient climate response in order to develop a regional economy-climate model under conditions of deep uncertainty. We associate welfare weights with regions and analyze cooperative outcomes derived by the social planner's solution at the regional scale. Recent literature indicates that damages are larger in low latitude (warmer) areas and are projected to become relatively even larger in low latitude areas than at temperate latitudes. Under deep uncertainty, robust control policies are more conservative regarding emissions and, when regional distributional weights are introduced, carbon taxes are lower in the relatively poorer region. Mild concerns for robustness are welfare improving for the poor region, while strong concerns have welfare cost for all regions. We show that increasing regional temperatures will increase resources devoted to learning, in order to reduce deep uncertainty.
    Keywords: regional temperature anomalies, deep uncertainty, distributional weights, cost of robustness, learning
    JEL: Q54 Q58 D81
    Date: 2020–03–18
  15. By: Teresa Molina (University of Hawaii at Manoa Department of Economics)
    Abstract: This paper explores how labor market conditions drive gender differences in the human capital decisions of men and women, focusing on how their schooling decisions respond to an exogenous change in cognitive ability. Using data from Mexico, I begin by documenting that in utero exposure to air pollution leads to lower cognitive ability in adulthood for both men and women. I then explore how male and female schooling decisions respond differentially to this cognitive shock: for women only, pollution exposure leads to reduced educational attainment and income. I show that two labor market features are fully responsible for this gender difference: (1) women sort into white-collar occupations at higher rates, and (2) schooling and ability are more complementary in white-collar than blue-collar occupations.
    Keywords: gender, occupational choice, early life, pollution, education, Mexico
    JEL: I26 Q53 J24
    Date: 2019–05
  16. By: Roland Ismer; Karsten Neuhoff; Alice Pirlot
    Abstract: As part of its Green Deal, the European Commission is considering the introduction of border carbon adjustments and alternative measures. The measures, which would primarily apply to basic materials like steel and cement, pursue a double objective: they are aimed at enhancing the effectiveness of carbon pricing for the transition to climate neutrality but also at avoiding carbon leakage risks. When implementing carbon adjustment mechanisms and alternative measures, various design options might be considered to reform the EU Emissions Trading Scheme (EU ETS). In this paper, we have decided to focus on three main models, which help to highlight the main differences between the available options. Under the first model, importers of basic materials would be required to surrender carbon allowances at the level of a product benchmark or, where lower, at the verified level of foreign carbon intensity. In parallel, allocation of free allowances would be phased out. Under the second model, a symmetric adjustment mechanism for exports and imports would be adopted, including refund to exporters for the carbon costs incurred on basic materials embodied in products. Finally, under the third model, the EU ETS would be complemented with a climate contribution charged for materials sold in the European Union (EU) at the product benchmark level related to the carbon intensity of each material. The free allowance allocation regime would then be modified to be directly linked to the volume of material production at the product benchmark level. In order to contribute to the current policy debate, we evaluate for each of these three models, their legality, coherence with EU climate objectives, effectiveness in carbon leakage prevention, potential international implications, as well as their administrative complexity and compliance costs
    Keywords: Carbon pricing, Climate policy, International trade, WTO
    JEL: F18 K33 L61 Q58
    Date: 2020
  17. By: Forslid, Rikard (Dept. of Economics, Stockholm University)
    Abstract: This paper analyzes the environmental impact of emissions related to trade and transportation. It is shown that transportation may in principle lower global emissions if the production sector is dirtier than the transport sector. The measure of a sector´s dirtiness is related to the emissions taxes and the abatement efficiency within that sector. It is shown that a firm´s abatement efficiency can be calculated from the emissions-to-cost ratio times the emissions tax. Using Swedish data to rank 5-digit industries in terms of their dirtiness reveals that several production sectors have a higher dirtiness index than transportation does.
