nep-ene New Economics Papers
on Energy Economics
Issue of 2020‒07‒20
sixty-six papers chosen by
Roger Fouquet
London School of Economics

  1. Assessing the impact of COVID-19 on global fossil fuel consumption and CO2 emissions By L. Vanessa Smith; Nori Tarui; Takashi Yamagata
  2. Can wholesale electricity prices support "subsidy-free" generation investment in Europe? By Chi Kong Chyong; Michael Pollitt; Reuben Cruise
  3. Seasonal impacts of climate change on electricity production By Jacques Despres; Marko Adamovic
  4. Carbon Monitor: a near-real-time daily dataset of global CO2 emission from fossil fuel and cement production By Zhu Liu; Philippe Ciais; Zhu Deng; Steven J. Davis; Bo Zheng; Yilong Wang; Duo Cui; Biqing Zhu; Xinyu Dou; Piyu Ke; Taochun Sun; Rui Guo; Olivier Boucher; Francois-Marie Breon; Chenxi Lu; Runtao Guo; Eulalie Boucher; Frederic Chevallier
  5. The Determinants of CO2 prices in the EU ETS System By Lovcha, Yuliya; Pérez Laborda, Àlex; Sikora, Iryna
  6. Steering the Energy Transition in a World of Intermittent Electricity Supply: Optimal Subsidies and Taxes for Renewables Storage By Mathias Mier
  7. Diversification and Cooperation Strategies in a Decarbonizing World By Peszko,Grzegorz; Van Der Mensbrugghe,Dominique; Golub,Alexander Alexandrovich
  8. Fixing Long-term Price Paths for Fossil Energy. The Optimal Incentive for Limiting Global Warming By Stephan Schulmeister
  9. Global Energy and Climate Outlook 2019: Electrification for the low-carbon transition By KERAMIDAS Kimon; DIAZ VAZQUEZ Ana R.; WEITZEL Matthias; VANDYCK Toon; TAMBA Marie; TCHUNG-MING Stephane; SORIA RAMIREZ Antonio; KRAUSE Jette; VAN DINGENEN Rita; SO CHAI Qimin; FU Sha; WEN Xinyuan
  10. The energy transition in Asia: The role of liquefied natural gas and implications for East African producers By Etienne Romsom; Kathryn McPhail
  11. COVID-19 and EU Climate Targets: Going Further with Less? By Tensay Meles; L. (Lisa B.) Ryan; Joe Wheatley
  12. A Unit Commitment and Economic Dispatch Model of the GB Electricity Market – Formulation and Application to Hydro Pumped Storage By Chi Kong Chyong; David Newbery; Thomas McCarty
  13. Global Energy and Climate Outlook 2018: Greenhouse gas emissions and energy balances By TCHUNG-MING Stephane; DIAZ VAZQUEZ Ana R.; KERAMIDAS Kimon
  14. Exploring public support for climate action and renewables in resource-rich economies: The case of Scotland By Rosemary Ostfeld; David M Reiner
  15. Towards the cost assessment of soil erosion By Dominique Desbois
  16. A carbon horse race: Abatement subsidies vs. permit trading in Switzerland By Hintermann, Beat; Zarkovic, Maja
  17. Qui emet du CO2? Panorama critique des inegalites ecologiques en France By Antonin Pottier; Emmanuel Combet; Jean-Michel Cayla; Simona de Lauretis; Franck Nadaud
  18. Adding Fuel to the Fire : Cheap Oil during the COVID-19 Pandemic By Wheeler,Collette Mari; Baffes,John; Kabundi,Alain Ntumba; Kindberg-Hanlon,Gene; Nagle,Peter Stephen Oliver; Ohnsorge,Franziska Lieselotte
  19. The Growth of Nations Revisited: Global Environmental Accounting from 1998 to 2018. By Aniruddh Mohan; Nicholas Z. Muller; Akshay Thyagarajan; Randall V. Martin; Melanie S. Hammer; Aaron van Donkelaar
  20. Coal Use and Student Performance By Duque, Valentina; Gilraine, Michael
  21. Carbon Curse in Developed Countries By Mireille Chiroleu-Assouline; Mouez Fodha; Yassine Kirat
  22. Renewable Energy, Trade Performance and the Conditional Role of Finance and Institutional Capacity of sub-Sahara African Countries By Akinyemi, Opeyemi; Efobi, Uchenna; Asongu, Simplice; Osabuohein, Evans
  23. Global macroeconomic balances for mid-century climate analyses By REY LOS SANTOS Luis; WOJTOWICZ Krzysztof; TAMBA Marie; VANDYCK Toon; WEITZEL Matthias; SAVEYN Bert; TEMURSHO Umed
  24. Covid-19 and Cacophony of coughing: Did International commodity Prices catch influenza? By Hillary C. Ezeaku; Simplice A. Asongu
  25. Climate change and the macro economy By Andersson, Malin; Morgan, Julian; Baccianti, Claudio
  26. Distributional effects of emission pricing in a carbon-intensive economy: the case of Poland By Marek Antosiewicz; Rodrigo Fuentes; Piotr Lewandowski; Jan Witajewski-Baltvilks
  27. The mitigation potential of eco-taxation on carbon emissions: income effects under downward rigid wages By Ferran Sancho
  28. Subjective Probabilistic Expectations, Household Air Pollution, and Health: Evidence from cooking fuel use patterns in India By Chattopadhyay, Mriduchhanda; Arimura, Toshi H.; Katayama, Hajime; Sakudo, Mari; Yokoo, Hide-Fumi
  29. Digitalisation and (de)centralisation in Germany - a comparative study of retail banking and the energy sector By Flögel, Franz; Beckamp, Marius
  30. Conservation Co-Benefits from Air Pollution Regulation By Yuanning Liang; Ivan J. Rudik; Eric Zou; Alison Johnston; Amanda D. Rodewald; Catherine L. Kling
  31. Environmental impacts and policy responses to Covid-19: A view from Latin America By Alejandro Lopez Feldman; Carlos Chavez, Maria Velez, Hernan Bejarano, Ariaster Chimeli, Jose Feres, Juan Robalino
  32. Financing low-carbon generation in the UK: The hybrid RAB model By David Newbery; Michael Pollitt; David M Reiner; Simon Taylor
  33. Emissions Trading with Transaction Costs By Marc Baudry; Anouk Faure; Simon Quemin
  34. European Gas Markets, Trading Hubs, and Price Formation: A Network Perspective By David Woroniuk; Arzé Karam; Tooraj Jamasb
  35. Asymmetric Responses of Consumer Spending to Energy Prices: A Threshold VAR Approach By Edward S. Knotek; Saeed Zaman
  36. The Impact of a Carbon Tax on Cross-Border Electricity Trading By Bowei Guo; David Newbery; Giorgio Castagneto Gissey
  37. Lessons from Australia's National Electricity Market 1998-2018: the strengths and weaknesses of the reform experience By Paul Simshauser
  38. The Long Arm of the Clean Air Act: Pollution Abatement and COVID-19 Racial Disparities By Jill Furzer; Boriana Miloucheva
  39. What can be learned from the free destination option in the LNG imbroglio? By Amina Baba; Anna Cretti; Olivier Massol
  40. Oil Price Dynamics and Currency-Hedging Behavior By Agudze, Komla; Ibhagui, Oyakhilome
  41. Environmental Taxation, Information Precision, and Information Sharing By Jihad C. Elnaboulsi; Wassim Daher; Yigit Saglam
  42. Electricity Use as a Real Time Indicator of the Economic Burden of the COVID-19-Related Lockdown: Evidence from Switzerland By Benedikt Janzen; Doina Radulescu
  43. Seasonal Flexibility in the European Natural Gas Market By Iegor Riepin; Felix Müsgens
  44. Assessing Market Power in the Italian Electricity Market: A synthetic supply approach By Francesco Rossetto; Luigi Grossi; Michael Pollitt
  45. Capacity mechanisms and the technology mix in competitive electricity markets By Par Holmberg; Robert A. Ritz
  46. Oil Price Dynamics and Currency-Hedging Behavior: Out-of-sample Appendix By Agudze, Komla; Ibhagui, Oyakhilome