    Keywords: Emissions; Trade; Transportation;
    JEL: F10 F18
    Date: 2020–01–31
  18. By: Nicolas Taconet (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech); Céline Guivarch (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech); Antonin Pottier (EHESS - École des hautes études en sciences sociales)
    Date: 2019–12–13
  19. By: Jorge L. Gumucio (Consultor Privado); Sergio M. Medinaceli (Consultor Privado)
    Abstract: The purpose of this paper is to show the shortcomings of incentive policies, specifically competitiveness, if they are designed without considering fundamentals of market development such as, level of demand, level of investment, and availability of alternative sources of supply. We focus on the analysis of the main market, financial, and economic variables in the Bolivia-Brazil Gas Supply Agreement, their relationship, development and dynamics through time and the current situation before the contract is renegotiated in 2019. Our analysis centers on the effective negotiation margin that Bolivia has calculated from the overall production costs of Bolivian gas (using EMV) vis a vis the opportunity cost of Brazil importing LNG. Using 10%-15% as discount rates and WTI prices between $50 and $60/bbl, the natural gas price result of EMV is between $ 4.96 and $ 7.99/MMbtu. Using the Bolivian tax incentive gas price should be between $2.29 and $5.16/MMbtu. Under the assumptions that WTI levels would be around $ 60/bbl, investors use a 15% discount rate to invest in Bolivia, incentive policy is in place, and the price of LNG is around $ 6.84/MMbtu; the opportunity cost of Brazil importing gas from Bolivia is $ -0.55/MMbtu. The same case without incentive policy will yield a $ -3.38/MMbtu. On the other hand, if the transport tariff is reduced the margin becomes positive under the assumption that the incentive policy is still in place. Therefore, as the price of LNG becomes more competitive through increase in supply (worldwide), Brazil will set its negotiation position around the price that they could import LNG on the short to medium term
    Keywords: Netback prices, GSA, Gas Pricing, Gas Contract Negotiation, Virtual Hub, Expected Monetary Value.
    JEL: Q31 Q35 F15
    Date: 2019–11
  20. By: Claudiu Albulescu (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers)
    Abstract: Coronavirus (COVID-19) creates fear and uncertainty, hitting the global economy and amplifying the financial markets volatility. The oil price reaction to COVID-19 was gradually accommodated until March 09, 2020, when, 49 days after the release of the first coronavirus monitoring report by the World Health Organization (WHO), Saudi Arabia floods the market with oil. As a result, international prices drop with more than 20% in one single day. Against this background, the purpose of this paper is to investigate the impact of COVID-19 numbers on crude oil prices, while controlling for the impact of financial volatility and the United States (US) economic policy uncertainty. Our ARDL estimation shows that the COVID-19 daily reported cases of new infections have a marginal negative impact on the crude oil prices in the long run. Nevertheless, by amplifying the financial markets volatility, COVID-19 also has an indirect effect on the recent dynamics of crude oil prices.
    Keywords: oil price,coronavirus,COVID-19,financial volatility,economic policy uncertainty
    Date: 2020–03–12
  21. By: Simon Dietz; Rick van der Ploeg; Armon Rezai; Frank Venmans
    Abstract: We show that several of the most important economic models of climate change produce climate dynamics inconsistent with the current crop of models in climate science. First, most economic models exhibit far too long a delay between an impulse of CO2 emissions and warming. Second, few economic models incorporate positive feedbacks in the carbon cycle, whereby carbon sinks remove less CO2 from the atmosphere, the more CO2 they have already removed cumulatively, and the higher is temperature. These inconsistencies affect economic prescriptions to abate CO2 emissions. Controlling for how the economy is represented, different climate models result in significantly different optimal CO2 emissions. A long delay between emissions and warming leads to optimal carbon prices that are too low and too much sensitivity of optimal carbon prices to the discount rate. Omitting positive carbon cycle feedbacks also leads to optimal carbon prices that are too low. We conclude it is important for policy purposes to bring economic models in line with the state of the art in climate science.
    Keywords: carbon cycle, carbon price, climate change, integrated assessment modelling, positive feedbacks, social cost of carbon
    JEL: Q54
    Date: 2020
  22. By: Schleich, Joachim; Faure, Corinne; Guetlein, Marie-Charlotte; Tu, Gengyang
    Abstract: This paper employs identical demographically representative discrete choice experiments (DCEs) on new heating systems with owner-occupier households in Poland, Sweden, and the United Kingdom (UK) to estimate respondent will-ingness-to-pay (WTP) for rebates, heating cost savings, installation time (re-flecting "hassle costs") and warranty length. The results from estimating coun-try-specific mixed logit models suggest that participants generally value rebates for new heating systems, but valuation differs substantially across countries and was found to be highest for Poland. For Sweden (but not for Poland or the UK), rebates appeared more effective if offered by a public rather than a private fund-ing source. Because higher income households in the UK value rebates more than lower income households, rebates may be regressive. The results for heat-ing cost savings in the three countries imply static payback times of ten to fif-teen years for more energy-efficient heating systems. We further find that re-spondents have a strong dislike for longer installation time and a high WTP for longer warranty times.