  47. Inflation expectations and the pass-through of oil prices By Knut Are Aastveit; Hilde Christiane Bjørnland; Jamie L. Cross
  48. Measuring inefficiency in international electricity trading By L.G. Montoya; Bowei Guo; David Newbery; P.E. Dodds; G Lipman
  49. Political Economy of Reform and Regulation in the Electricity Sector of Sub-Saharan Africa By Mahmud I Imam; Tooraj Jamasb; Manuel Llorca
  50. Asymmetric impact of renewable and non-renewable energy on economic growth in Pakistan: New evidence from a nonlinear analysis By Abbasi, Kashif; Jiao, Zhilun; Khan, Arman; Shahbaz, Muhammad
  51. What Predicts Government Trustworthiness in Cross-border HK-Guangdong Nuclear Safety Emergency Governance By Yang Han; Jacqueline CK Lam; Peiyang Guo; Zhonghua Gou
  52. Competition in Markets for Ancillary Services? The implications of rising distributed generation By Michael Pollitt
  53. Make Sure the Kids are OK: Indirect Effects of Ground-Level Ozone on Well-Being By Julia Rechlitz; Luis Sarmiento; Aleksandar Zaklan
  54. Carbon cost pass-through in industrial sectors By Karsten Neuhoff; Robert A. Ritz
  55. Costs of inefficient regulation: Evidence from the Bakken By Lade, Gabriel; Rudik, Ivan
  56. Digitalisation and New Business Models in Energy Sector By Sinan Küfeoglu; Gaomin Liu; Karim Amaya; Michael G. Pollitt
  57. Analysis of the water, energy, and food nexus using system archetypes: A case study in the Jatiluhur reservoir, West Java, Indonesia By bahri, muhamad
  58. The Consequences of Treating Electricity as a Right By Burgess, Robin; Greenstone, Michael; Ryan, Nicholas; Sudarshan, Anant
  59. Projecting input-output tables for model baselines By Umed Temursho; Manuel Alejandro Cardenete; Krzysztof Wojtowicz; Luis Rey; Matthias Weitzel; Toon Vandyck; Bert Saveyn
  60. Possible carbon adjustment policies: An overview By Cecilia Bellora; Lionel Fontagné
  61. Global Sensitivity and Domain-Selective Testing for Functional-Valued Responses: An Application to Climate Economy Models By Matteo Fontana; Massimo Tavoni; Simone Vantini
  62. Climate Change and Green Finance in Emerging Market Economies: The Open Economy Dimension By Bortz, Pablo Gabriel; Toftum, Nicole
  63. Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis By Matthew E Khan; Kamiar Mohaddes; Ryan N.C. Ng; Hashem Pesaran; Mehdi Raisse
  64. Towards the establishment of a voluntary carbon compensation market: the contributions of a choice experiment method By Pierre Dupraz; Abdoul Nasser Seyni Abdou; Thomas Coisnon; Bertille Thareau
  65. Waiting for My Sentence: Air Pollution and the Productivity of Court Rulings By Luis Sarmiento
  66. How Environmental Policies Spread ? A Network Approach to Diffusion in the U.S. By Côme Billard; Anna Creti; Antoine Mandel

  1. By: L. Vanessa Smith; Nori Tarui; Takashi Yamagata
    Abstract: The shock to the global economy from COVID-19 is predicted to be faster and more severe than the 2008 global financial crisis and even the Great Depression. We assess its impact on global fossil fuel consumption and CO2 emissions over a two-year horizon. For this purpose we employ a global vector autoregressive (GVAR) model, which captures complex spatial-temporal interdependencies across countries due to the spread of the virus and associated international propagation of economic impact. The model makes use of a unique quarterly data set of coal, natural gas, and oil consumption, output and exchange rates, including global fossil fuel prices for 32 major CO2 emitting countries. We produce forecasts of coal, natural gas and oil consumption, conditional on GDP growth scenarios based on alternative IMF World Economic Outlook forecasts that were made before and after the outbreak. We also simulate the effect of a relative price change in fossil fuels, due to carbon pricing in all countries in the sample, on consumption and output. Our results show that fossil fuel consumption and CO2 emissions are expected to return to their pre-crisis levels, and even exceed them, within the two-year horizon despite the large reductions in the first quarter following the outbreak. Our forecasts anticipate more robust growth for emerging than for advanced economies. Recovery to the pre-crisis levels is expected even if another wave of pandemic occurs within a year. The results from our counterfactual carbon pricing scenario show that an increase in coal prices is expected to have a smaller impact on GDP than on fossil fuel consumption. Thus, the COVID-19 pandemic would not provide countries with a strong reason to delay climate change mitigation efforts.
    Keywords: COVID-19, CO2 emissions, fuel consumption, Global VAR (GVAR), conditional forecasts
    JEL: C33 O50 P18 Q41 Q43 Q47
    Date: 2020–07
  2. By: Chi Kong Chyong (University of Cambridge); Michael Pollitt (EPRG, CJBS, University of Cambridge); Reuben Cruise (University of Cambridge)
    Keywords: electricity market design, electricity regulation, wind energy, solar energy, electricity generation investment, ancillary services, capacity renumeration mechanisms, energy-only prices
    JEL: D47 L94 L98 L51 Q48 Q41 C61
    Date: 2019–06
  3. By: Jacques Despres (European Commission - JRC); Marko Adamovic (European Commission - JRC)
    Abstract: PESETA IV assesses the impacts of climate change on electricity production by hydro, wind, solar, nuclear and other thermal power plants, including biomass, coal, gas and oil. We assess these impacts in the present power system and in 2050 for a dynamic scenario in line with 2°C mitigation efforts. Both scenarios show that, at EU-level, the production of hydropower plants increases with global warming thanks to higher water availability (although this does not imply substantial development of new hydro plants), while nuclear power decreases. However, there are regional differences in the impacts, such as increased hydro production in the North, and a decline in hydro- and nuclear power production in southern Europe due to lower water availability for direct production or for cooling river-based plants. In northern Europe, the increasing availability of cheaper hydro results in substitution effects and lower production costs, while in southern Europe production costs could increase. Based on the modelling methodology used and the latest available climate simulations, the direct impacts of climate change on wind and solar production are not significant at EU-level. However, in the 2050 power system their capacity would increase in southern regions to compensate for the lost hydro and nuclear production. Climate change impacts on energy in the rest of the world show a negligible spill-over effect on Europe. Improved cooling technologies have the potential to reduce strongly the negative effects of water scarcity, particularly for nuclear plants in southern Europe.
    Keywords: Climate change impacts, Water scarcity, Hydropower, Thermal plants, Wind, Solar, Climate change, Electricity production, Electricity supply
    Date: 2020–05
  4. By: Zhu Liu; Philippe Ciais; Zhu Deng; Steven J. Davis; Bo Zheng; Yilong Wang; Duo Cui; Biqing Zhu; Xinyu Dou; Piyu Ke; Taochun Sun; Rui Guo; Olivier Boucher; Francois-Marie Breon; Chenxi Lu; Runtao Guo; Eulalie Boucher; Frederic Chevallier
    Abstract: We constructed a near-real-time daily CO2 emission dataset, namely the Carbon Monitor, to monitor the variations of CO2 emissions from fossil fuel combustion and cement production since January 1st 2019 at national level with near-global coverage on a daily basis, with the potential to be frequently updated. Daily CO2 emissions are estimated from a diverse range of activity data, including: hourly to daily electrical power generation data of 29 countries, monthly production data and production indices of industry processes of 62 countries/regions, daily mobility data and mobility indices of road transportation of 416 cities worldwide. Individual flight location data and monthly data were utilised for aviation and maritime transportation sectors estimates. In addition, monthly fuel consumption data that corrected for daily air temperature of 206 countries were used for estimating the emissions from commercial and residential buildings. This Carbon Monitor dataset manifests the dynamic nature of CO2 emissions through daily, weekly and seasonal variations as influenced by workdays and holidays, as well as the unfolding impacts of the COVID-19 pandemic. The Carbon Monitor near-real-time CO2 emission dataset shows a 7.8% decline of CO2 emission globally from Jan 1st to Apr 30th in 2020 when compared with the same period in 2019, and detects a re-growth of CO2 emissions by late April which are mainly attributed to the recovery of economy activities in China and partial easing of lockdowns in other countries. Further, this daily updated CO2 emission dataset could offer a range of opportunities for related scientific research and policy making.
    Date: 2020–06
  5. By: Lovcha, Yuliya; Pérez Laborda, Àlex; Sikora, Iryna
    Abstract: European Union has launched its Emissions Trading Scheme (ETS) in 2005, creating the first and one of the biggest international carbon markets, with the aim of reducing CO2 emissions of the Member States. Forming a part of the EU Climate Action plan, composed by a broad set of policies, as well as belonging to a complex interrelated energy system, the assessment of the ETS system effectiveness is not straight forward. Policy-makers tend to use emission levels or CO2 prices as indicators, even though both measures are affected by other policies, energy market fundamentals, and speculative shocks. This paper develops an empirical VAR model that connects the energy sector (oil, natural gas, coal and electricity prices, as well as a share of fossil fuels in electricity production), economic activity and CO2 permit prices. We use frequency domain analysis to study how the parts of this system impact each other and how these impacts evolve over time. The model can be used as a monitoring tool for CO2 price dynamics and for the effectiveness of the ETS system. Our empirical results indicate that up to 90% (65% on average) of the variation in CO2 prices, adjusted by supply effects, is explained by the variations in fundamental market variables; however, the individual contributions of them have changed over time. For example, the importance of the economic activity, used to be a major source of CO2 price variations in the past, is vanishing recently, while the opposite occurs to the coal prices, which have gained in importance in recent periods. The impact of CO2 prices on a share of fossil fuels in electricity production is limited, pointing towards the still low contribution of the ETS system for renewable energy penetration.
    Keywords: Anhídrid carbònic--Aspectes econòmics, 33 - Economia, 504 - Ciències del medi ambient,
    Date: 2019
  6. By: Mathias Mier
    Abstract: We consider an economy in which competitive firms use three technologies for electricity production: pollutive fossils, intermittent renewables whose availability varies continuously over time, and storage. A Pigouvian tax implements the first-best solution. This is also the case for an electricity consumption tax that is supplemented by subsidies for renewables and a tax on storage, but not for high shares of renewables in the energy mix. We then analyze second-best subsidies for renewables and storage capacities when carbon pricing is imperfect. The subsidy rate for renewables decreases as electricity production becomes less reliant on fossils. The storage subsidy is usually negative as long as fossils contribute to filling the storage, but turns positive (and remains constant for linear demand) thereafter. This is because more storage capacity reduces the price during times of destorage, but raises it when electricity is taken from the market to fill the storage. This has countervailing effects on firms’ incentives to invest in fossil capacities, which are more pronounced for higher round-trip efficiency losses during a storage cycle. A numerical simulation illustrates that substantial subsidy payments are required even after fossils have been completely driven out of the market.
    Keywords: intermittent renewable energies, electricity storage, carbon externality, subsidies, peak-load pricing, optimal control
    JEL: H23 Q42 Q58 O33
    Date: 2020
  7. By: Peszko,Grzegorz; Van Der Mensbrugghe,Dominique; Golub,Alexander Alexandrovich
    Abstract: Fossil fuel importers can apply various climate and trade taxes to encourage fossil fuel?dependent countries to cooperate on climate mitigation, and fossil fuel?dependent countries can respond with alternative diversification and cooperation strategies. This paper runs macroeconomic model simulations of alternative strategies that the global community and fossil fuel?dependent countries can pursue to encourage and enable their participation in a global low-carbon transition. The following are the findings from the simulations. (i) Fuel importers? unilateral carbon taxes capture fossil fuel?dependent countries? resource rents and accelerate their emission-intensive diversification. (ii) Border taxes on the carbon content of imports from fossil fuel?dependent countries do not induce comprehensive cooperation, but broader trade sanctions do. (iii) Cooperative wellhead carbon taxes can achieve cooperation without trade wars. (iv) Lower-income fossil fuel?dependent countries with large untapped reserves need additional incentives and enablers to cooperate and diversify into low-carbon assets. (v) Incentives to cooperate are misaligned between different fossil fuel?dependent countries and between owners of different fuels. (vi) The strategies that maximize consumption and growth in fossil fuel?dependent countries reduce the value of assets in extractive and heavy industries. (vii) Asset diversification is a robust, long-term strategy but faces the tragedy of the horizon.
    Keywords: Climate Change Mitigation and Green House Gases,International Trade and Trade Rules,Energy and Environment,Energy Demand,Energy and Mining,Oil&Gas
    Date: 2020–07–02
  8. By: Stephan Schulmeister
    Abstract: Neither a gradually rising carbon tax nor emission trading schemes can ensure that the costs of emitting greenhouse gases, in particular CO2, will steadily rise faster than the general price level. If, e.g., global fossil energy prices decline faster than a carbon tax or the emission permit price rises, then the final good and its use become cheaper. Since the prices of fossil energy as well as CO2 emission permit prices belong to the most unstable prices in the global economy, carbon taxes and trading schemes cannot anchor the long-term expectation that the effective emission costs for firms and households will rise continuously. Such an expectation, however, is a prerequisite for steadily growing investment in energy efficiency and/or renewable energy because the profits from such investments consist of the saved fossil energy costs ("opportunity profits"). This paper presents an alternative approach: the EU sets a path of steadily rising prices of crude oil, coal and natural gas by skimming off the difference between the EU target price and the respective world market price through a monthly adjusted quantity tax. Instead of the prices of fossil raw materials, the (implicit) quantity tax should fluctuate. In this way, the uncertainty about future price developments of crude oil, coal and natural gas and, hence, of the effective emission costs would be eliminated. Firms and households could calculate the profitability of investments in avoiding carbon emissions. At the same time, such a tax would ensure a uniform European carbon price in all sectors, provided the initial level of the price paths of crude oil, coal and natural gas account for the different CO2 intensities of these types of fossil energy. Given the size of the EU import bill for fossil energy, the amount of potential receipts of such an implicit and flexible CO2 tax would be (very) huge.