    Keywords: energy efficiency,energy efficiency obligations,heating systems,hassle costs,energy efficiency paradox,choice experiment
    Date: 2020
  23. By: Matthew Plosser
    Abstract: In a recent post, I discussed the significant impact that ?fracking? and other unconventional energy development has had on bank deposits. Using this deposit windfall, I estimated how banks allocate these funds, finding that over the recent business cycle they reduced the portion used for loans. In this post, I will discuss what may have influenced the decision to lend these funds or to hold liquid assets like cash or securities.
    Keywords: Business Cycle; Liquidity; Financial Intermediation
    JEL: G2
  24. By: Shreekant Gupta (Department of Economics, Delhi School of Economics); Bishwanath Goldar (Institute of Economic Growth); Shubham Dang (SCOPT Analytics)
    Abstract: This paper examines whether capital markets in developing countries respond to news about environmental performance of firms thereby creating incentive for pollution control. In particular we conduct an event study of firms in three polluting industries in India (paper and pulp, cement and iron and steel) that were rated under the Green Rating Project. Along lines of earlier research we find the stock market generally penalizes weak environmental performance among firms. Interestingly, paper and pulp firms that were being rated for a second time and did strictly worse relative to their previous performance experienced significant negative returns. In terms of methodology, the paper controls for event day clustering by using the KP-statistic instead of the commonly used Z or BMP-statistic. We show when KP statistic is used, the negative impact of poor environmental performance on the stock returns is not as pronounced as the standard Z or BMP statistic would lead one to believe.
    JEL: G14 Q53 G32
    Date: 2019–12
  25. By: Nico Pestel (Institute of Labor Economics (IZA), Germany); Florian Wozny (Institute of Labor Economics (IZA), Germany)
    Abstract: This paper studies health effects from restricting the access of high-emission vehicles to innercities by implementing Low Emission Zones. For identification, we exploit variation in the timing and the spatial distribution of the introduction of new Low Emission Zones across cities in Germany. We use detailed hospitalization data combined with geo-coded information on the coverage of Low Emission Zones. We find that Low Emission Zones significantly reduce levels of air pollution in urban areas and that these improvements in air quality translate into population health benefits. The number of diagnoses related to air pollution is significantly reduced for hospitals located within or in close proximity to a Low Emission Zone after it becomes effective. The results are mainly driven by reductions in chronic cardiovascular and respiratory diseases.
    Keywords: Low Emission Zone, air pollution, health, Germany
    JEL: I18 Q52 Q53
    Date: 2019–08
  26. By: Foster,Vivien; Witte,Samantha Helen
    Abstract: This paper provides a comprehensive overview of electricity pricing practices and tariff structure design in more than 60 developed and developing countries worldwide as of 2015-16. It evaluates the performance of electricity tariff designs according to a variety of important dimensions, notably cost recovery, vertical equity (affordability), and horizontal equity (or price differentiation). It also reflects on the extent to which current electricity tariff designs are well-suited to incentivize efficient adoption of emerging technologies, such as distributed generation and storage, electric vehicles, and demand-side participation. The results of the survey indicate that electricity tariffs stand at $0.13 per kilowatt-hour (when fully averaged across countries and customer groupings); but differ hugely across jurisdictions by a factor of 40:1. Electricity tariffs are far from recovering limited capital costs and have not kept up with inflation over time. Substantial price differentiation is the norm, and affordability remains a significant concern. Most countries'tariff structures are ill-adapted to emerging technological disruption in the sector, due to the scant use of load-related charges to cover the fixed costs of the network, the continued preponderance of increasing block tariffs for residential customers, and the limited application of time-of-use pricing.
    Date: 2020–03–04
  27. By: Gregor Semieniuk (Political Economy Resaerch Institute and Department of Economics, University of Massachusetts Amherst); Emanuele Campiglio (Institute of Ecological Economics, Vienna University of Economics and Business); Jean-Francois Mercure (Department of Geography, University of Exeter); Ulrich Volz (SOAS Centre for Sustainable Finance & Department of Economics, SOAS University of London); Neil R. Edwards (Environment, Earth and Ecosystems, The Open University, UK)
    Abstract: Transition risks for finance arise from the transition to a low-carbon economy, which can disrupt the ability of carbon-intensive industries to meet their financial obligations and lead to abrupt changes in asset valuations of affected firms and default on their debt. An understanding of these risks is key for any ambitious emissions reduction programme, such as that implied by the Paris Agreement. Insight from theory and study of past transitions is of limited help, as these see financial risks mostly flowing from speculation with rising industries propped up by a set of new vastly more productive technologies. The current transition instead requires policy to quickly render a set of currently productive high-carbon industries unprofitable, stranding their assets, so the risks are located in the declining industries. Absent a unified framework of the interaction of real and financial aspects of the transition, one set of studies conceptualises and quantifies asset stranding and other transition costs in declining industries, and a separate one estimates the potential impact of these transition costs on the financial system. Combining these two research strands and modelling the feedback of financial distress on the real economy will require more research, which could help integrate transition risks into the cost analysis of mitigation in integrated assessment models. An important insight from the past transitions literature is that once low-carbon industries are rendered more profitable than high-carbon ones, financial risks could also build in these newly rising industries due to speculation.
    Keywords: Transition risks, low-carbon economy, declining industries, stranded assets, financial distress
    JEL: E32 E44 G17 G32 L16 N2 O3
    Date: 2020–03
  28. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study assesses how globalisation modulates the effect of environmental degradation on inclusive human development in 44 countries in Sub-Saharan Africa (SSA), using data for the period 2000 to 2012. The empirical results are based on the Generalized Method of Moments (GMM). The following main findings are established. First, a trade openness (imports + exports) threshold of between 80-120% of GDP is the maximum level required for trade openness to effectively modulate CO2 emissions (metric tonnes per capita) and induce a positive effect on inclusive human development. Second, a minimum threshold required for trade openness to modulate CO2 intensity (kg per kg of oil-equivalent energy use) and induce a positive effect on inclusive human development is 200% of GDP. Third, there is a net positive effect on inclusive human development from the relevance of trade openness in modulating the effect of CO2 emissions per capita on inclusive human development and a negative net effect on inclusive human development from the importance of trade openness in moderating the effect of CO2 intensity on inclusive human development.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2020–01
  29. By: Thomas Douenne (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics); Adrien Fabre (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics)
    Abstract: This paper helps to understand how beliefs form and determine attitudes towards policies. Using a new survey and official households' survey data, we investigate the case of carbon taxation in France in the context of the Yellow Vests movement that started against it. We find that French people would largely reject a Tax & Dividend policy, i.e. a carbon tax whose revenues are redistributed uniformly to each adult. However, they also overestimate the negative impact of the scheme on their purchasing power, wrongly think it is regressive, and do not perceive it as environmentally effective. Using information about the scheme as instruments to robustly identify causal effects, our econometric analysis shows that if we could rectify these three biased beliefs, it would suffice to generate majority approval. Yet, only a small minority can be convinced by new information and revisions are biased towards pessimism. Finally, if overly pessimistic beliefs cause tax rejection, they also result from it through motivated reasoning, which manifests what we define as "tax aversion".
    Keywords: Climate Policy,Carbon tax,Bias,Beliefs,Preferences,Tax aversion
    Date: 2020–02
  30. By: Jonathan McCarthy
    Abstract: In a previous post, I discussed the impact of changing commodity prices on the discretionary income of households and concluded that these effects generally were relatively modest except in cases of extreme swings in commodity prices. As many people know, there was a large surge in energy prices during the first quarter of 2011, and it appears to have had a significant effect on discretionary income and consumer spending. (See recent speeches by Federal Reserve Chairman Bernanke and New York Fed President Dudley; for views outside the Fed, see FT Alphaville, Tim Duy, and James Hamilton.)
    Keywords: income quintiles; Consumer Expenditure Survey; commodity prices; consumption; disposable income; low-income households
    JEL: E2
  31. By: Phoebe W. Ishak; Mohammad Reza Farzanegan
    Abstract: We study the association between oil rents and tax revenues, highlighting the importance of the shadow economy as a mediating factor. We present a simple theoretical model demonstrating that decreasing oil rents are likely to be positively associated with the tax revenues in a country with a moderate size of shadow economy. Declining oil rents may not lead to higher tax efforts of the state if the shadow economy is sizable. Using a sample of 124 countries from 1991 to 2015, our panel data regression analysis illustrates the moderating role of the shadow economy in the final effect of negative oil rents shocks on the tax revenues. A decline in oil rents following negative oil price shocks cease to have any significant positive impact on tax revenues in countries with shadow economy representing more than 35% of GDP. The results are robust after controlling country and year fixed effects, other determinants of tax revenues and using a dynamic model.