    Date: 2020–07–15
  9. By: KERAMIDAS Kimon (European Commission - JRC); DIAZ VAZQUEZ Ana R. (European Commission - JRC); WEITZEL Matthias (European Commission - JRC); VANDYCK Toon (European Commission - JRC); TAMBA Marie (European Commission - JRC); TCHUNG-MING Stephane (European Commission - JRC); SORIA RAMIREZ Antonio (European Commission - JRC); KRAUSE Jette; VAN DINGENEN Rita; SO CHAI Qimin; FU Sha; WEN Xinyuan
    Abstract: This edition of the Global Energy and Climate Outlook (GECO) analyses the role of electrification in global transition pathways to a low Greenhouse Gas (GHG) emissions economy. Electricity is found to be an increasingly important energy carrier in final energy consumption already in the absence of stronger climate policies than those currently in place (Reference scenario), while enhanced electrification of final energy demand is a crucial element of the 2°C temperature change scenario, paving the way to climate neutrality. The 2°C target could be achieved by simultaneously transforming various elements of the energy system: shifting final energy demand from mainly fossil fuels towards electricity and low-carbon synthetic fuels mainly derived from electricity; decarbonising power generation; increasing energy efficiency in end-uses, which is favoured by further electrification; and mobilising novel options to better accommodate high shares of intermittent renewable electricity sources, such as demand-side load management and power storage. This report further shows that the 2°C target is technically possible at relatively low cost for the overall economy (global GDP reduction below 1% across all sensitivities compared to Reference in 2050). This would also bring along co-benefits for air quality. In order to explore the role that electrification can play as an emissions mitigation option, a number of sensitivity variants on key parameters impacting the energy system – energy prices, cost of technologies, non-economic drivers related to behaviour and policy – are conducted. The role of electricity is examined by large sector (industry, transport, buildings, power generation), with a particular regional focus on the EU and China and a sectoral focus on road transport electrification.
    Keywords: Electrification, Paris Agreement, Climate Change mitigation, 2°C scenarios
    Date: 2020–03
  10. By: Etienne Romsom; Kathryn McPhail
    Abstract: This study provides an overview of the use of natural gas and liquefied natural gas in Asia, both historic, current, and with an outlook for the future. Traditionally, Asia has been a strong liquefied natural gas producing region as well as the premier liquefied natural gas market. This continues to be the case today, and it is expected to continue as well in the future. There are significant lessons to be obtained from the Asian gas market for other new liquefied natural gas producing nations and developing gas markets, such as Mozambique.
    Keywords: Energy, energy utilities, fuel, Gas, Liquefied natural gas, renewable resources
    Date: 2020
  11. By: Tensay Meles; L. (Lisa B.) Ryan; Joe Wheatley
    Abstract: The COVID-19 crisis comes at a complex moment for European climate policy as it pivots from a 40% 2030 emissions reduction target to a European Green Deal that is in better alignment with long-term Paris Agreement goals. Here, the implications of the dramatic fall in economic output associated with the crisis are examined using a representative range of growth scenarios. With lower economic activity resulting from the COVID-19 crisis, existing policy measures could achieve the 40% target sooner than 2030. However, we find that even in the most severe economic scenario examined, this falls well short of the 50-55% emissions reduction target under the Green Deal. Maintaining the existing 40% target in 2030 with reduced policy measures on the other hand would move European climate policy away from the required path. This analysis indicates the feasibility of increased climate ambition in the wake of the pandemic and supports the Green Deal 50-55% targets in 2030.
    Keywords: Climate change policy; Greenhouse gas emissions; Economic recovery; COVID-19 economic effects; Energy demand
    JEL: Q5 Q54 Q58 E6 Q43
    Date: 2020–05
  12. By: Chi Kong Chyong (EPRG, CJBS, University of Cambridge); David Newbery (Faculty of Economics, University of Cambridge); Thomas McCarty (EPRG, CJBS, University of Cambridge)
    Keywords: economic modelling, unit commitment, economic dispatch, electricity market modelling, hydro pumped energy storage, wind energy, solar energy, electrical energy storage investment
    JEL: C61 C63 L94 L98 Q40 Q41 Q48
    Date: 2019–07
  13. By: TCHUNG-MING Stephane (European Commission - JRC); DIAZ VAZQUEZ Ana R. (European Commission - JRC); KERAMIDAS Kimon (European Commission - JRC)
    Abstract: This document complements the Global Energy and Climate Outlook 2018 report. It provides the detailed GHG and energy balances for the Reference, the central 2°C and 1.5°C scenarios described in the main report. The results displayed in this report have been produced with the global energy & GHG model POLES-JRC.
    Keywords: Energy Balance, GHG emissions Balance, Paris Agreement, energy sector, Mid-century strategy, Long-Term Strategy, 2°C, 1.5°C, UNFCCC, climate change mitigation
    Date: 2018–12
  14. By: Rosemary Ostfeld; David M Reiner (EPRG, CJBS, University of Cambridge)
    Keywords: Citizens' jury, focus groups, energy transition, climate policy, renewable energy, low-carbon technologies, Scotland, carbon capture and storage
    JEL: P18 Q42 Q54 Q58
    Date: 2019–10
  15. By: Dominique Desbois (ECO-PUB - Economie Publique - AgroParisTech - INRA - Institut National de la Recherche Agronomique)
    Abstract: Signatory States to the 2015 Paris Agreement have set a common goal of achieving carbon neutrality. According to a logic of net emissions flow adopted by several European countries, France has adopted a Climate Plan in July 2017 with a target of zero net emissions (ZEN) of greenhouse gases, at the 2050 horizon (Quinet, 2019). The introduction of an option to use offset credits from agricultural projects in the European Emissions Trading Scheme (EETS) requires the drafting of a regulation requiring the establishment of the initial level of carbon in the EU soil and verification of the amount of CO2 sequestered by eligible projects. The decision to adopt one or another of the sustainable land management alternatives should not be based solely on their respective benefits in terms of climate change mitigation but rather based on the consideration of the workshops. farm, assessing comprehensively the productivity, resource utilization and environmental impact of the productive system (Pellerin et al., 2017).
    Abstract: Les États signataires de l'Accord de Paris de 2015 ont fixé un objectif commun visant à atteindre la neutralité carbone. Selon une logique de flux nets d'émissions adoptée par plusieurs pays européens, la France a adopté en juillet 2017 un Plan Climat visant un objectif de zéro émission nette (ZEN) de gaz à effet de serre, à l'horizon 2050 (Quinet, 2019). L'introduction d'une option d'utilisation des crédits compensatoires provenant de projets agricoles dans le Système européen d'échange de quotas d'émission (EETS) nécessite la rédaction d'un règlement exigeant la fixation du niveau initial de carbone dans le sol de l'UE et la vérification de la quantité de CO2 séquestrée par les entreprises éligibles. projets. La décision d'adopter l'une ou l'autre des solutions de rechange en matière de gestion durable des sols ne devrait pas reposer uniquement sur leurs avantages respectifs en termes d'atténuation des changements climatiques, mais plutôt sur la prise en compte des ateliers. de l'exploitation agricole, en évaluant globalement leur productivité, l'utilisation des ressources et l'impact environnemental du système de production (Pellerin et al., 2017).
    Keywords: Cost,Soil,Erosion
    Date: 2019–11–14
  16. By: Hintermann, Beat (University of Basel); Zarkovic, Maja (University of Basel)
    Abstract: Swiss climate policy consists of three regulatory instruments for greenhouse gas emissions reduction: A CO 2 levy, the Swiss Emissions Trading System (CH EHS), and an additional nonEHS" program for medium-sized plants that consists of command-and-control elements plus a sizeable abatement subsidy. Our paper informs about this tripartite climate policy, which is unique in the international context. Second, we estimate the dierential impact of the CH EHS and the nonEHS program on plants' emissions. Our empirical strategy exploits a policy change in 2013 that instituted a mandatory emissions trading system for a subset of previously regulated rms. We nd that the nonEHS outperforms the CH EHS for a minority of plants, but that on average, the two programs result in similar abatement eorts despite very dierent nancial incentives. Firms that previously engaged in abatement eorts continue to do so even after the nancial incentives were reduced by an order of magnitude. Our results suggest the presence of preferences for abatement per se, above and beyond nancial incentives. They further imply that expanding the nonEHS system at the expense of the CO 2 levy may be associated with signifcant costs but no additional emission reductions.
    Keywords: Climate policy, emissions tax, carbon tax, emissions trading, subsidies, command-and-control, Switzerland
    JEL: D22 D62 H23 H25 H32 Q52 Q54 Q58
    Date: 2020–05–19
  17. By: Antonin Pottier (CIRED); Emmanuel Combet (ADEME); Jean-Michel Cayla (EDF); Simona de Lauretis (CIRED); Franck Nadaud (CIRED)
    Abstract: This article provides an overview of the inequalities in greenhouse gas (GHG) emissions between French households. It presents in a detailed and critical manner the methodological conventions used to compute "household emissions", and the related assumptions. The most common principle of attribution, the carbon footprint, which assigns to households the emissions of the products they consume, conveys implicit conceptions of responsibility. It focuses attention on the contributions of individuals, on their choices, and may obscure the role of non-individual actors as well as the collective component of GHG emissions, and neglect the dimensions of responsibility not related to consumption choices. We estimate the distribution of household carbon footprints based on data from the 2011 French Expenditure Survey. Household emissions tend to increase with income, but they also show a strong variability linked to geographical and technical factors that force to use fossil fuels. Based on sectoral surveys (ENTD 2008; PHEBUS 2013), we also reconstruct household CO2 emissions linked to housing and transport energy. For transport, emissions are proportional to the distances travelled due to the predominant use of private cars. Urban settlement patterns constraint both the length of daily commuting and access to less carbon-intensive modes of transport. For housing, while house size increases with income and distance from urban centres, the first factor to account for variability of emissions is the heating system. It has little to do with income but more to do with settlement patterns, which constrain access to the various energy carriers. Finally, we discuss the difficulties, both technical and conceptual, involved in estimating emissions from the super-rich (the top 1 percent).
    Keywords: greenhouse gas emissions, carbon footprint, emissions inequality, household expenditure distribution, responsibility
    JEL: D12 D30 Q56 R20
    Date: 2020–06
  18. By: Wheeler,Collette Mari; Baffes,John; Kabundi,Alain Ntumba; Kindberg-Hanlon,Gene; Nagle,Peter Stephen Oliver; Ohnsorge,Franziska Lieselotte
    Abstract: The outbreak of COVID-19 and the wide-ranging measures needed to slow its advance triggered an unprecedented collapse in oil demand, a surge in oil inventories, and a record one-month decline in oil prices in March 2020. This paper examines the likely implications of the 2020 oil price plunge for emerging market and developing economies. It presents four main results. First, the record plunge in oil prices was predominantly driven by demand factors as wide-ranging measures to stem the pandemic precipitated an unprecedented collapse in oil demand, but the surge in oil inventories also exerted downward pressure on oil prices. Second, this latest oil price decline was preceded by six previous plunges over the past half-century, during which energy exporters and importers suffered similar initial output losses (about 0.5 percent) that were unwound within three years. Third, the current episode of low oil prices holds limited promise to boost the global economy amid widespread restrictions and narrow room for fiscal support in energy-exporting emerging market and developing economies. Fourth, many emerging market and developing economies entered the current public health crisis with precarious fiscal positions; current low oil prices are thus an opportunity to review energy-pricing policies, including remaining energy subsidies, to mobilize domestic resources.
    Date: 2020–07–13
  19. By: Aniruddh Mohan; Nicholas Z. Muller; Akshay Thyagarajan; Randall V. Martin; Melanie S. Hammer; Aaron van Donkelaar
    Abstract: A persistent issue in environmental economics is whether growth is sustainable. Pollution is a key driver of sustainability, which we define as an economy exhibiting falling pollution damages at its balanced growth path. We deduct air pollution and carbon dioxide damages from the national accounts for 163 countries between 1998 and 2018. Global pollution intensity fell from 1998 to 2008, remaining flat thereafter. China highlights the importance of defining sustainability in terms of damages; between 2011 and 2018, physical measures of environmental quality improved, but monetary damage increased by 50 percent. Sustainability based on emissions ignores this rise in damage.
    JEL: E13 Q51 Q53 Q54 Q56
    Date: 2020–06
  20. By: Duque, Valentina; Gilraine, Michael
    Abstract: This paper examines the effect of air pollution from power production on students’ cognitive outcomes. To do so, we leverage variation in power production over time, wind patterns, and plant closures. We find that each one million megawatt hours of coal-fired power production decreases student performance in schools within ten kilometers by 0.02 SD and 0.01 SD in math and English, respectively. We find no such relationship for gas-fired plants. Extrapolating our results nationwide indicates that the decline in coal use in the United States from 2007 through 2018 increased student performance by 0.003 SD and reduced the black-white test score gap by 0.002 SD.
    Keywords: Air Pollution; Coal Power; Education; Health.
    Date: 2020–07
  21. By: Mireille Chiroleu-Assouline (Paris School of Economics, University Paris 1 Panthéon-Sorbonne); Mouez Fodha (Paris School of Economics, University Paris 1 Panthéon-Sorbonne); Yassine Kirat (Paris School of Economics, University Paris 1 Panthéon-Sorbonne)
    Abstract: Among the ten countries with the highest carbon intensity, six are natural resource-rich countries. This suggests the existence of a carbon curse: resource-rich countries would tend to follow more carbon-intensive development paths than resource-poor countries. We investigate this assumption empirically using a panel data method covering 29 countries (OECD and BRIC) and seven sectors over the 1995-2009 period. First, at the macroeconomic level, we find that the relationship between national CO2 emissions per unit of GDP and abundance in natural resources is U-shaped. The carbon curse appears only after the turning point. Second, we measure the impact of resource abundance on sectoral emissions for two groups of countries based on their resource endowments. We show that a country rich in natural resources pollutes relatively more in resource related sectors as well as all other sectors. Our results suggest that the debate on climate change mitigation should rather focus on a comparison of resource-rich countries versus resource-poor countries than the developed-country versus developing-country debate.
    Keywords: carbon curse, carbon intensity, resource-rich economies
    JEL: Q32 Q53
    Date: 2020–07
  22. By: Akinyemi, Opeyemi; Efobi, Uchenna; Asongu, Simplice; Osabuohein, Evans
    Abstract: The paper investigates the dynamic relationship between renewable energy usage and trade performance in sub-Saharan Africa (SSA), while considering the conditioning role of corruption control, regulatory quality, and the private sector access to finance. Focusing on 42 SSA countries for the period 2004-2016, and engaging the System generalized method of moments (GMM) technique for its estimation, this study found a negative relationship between renewable energy usage and the indicators of trade performance. However, with corruption control, improved regulatory framework, and better finance for the private sector, there are potentials for a positive net impact of renewable energy usage on manufacturing export. For renewable energy and total trade nexus, we find that improved regulatory framework and better finance for the private sector are important conditioning structures. These findings are significant because they highlight the different important structures of SSA countries that improve the effect of renewable energy use on trade outcomes. For instance, the consideration of the financial, institutional and regulatory frameworks in SSA countries in conditioning the renewable energy-trade nexus stipulates a clear policy pathway for countries in this region as the debate for transition to the use of renewable energy progresses.