    Keywords: shadow economy, tax revenues, oil rents, resource curse
    JEL: Q32 Q35 H26 O17
    Date: 2020
  32. By: Phoebe Koundouri; Lydia Papadaki
    Abstract: This chapter is based on the work of DAFNE project, a decision analytic framework to explore the Water-Energy-Food (WEF) nexus in complex transboundary water resources of fast countries. In particular, we develop three geo- and temporally-referenced scenarios under economic growth and climate change in the Zambezi river basin (ZRB), which is the 4th largest river basin in Africa and located in eight different countries 1. The future scenarios are conceptually driven by the selected combination of the Shared Socio-economic Pathways (SSPs) and the Representative Concentration Pathway (RCP 4.5). As baseline is used the SSP2 or the Business-as-usual pathway following a pattern of action that is consistent with the experience of the last century. The time horizon of the explored case study ZRB shared by eight countries is the period from 2018 to 2060. The aim of this work is to develop a better understanding of the WEF nexus by providing the input to a cost-benefit optimization model aiming to optimally allocate over time and space water-energy-food. WEF nexus is a complex situation to be modeled due to the trade-offs among the different sectors of the economy, energy production and irrigation, governance and common property challenges. The findings show that the water, energy and food requirements are expected to double during the period of interest considering only demographic development, while economic development and international trade will put an additional burden to the supply chain in meeting those goals.
    Keywords: Modelling tool, integrated assessment, river basin, demographic index, water, electricity and food projections, economic indexes forecast, nexus, Africa.
    Date: 2020–03
  33. By: Tetsuji OKAZAKI
    Abstract: This paper investigates how mechanization, white-collar human capital, and the complementarity between them led to an improvement in the labor productivity of bluecollar workers. We estimated production functions that included interaction terms between variables representing the intensity of physical capital and white-collar human capital, using detailed mine-level panel data from the coal mining industry in prewar Japan. We found that mechanization and white-collar human capital were indeed complementary. That is, in the mines where mechanization proceeded, and only in those mines, the higher the education level of white-collar workers was, the larger was the impact on the labor productivity of blue-collar workers.
    Date: 2020–01
  34. By: Mehdi Abbas (Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: The new European Commission, chaired by Ursula Von der Leyen, has made the environment and climate the central parameters of European policy, both internal and international, for the period 2020-2025. As such, the European Green Deal has set itself the goal of making Europe the "first climate neutral" continent by 2050. It has been five years since the Paris Agreements was agreed. This working Paper analyzes the trade policy options available to the EU for a low-carbon international trading system.
    Date: 2020–03–09
  35. By: Janet Currie; John Voorheis; Reed Walker
    Abstract: Racial differences in exposure to ambient air pollution have declined significantly in the United States over the past 20 years. This project links restricted-access Census Bureau microdata to newly available, spatially continuous high resolution measures of ambient particulate pollution (PM2.5) to examine the underlying causes and consequences of differences in black-white pollution exposures. We begin by decomposing differences in pollution exposure into components explained by observable population characteristics (e.g., income) versus those that remain unexplained. We then use quantile regression methods to show that a significant portion of the “unexplained” convergence in black-white pollution exposure can be attributed to differential impacts of the Clean Air Act (CAA) in non-Hispanic African American and non-Hispanic white communities. Areas with larger black populations saw greater CAA-related declines in PM2.5 exposure. We show that the CAA has been the single largest contributor to racial convergence in PM2.5 pollution exposure in the U.S. since 2000 accounting for over 60 percent of the reduction.