    Keywords: Environment; Green growth; Trade performance; Pollution; Renewable energy; sub-Saharan Africa
    JEL: C50 F1 Q40 Q5
    Date: 2019–01
  23. By: REY LOS SANTOS Luis (European Commission - JRC); WOJTOWICZ Krzysztof (European Commission - JRC); TAMBA Marie (European Commission - JRC); VANDYCK Toon (European Commission - JRC); WEITZEL Matthias (European Commission - JRC); SAVEYN Bert (European Commission - JRC); TEMURSHO Umed
    Abstract: In this document the economic balances for the Baseline scenario used in the Global Energy and Climate Outlook (GECO) 2018 are presented. The Baseline scenario represents a projection of the world economy with corresponding energy demand and GHGs emissions under the assumption of current climate and energy policies and also realization of Nationally Determined Contributions (NDC) in line with Paris agreement. As this scenario still does not allow avoiding catastrophic climate change in the future, it is used as a reference to compare alternative scenarios with more stringent policy measures. Economic balances are supplemented by energy balances, where the latter are coming from energy models, but are consistent with economic data. Finally we show GHGs evolution over time that comes from economic activity presented in the Baseline. The procedure that was used to generate Baseline scenario is called PIRAMID which stands for: Platform to Integrate, Reconcile and Align Model-based Input-output Data. PIRAMID is a new methodology to project Multi-Regional Input-Output tables over time. This approach allows for integrating data from external models and databases. The result is a series of consistent and transparent IO tables.
    Keywords: Baseline, CGE, Input-Output tables, Macroeconomic projections
    Date: 2018–12
  24. By: Hillary C. Ezeaku (Caritas University, Enugu, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The Covid-19 outbreak has led to extensive declines in international commodity prices. The outbreak as well as measures fashioned to contain it has been weighing down on global supply chains and commodity prices. The pandemic has been accompanied with unprecedented shock that has disrupted both the demand and supply of commodities. In view of the widespread global impact of Covid-19, this paper analyses the impact of the outbreak on global commodity prices with particular emphasis on the energy, agricultural and metals and materials sectors using international global prices and indices to trend the movements. In the wake of oil price war and dampened oil demand, the energy sector was the most hit with 15% average monthly decline in energy indices between December 2019 and April 2020. Oil recorded its largest one-month plunge on record in March. Movements in coal indices showed more resilience to the pandemic compared to crude oil and natural gas. Base metals were the most affected sector after energy with -3.49% average monthly changes in indices between December 2019 and April 2020. Of the major base metals and minerals, aluminum appears less affected by the outbreak compared to copper and zinc. In contrast, precious metals prices and indices remain stable and is the only commodity sector with positive monthly average change (1.99%) during the period. Gold prices maintained steady gains while silver and platinum prices followed a similar but weaker trend. The agricultural commodity indices largely maintained strong upward movement but plummeted at monthly average of 0.89% between December 2019 and April 2020. Grains and cereals proved more resilient to Covid-19 pandemic compared to timber, beverages, raw materials, and oils & meals.
    Keywords: Covid-9; Commodity Prices
    JEL: H12 I12 O10
    Date: 2020–06
  25. By: Andersson, Malin; Morgan, Julian; Baccianti, Claudio
    Abstract: This Occasional Paper reviews how climate change and policies to address it may affect the macro economy in ways that are relevant for central banks’ monetary policy assessment of the inflation outlook. To this end, the paper focuses on the potential channels through which climate change and the policy and technological responses to climate change could have an impact on the real economy. Overall, the existing literature suggests a likelihood that climate change will have demand-side implications, but will also cause a negative supply shock in the decades to come and may even have the potential to lead to widespread disruption to the economic and financial system. We may already be observing a rise in the costs resulting from an increased incidence of extreme weather conditions. The direct effects stemming from climate change are likely to increase gradually over time as global temperatures increase. Nevertheless, it is extremely difficult to obtain reliable estimates of the overall macroeconomic impact of climate change, which will also depend on the extent to which it can be brought under control through mitigation policies requiring major structural changes to the economy. In order to implement such policies political economy obstacles will need to be overcome and measures will need to be put in place that address underlying market failures. They could involve significant fiscal implications, with an increased price of carbon contributing to higher overall prices. At the same time, these measures could also foster innovation, generate fiscal revenues and dampen inflationary pressures as energy efficiency increases and the price of renewable energy falls. JEL Classification: Q43, Q54, Q55, Q58
    Keywords: climate, energy, global warming, government policy, macro economy, technological innovation
    Date: 2020–06
  26. By: Marek Antosiewicz; Rodrigo Fuentes; Piotr Lewandowski; Jan Witajewski-Baltvilks
    Abstract: In this paper, we assess the distributional impact of introducing a carbon tax in Poland. We apply a two- step simulation procedure. First, we evaluate the economy-wide effects with a dynamic general equilibrium model. Second, we use a microsimulation model based on household budget survey data to assess the effects on various income groups and on inequality. We introduce a new adjustment channel related to employment changes, which is qualitatively different from price and behavioural effects, and is quantitatively important. We find that the overall distributional effect of a carbon tax is largely driven by how the revenue is spent: distributing the revenues from a carbon tax as lump-sum transfers to households reduces income inequality, while spending the revenues on a reduction of labour taxation increases inequality. These results could be relevant for other coal-producing countries, such as South Africa, Germany, or Australia
    Keywords: climate policy, distribution effect, microsimulation model, general equilibrium model, employment
    JEL: H23 P18
    Date: 2020–07
  27. By: Ferran Sancho
    Abstract: Eco-taxation is the preferred market based tool for achieving mitigation of CO2 emissions and fostering sustainability. It works through tax-induced changes in the price of polluting activities while ideally transferring the environmental cost to emitters and users. The initial eco-tax signaling is transmitted and further amplified to the rest of the economy through the structure of cost interactions. In particular, real-world economies work under wage adjustment rules that reflect downward rigidity in labor costs when facing rising prices. These common rules may in fact affect the mitigation capacity of the eco-tax policies. We study this issue using an interindustry model in which we overcome the classical dichotomy between prices and quantities thanks to the novelty of connecting consumption demand with the changes in private income levels that would follow from the enacted eco-tax. We isolate income effects by keeping the given productive structure of the economy as unaltered as possible. In this sense, the proposed model has a bit of a neo-ricardian flavor. We implement the model and check the mitigation effectiveness of two different eco-tax policies using recent tabular data for the Spanish economy in 2015. The main conclusion is that we would not observe double benefits, even when all eco-tax collections are recycled back into the economy.
    Keywords: Mitigation, eco-taxation, tax recycling, wage adjustment.
    JEL: C57 Q41 Q52 Q58
    Date: 2020–07–01
  28. By: Chattopadhyay, Mriduchhanda; Arimura, Toshi H.; Katayama, Hajime; Sakudo, Mari; Yokoo, Hide-Fumi
    Abstract: An increasing number of empirical studies have investigated the determinants of cooking fuel choice in developing countries, where health risk from household air pollution is one of the most important issues. We contribute to this stream of literature by examining individuals’ subjective probabilistic expectations about health risks when using different types of fuel and their influence on cooking fuel usage patterns. We also explore how these patterns, in turn, affect health status. Using data collected from 557 rural Indian households, we find that subjective probabilistic expectations of becoming sick from dirty fuel usage have a negative influence on the fraction of days with dirty fuel usage in the household. The results also show that dirty fuel usage degrades the health of the individual. We then examine the effectiveness of information provision regarding the health risks of dirty/clean fuel usage. Our simulation demonstrates that although the provision of information results in statistically significant changes in the households’ cooking fuel usage patterns and in the individuals’ health status, the changes may be small in size.