    Date: 2020–01
  36. By: Tushar Bharati (Economics Discipline, Business School, University of Western Australia); Yiwei Qian (Department of Economics, University of Southern California); Jeonghwan Yun (Department of Economics, University of Southern California)
    Abstract: Using the staggered rollout of the Indonesian “Conversion to Liquefied Petroleum Gas (LPG) Program”, we show that a subsidy on the labor- and time-saving cook technology increased the female labor force participation. The program also increased household consumption expenditure and the decision-making power of women in the household, especially in financial matters. A back-of-the-envelope calculation suggests that the benefits of switching to LPG far outweighed the costs to the households. Based on previous research, we conjecture that intra-household externalities and gender differences in preferences drive low rates of adoption of the cost effective technology. The program’s impact on the financial decision-making power of women suggests that subsidies that empower women, even if temporary, can encourage the adoption and sustained use of beneficial technology.
    Keywords: household technology; time saving; female labor; decision making
    JEL: D13 J22 O14 Q4
    Date: 2020
  37. By: Claire Alestra (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Gilbert Cette (Centre de recherche de la Banque de France - Banque de France, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Valérie Chouard (Centre de recherche de la Banque de France - Banque de France); Rémy Lecat (Centre de recherche de la Banque de France - Banque de France)
    Abstract: This paper provides a tool to build climate change scenarios to forecast Gross Domestic Product (GDP), modelling both GDP damage due to climate change and the GDP impact of mitigating measures. It adopts a supply-side, long-term view, with 2060 and 2100 horizons. It is a global projection tool (30 countries / regions), with assumptions and results both at the world and the country / regional level. Five different types of energy inputs are taken into account according to their CO2 emission factors. Full calibration is possible at each stage, with estimated or literature-based default parameters. In particular, Total Factor Productivity (TFP), which is a major source of uncertainty on future growth and hence on CO2 emissions, is endogenously determined, with a rich modeling encompassing energy prices, investment prices, education, structural reforms and decreasing return to the employment rate. We present four scenarios: Business As Usual (BAU), with stable energy prices relative to GDP price; Decrease of Renewable Energy relative Price (DREP), with the relative price of non CO2 emitting electricity decreasing by 2% a year; Low Carbon Tax (LCT) scenario with CO2 emitting energy relative prices increasing by 1% per year; High Carbon Tax (HCT) scenario with CO2 emitting energy relative prices increasing by 3% per year. At the 2100 horizon, global GDP incurs a loss of 12% in the BAU, 10% in the DREP, 8% in the Low Carbon Tax scenario and 7% in the High Carbon Tax scenario. This scenario exercise illustrates both the "tragedy of the horizon", as gains from avoided climate change damage net of damage from mitigating policies are negative in the medium-term and positive in the long-term, and the "tragedy of the commons", as climate change damage is widely dispersed and particularly severe in developing economies, while mitigating policies should be implemented in all countries, especially in advanced countries modestly affected by climate change but with large CO2 emission contributions.
    Keywords: Climate,Global warming,Energy prices,Government policy,Growth,Productivity,Long- term projections
    Date: 2020–03–10
  38. By: Dasgupta,Susmita; Lall,Somik V.; Wheeler,David
    Abstract: Air pollution from vehicular traffic is a major source of health damage in urban areas. The problems of urban traffic and pollution are essentially geographic, because their incidence and impacts depend on the spatial distribution of economic activities, households, and transport links. This paper uses satellite images to investigate the spatial dynamics of vehicle traffic, air pollution, and exposure of vulnerable residents in the Dar es Salaam metro region of Tanzania. The results highlight significant impacts of seasonal weather (temperature, humidity, and wind-speed factors) on the spatial distribution and intensity of air pollution from vehicle emissions. These effects on the metro region's air quality vary highly by area. During seasons when weather factors maximize pollution, the worst exposure occurs in areas along the wind path of high-traffic roadways. The research identifies core areas where congestion reduction would yield the greatest exposure reduction for children and the elderly in poor households.