    Keywords: Subjective probabilistic expectations, Household air pollution, Cooking fuel usage pattern, Health, Developing country
    JEL: I10 Q40 C83
    Date: 2020–05
  29. By: Flögel, Franz; Beckamp, Marius
    Abstract: The paper in hand compares retail banking and the electric energy sector to investigate how digitalisation influences (de)centralisation. Structural similarities of both industries like the direct competition of large international companies (Deutsche Bank and RWE) with locale providers such as savings banks and municipal utilities (Stadtwerke) motivate this comparison. Our findings suggest that digitalisation affects (de)centralisation differently. Despite scale economies inherent to processes of digitalisation, small entities must not be on the losing side. Cooperation tends to play a key role for regional companies to profit from digitalisation. Interestingly, digitalisation of the first and second transformation affects (de)centralisation of both industries diametrically (though, it is too early for final conclusions about the second digital transformation). The geographical properties of the businesses in question (i.e. the distance dependence of soft information respectively the physical properties of electricity transmission) and (regulatory) context factors tend to influence the relationship between digitalisation and (de)centralisation. More research is needed to enhance our understanding of digitalisation on (de)centralisation of the economy. As this discussion paper indicates, sector comparisons tend to be useful to contribute to such an understanding.
    Keywords: (de)centralisation,digitalisation,energy transition,retail banking,FinTech,EnergyTech,Digital Transformation
    Date: 2020
  30. By: Yuanning Liang; Ivan J. Rudik; Eric Zou; Alison Johnston; Amanda D. Rodewald; Catherine L. Kling
    Abstract: Massive wildlife losses over the past 50 years have brought new urgency to identifying both the drivers of population decline and potential solutions. We provide the first large-scale evidence that air pollution, specifically ozone, is associated with declines in bird abundance in the United States. We show that an air pollution regulation limiting industrial emissions during summer ozone seasons has generated substantial benefits in conserving bird populations. Our results imply that air quality improvements over the past four decades have substantially slowed the decline in bird populations, preventing a loss of 1.5 billion birds, approximately 20 percent of current totals. Our results highlight that in addition to protecting human health, air pollution regulations have previously unrecognized and unquantified conservation co-benefits.
    JEL: Q53 Q57 Q58
    Date: 2020–06
  31. By: Alejandro Lopez Feldman; Carlos Chavez, Maria Velez, Hernan Bejarano, Ariaster Chimeli, Jose Feres, Juan Robalino
    Abstract: COVID-19 is currently having major short run effects with possible serious long run consequences on economic and social aspects, including several potential implications for the environment and the management of natural resources in Latin America. In this paper, we discuss the possible effects of the pandemic on air pollution, deforestation and other relevant environmental dimensions across the region. With contributions from environmental economists from eight countries, we give an overview of the initial and expected environmental effects of this health crisis. We discuss potential effects on environmental regulations and possible policy interventions, as well as an agenda for future research for those interested in the design and evaluation of environmental policies relevant for the Latin American context.
    Keywords: Air pollution; COVID-19; coronavirus; deforestation; environmental impacts; environmental policy; Latin America; pandemic; SARS-Cov2-19
    JEL: H12 Q22 Q23 Q53 Q56
    Date: 2020–07–13
  32. By: David Newbery (Faculty of Economics, University of Cambridge); Michael Pollitt (EPRG, CJBS, University of Cambridge); David M Reiner (EPRG, CJBS, University of Cambridge); Simon Taylor (EPRG, CJBS, University of Cambridge)
    Keywords: Nuclear power, financing, RAB, WACC, risk
    JEL: C54 D53 E43 G11 H54 L94
    Date: 2019–07
  33. By: Marc Baudry (EconomiX (Université Paris Nanterre) & Chaire Economie du Climat (PSL)); Anouk Faure (EconomiX (Université Paris Nanterre) & Chaire Economie du Climat (PSL)); Simon Quemin (Grantham Research Institute (LSE) & Chaire Economie du Climat (PSL))
    Abstract: We develop an equilibrium model of emissions permit trading in the presence of ï¬ xed and proportional trading costs in which the permit price and ï¬ rms’ participation in and extent of trading are endogenously determined. We analyze the sensitivity of the equilibrium to changes in the trading costs and ï¬ rms’ allocations, and characterize situations where the trading costs alternatively depress or raise permit prices relative to frictionless market conditions. We calibrate our model to annual transaction and compliance data in Phase II of the EU ETS (2008-2012) which we consolidate at the ï¬ rm level. We ï¬ nd that trading costs in the order of 10 k€ per annum plus 1€ per permit traded substantially reduce discrepancies between observations and theoretical predictions for ï¬ rms’ behavior (e.g. autarkic compliance). Our simulations suggest that ignoring trading costs leads to an underestimation of the price impacts of supply-curbing policies, this difference varying with the incidence on ï¬ rms.
    Keywords: Emissions trading, Transaction costs, Policy design and evaluation, EU ETS
    JEL: D22 D23 H23 Q52 Q58
    Date: 2020–06
  34. By: David Woroniuk (Durham University Business School); Arzé Karam (Durham University Business School); Tooraj Jamasb (Durham University Business School)
    Keywords: Market Integration, Information Transmissions, Natural Gas, Network Theory
    JEL: C32 F18 Q43 Q47 Q48
    Date: 2019–07
  35. By: Edward S. Knotek; Saeed Zaman
    Abstract: We document asymmetric responses of consumer spending to energy price shocks: Using a multiple-regime threshold vector autoregressive model estimated with Bayesian methods on US data, we find that positive energy price shocks have a larger negative effect on consumption compared with the increase in consumption in response to negative energy price shocks. For large shocks, the cumulative consumption responses are three to five times larger for positive than for negative shocks. Digging into disaggregated spending, we find that the estimated asymmetric responses are strongest for durable goods, but asymmetries are also present in the responses of nondurables and services.
    Keywords: consumption; nonlinear structural impulse response; multivariate threshold models; asymmetry; energy prices
    JEL: C11 Q43 C32 E21
    Date: 2020–06–16
  36. By: Bowei Guo (Faculty of Economics, University of Cambridge); David Newbery (Faculty of Economics, University of Cambridge); Giorgio Castagneto Gissey (University College London)
    Keywords: Carbon tax, Interconnectors, Cost-benefit analysis, M-GARCH
    JEL: Q48 F14 D61 C13
    Date: 2019–06
  37. By: Paul Simshauser (Griffith University, Australia)
    Keywords: Microeconomic reform, energy-only markets, network regulation
    JEL: D52 D53 G12 L94 Q40
    Date: 2019–07
  38. By: Jill Furzer; Boriana Miloucheva
    Abstract: This paper investigates the role of long-term exposure to fine particulate pollution (PM 2.5) on COVID-19 disparities. To isolate the effect of PM 2.5, we leverage pollution spillovers from neighbouring counties not meeting Clean Air Act-set maximums on acceptable pollution levels. We find a 1-unit increase in cumulative exposure to PM 2.5 increased COVID-19 deaths by 43.5%. PM 2.5 exposure carries an additional race-specific mortality effect of 6.8%-16% for counties with a high proportion of minority or Black residents. However, counties just above CAA pollution thresholds, which had significant pollution reductions over time, saw a full standard deviation reduction in COVID-19 deaths per 100,000. Counties with higher representation of minority or Black residents saw reductions in deaths by 1.50 and 1.15 standard deviations, respectively. Nevertheless, these protective effects insufficiently compensate for the still higher levels of pollution exposure in counties with more Black or minority residents and the more consequential impact of pollution for these communities.