    Keywords: Intelligent Transport Systems,Air Quality&Clean Air,Pollution Management&Control,Brown Issues and Health,Inequality,Health Care Services Industry,Railways Transport
    Date: 2020–03–13
  39. By: Halim,Ronald Apriliyanto; Smith,Tristan; Englert,Dominik Paul
    Abstract: The International Maritime Organization's initial strategy on reduction of greenhouse gas emissions from ships stipulates that the international shipping sector should assess the impacts on states prior to adoption of the mitigation measures included in the strategy. This assessment should be undertaken as a matter of urgency, and disproportionately negative impacts should be assessed and addressed as appropriate. This paper aims to contribute to this discussion by reviewing the state-of-the-art research on the economic impacts of greenhouse gas mitigation measures on states, using model-based analysis. Specifically, the paper: (i) identifies four areas of economic impacts and their relationships, (ii) compiles the latest findings on the estimated magnitudes of these impacts, and (iii) presents relevant modeling approaches along with best practices for selecting and applying these approaches in impact assessments. The paper concludes that introducing greenhouse gas mitigation measures, such as carbon prices applied to bunker fuels in the range of 10 to 50 USD/ton of carbon dioxide, might increase maritime transport costs by 0.4 percent to 16 percent. However, this would only marginally increase the import prices of goods (by less than 1 percent). For transport choices, the increased cost of maritime transport induced by greenhouse gas mitigation measures might only slightly reduce the share of maritime transport, by 0.16 percent globally. Furthermore, a global carbon tax applied to all transport modes might stimulate a shift toward maritime transport from all other modes. The impacts of a carbon price in the range of 10 to 90 USD/ton of carbon dioxide on national economies are expected to be modest (-0.002 percent to -1 percent of GDP).
    Keywords: Transport Services,International Trade and Trade Rules,Climate Change Mitigation and Green House Gases,Trade and Services,Transport Economics Policy&Planning
    Date: 2019–01–09
  40. By: Francis Declerck (ESSEC Business School - Essec Business School); Jean-Pierre Indjehagopian (ESSEC Business School - Essec Business School); Frédéric Lantz (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles)
    Abstract: This paper aims at explaining the major drivers of biodiesel market prices by examining agricultural resource prices and gasoil prices for automotive fuels in the context of the EU environmental policy. The EU policy has enhanced biodiesel production since 2006. Biodiesel prices are impacted by the EU policy as well as rapeseed and oil prices which have fluctuated a lot over the last decade. An econometric analysis was performed using monthly data from November 2006 to January 2016. However, tests for structural breaks show several changes in price behavior. This leads us to estimate a regime-switching model which reveals two main regimes for the biodiesel price pattern. When oil prices are high, biodiesel, rapeseed and diesel oil prices are related, mainly driven by oil prices. When oil prices are low, biodiesel prices are mostly related to rapeseed prices according to EU regulations requiring the blending of biodiesel and gasoil.
    Keywords: switching regime model,biofuel,oil market,structural changes
    Date: 2020–02–21
  41. By: Shahbaz, Muhammad; Kablan, Sandrine; Hammoudeh, Shawkat; Nasir, Muhammad Ali; Kontoleon, Andreas
    Abstract: Contextualising on the internationally low oil prices era and historically high oil production in USA and refusal to honour the commitments under Paris Agreement (COP: 21), this study investigates the role of education, oil prices and natural resources on CO2 emissions and energy demand in the USA for the period of 1976-2016. In so doing, we employed a bounds testing approach to cointegration which also accounts for the structural breaks. Key findings suggest the presence of a long-run association between underlying variables. The abundance of natural resources and economic growth of the US economy seem to weigh on environmental quality by increasing energy consumption and carbon emissions. Oil prices show a negative association with energy consumption as well as carbon emissions suggesting that a low oil price regime can lead to an increase in carbon emissions and energy consumption. Interestingly, education seems to play an important role by reducing energy consumption and carbon emissions, resultantly improving the US environmental quality. Our findings have profound environmental implications in terms of efforts to tackle climate change and meeting the Paris agreement (COP: 21) ambitions with reality and USA policy stance.
    Keywords: Natural Resources, Oil Prices, Education, Energy and Emissions, COP: 21
    JEL: Q5
    Date: 2020–01–03
  42. By: Bulusu, Vishwanath; Sengupta, Raja
    Abstract: Owing to a century of innovation in connected and automated aircraft design, for the rst time in history, air transport presents a potential competitive alternative to road, for hub-to-door and door-to-door urban services. In this article, we study the viability of air transport, for moving people and goods in an urban area, based on three metrics - enroute travel time, fuel cost and carbon dioxide (CO2) emissions. We estimate the metrics from emission standards and operational assumptions on vehicles based on current market data and compare electric air travel to gasoline road travel. For passenger movement, air is faster than road for all distances. It fares better on fuel cost and emissions only for longer distances (specic transition distances are stated in the text). For consolidated movement of goods, air is at par with road. Finally, for movement of unconsolidated goods, air again fares better than road on all three metrics. It is also noteworthy that these results are based on a road friendly urban design. Changes in design that facilitate easier access to air based hub-to-door and door-to-door services, would only make the case stronger for Urban Air Mobility (UAM), especially with connected and automated aircraft, as the next revolution in urban transportation.
    Keywords: Engineering, Urban air mobility, drones, VTOL
    Date: 2020–03–01
  43. By: Younes Ahmadi (Department of Economics. University of Calgary, Canada); Akio Yamazaki (National Graduate Institute for Policy Studies, Japan)
    Abstract: This paper investigates the effectiveness of carbon taxes in the manufacturing sector by examining British Columbia’s revenue-neutral carbon tax. We theoretically demonstrate that the magnitude of plants’ exposure to the policy monotonically increases with its emission intensity. Using detailed confidential plant-level data, we directly exploit the variations in plants’ emission intensity to isolate the emission effect of the policy. We find that the carbon tax lowers emission by 2 percent. Furthermore, we find that the policy had a positive output effect, suggesting that the carbon tax encouraged plants to produce more with less energies. These findings are possibly due to the revenue neutrality of the policy, especially through the reduction of the corporate income taxes. It incentivized plants to invest in both energy-saving and productivity-enhancing technologies.
    Date: 2020–03
  44. By: Fabian Herweg
    Abstract: According to the Phase IV (2021-2030) rules of the EU ETS, the total amount of emissions permits allocated to firms is not fixed but endogenous. This implies that a national climate policy that overlaps with the emission trading system can have an impact on total aggregate emissions. Roughly speaking, if firms increase their holdings of emission permits, the total amount of emissions allocated is reduced. This paper investigates analytically how an overlapping national policy affects the decision of an individual firm and the whole industry to bank emission permits. If marginal abatement costs are not too convex, national climate policies increase banking and thus tend to reduce overall emissions. This effect, however, is reduced in times of low interest rates.
    Keywords: banking of permits, cap-and-trade, EU ETS, national measures
    JEL: D45 Q48 Q58
    Date: 2020
  45. By: Hamilton,Kirk E.; Naikal,Esther G.; Lange,Glenn-Marie
    Abstract: Estimates of total factor productivity growth, a measure of increases in the efficiency of production, have traditionally been based on a two-factor model of labor and fixed capital. Because profits are measured residually in the System of National Accounts, they implicitly include rents on natural resource exploitation, with the result that the contribution of fixed capital to growth in the inputs to gross domestic product is misstated, particularly in resource dependent developing countries. This leads to incorrect measures of total factor productivity growth. Using data on natural resources from the World Bank's Wealth of Nations database and methods combining the Solow growth accounting model with recent work at the Organisation for Economic Co-operation and Development, this paper makes new estimates of total factor productivity growth for 74 developing countries over 1996-2014. In the aggregate, including natural resources as a factor of production increases estimated total factor productivity growth across all country income classes and regions of the world when compared with the traditional two-factor approach. In addition, the estimated total factor productivity growth including natural resources is less volatile over time in the great majority of countries compared with the traditional approach. The availability of World Bank data on natural resource quantities and rents for a wide range of countries suggests that natural resources should be included in total factor productivity growth estimation going forward. Further research could focus on the distinctive roles played by different natural resource endowments.
    Keywords: Global Environment,Energy and Natural Resources,Coastal and Marine Resources,Food Security,Oil Refining&Gas Industry,Inequality
    Date: 2019–01–16
  46. By: Lutz Kilian; Xiaoqing Zhou
    Abstract: Oil market VAR models have become the standard tool for understanding the evolution of the real price of oil and its impact in the macro economy. As this literature has expanded at a rapid pace, it has become increasingly difficult for mainstream economists to understand the differences between alternative oil market models, let alone the basis for the sometimes divergent conclusions reached in the literature. The purpose of this survey is to provide a guide to this literature. Our focus is on the econometric foundations of the analysis of oil market models with special attention to the identifying assumptions and methods of inference. We not only explain how the workhorse models in this literature have evolved, but also examine alternative oil market VAR models. We help the reader understand why the latter models sometimes generated unconventional, puzzling or erroneous conclusions. Finally, we discuss the construction of extraneous measures of oil demand and oil supply shocks that have been used as external or internal instruments for VAR models.
    Keywords: Oil supply elasticity; oil demand elasticity; IV estimation; structural VAR
    JEL: Q43 Q41 C36 C52
    Date: 2020–03–06

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