    Keywords: pollution, health, racial disparities
    JEL: I10 I14 Q52 Q53
    Date: 2020–06–26
  39. By: Amina Baba; Anna Cretti; Olivier Massol
    Abstract: We examine the profitability of flexible routing by LNG cargoes for a single supplier taking into account uncertainty in the medium-term dynamics of gas markets. First, we model the trajectory of natural gas prices in Asia, Northern America, and Europe using a Threshold Vector AutoRegression representation (TVAR) in which the system’s dynamics switches back and forth between high and low regimes of oil price volatility. We then use the generalized impulse response functions (GIRF) obtained from the estimated threshold model to analyze the effects of volatility shocks on the regional gas markets dynamics. Lastly, the valuation of destination flexibility in LNG supplies is conducted using a real option approach. We generate a sample of possible future regional price trajectories using Monte Carlo simulations of our empirical model and determine for each trajectory the optimal shipping decisions and their profitability. Our results portend a substantial source of profit for the industry and reveal future movements of vessels. We discuss the conditional impact of destination flexibility on the globalization of natural gas markets.
    Keywords: LNG arbitrage, Volatility, TVAR, Monte Carlo simulation
    JEL: C32 C15 Q40 M31
    Date: 2020
  40. By: Agudze, Komla; Ibhagui, Oyakhilome
    Abstract: For Korea, a major crude oil importer, we document that after crude oil prices spike, cross-currency basis swap spreads tend to tighten as the propensity to currency-hedge rises.
    Keywords: Oil prices, currency hedging, cross-currency swaps, dollar-won basis, oil import
    JEL: F0
    Date: 2020–02
  41. By: Jihad C. Elnaboulsi (CRESE, Univ. Bourgogne Franche-Comté); Wassim Daher (Gulf University for Science and Technology, Department of Mathematics and Natural Sciences); Yigit Saglam (Victoria University of Wellington, School of Economics and Finance)
    Abstract: We analyze how environmental taxes should be optimally levied when the regulators and firms face costs uncertainties in a Stackelberg-Cournot game. We allow linear-quadratic payoffs functions coupled with an affine information structure encompassing common and private information with noisy signals. In the first period, the regulator chooses the intensity of emissions taxes in order to reduce externalities. In the second period, facing industry-related and firm-specific shocks, firms compete in the market-place as Cournot rivals and choose outputs. We show that, given costs uncertainties with non-uniform quality of signals across firms, the regulator sets differentiated tax policy. We also examined the social value of information under ex-ante calibrated emissions taxes. We argue that the magnitude of the associated social benefits and costs of more precise private signals hinge largely and fundamentally on the value of the ratio of the slopes of the marginal damage and the marginal consumer surplus. The lack of accurate data clouds the regulatory process by preventing the necessary fine-tuning of the tax rules towards specific environmental circumstances. Finally, we investigate information sharing between polluters and its impacts on welfare. We stress that, when there are threats of severe environmental damages under deep uncertainties, collusion is welfare reducing and may jeopardize the regulatory process. Numerical simulations illustrate the results that the model delivers.
    Keywords: Differentiated Taxes, Costs Uncertainties, Signaling, Precision, Information Sharing, Collusion, Energy Markets.
    JEL: D43 D83 H23 L13 Q58
    Date: 2020–06
  42. By: Benedikt Janzen; Doina Radulescu
    Abstract: We employ hourly electricity load data for Switzerland as a real time indicator of the economic e ects of the lockdown following the spread of SARS-CoV-2. Our findings reveal that following the drastic lockdown, overall electricity use decreased by 4 per cent, with a reduction of even 11.3 per cent in the Canton of Ticino where the number of confirmed cases per capita was one of the highest in Switzerland and also stricter measures such as closures of construction sites and industrial companies were implemented on top of federal regulations. Looking at working days only, we estimate a Swiss-wide decrease in electricity consumption of 6.3 per cent. Assuming industry, services, transport and agriculture account for 67 per cent of electricity demand, the 4 per cent decrease in electricity use implies a 6 per cent output reduction in these sectors. In addition, the reduced electricity imports and the change in the generation mix of neighbouring countries, also translates into reduced CO2 emissions related to these imports.
    Keywords: COVID-19, economic indicator, electricity load, CO2 emissions
    JEL: C53 Q4 C3
    Date: 2020–06
  43. By: Iegor Riepin (BTU Cottbus-Senftenberg); Felix Müsgens (BTU Cottbus-Senftenberg)
    Keywords: European gas market, market modelling, seasonality
    JEL: C61 Q40 Q41 Q47
    Date: 2019–08
  44. By: Francesco Rossetto (Department of Economics, University of Verona); Luigi Grossi (Department of Economics, University of Verona); Michael Pollitt (EPRG, CJBS, University of Cambridge)
    Keywords: Electricity Wholesale Market, Market Power, Bidding Strategy, Synthetic Supply
    JEL: L94
    Date: 2019–07
  45. By: Par Holmberg (IFN, Stockholm); Robert A. Ritz (EPRG, University of Cambridge)
    Keywords: Investment, wholesale electricity market, capacity mechanism, capacity auction, strategic reserve
    JEL: D41 L94
    Date: 2019–07
  46. By: Agudze, Komla; Ibhagui, Oyakhilome
    Abstract: In a recent paper, Agudze and Ibhagui (2019) showed that for Korea, a major crude oil importer, the dollar-won cross-currency basis tends to tighten when oil prices increase. They argued that this positive relation stems from importers’ increased propensity to currency-hedge, that is to buy the dollar forward, when oil prices are in a high regime. They estimated this high oil price regime to have a median lower bound of $55. Much below this bound, such as the sub $40 oil prices that are being observed in the market in recent times, they noted that this meant oil prices have transitioned to a low-price regime. Under this regime, they argued that the propensity for oil importers to currency-hedge becomes substantially diminished. As a result, the dollar-won basis no more bears a positive and significant relation with oil prices. Interestingly, under the low price regime, they found evidence that the relation turns negative, so that a rise in oil prices goes together with wider dollar-won basis rather than the tighter dollar-won basis documented under the high price regime.
    Keywords: Oil Price Dynamics, Currency-Hedging Behavior, Out-of-sample
    JEL: F0
    Date: 2020–04
  47. By: Knut Are Aastveit; Hilde Christiane Bjørnland; Jamie L. Cross
    Abstract: Do inflation expectations and the associated pass-though of oil price shocks depend on demand and supply conditions underlying the global market for crude oil? We answer this question with a novel structural vector autoregressive model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through the real price of oil to both expected and realized inflation. Our main insight is that US households form their expectations of inflation differently when faced with long sustained increases in the price of oil, such as the early millennium oil price surge of 2003 to 2008, as compared to short and sharp price fluctuations that characterized much of the twentieth century. We also find that oil demand and supply shocks can explain a large proportion of expected and realized inflation dynamics during multiple periods of economic significance, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.
    Keywords: Inflation expectations, inflation pass-through, oil prices
    Date: 2020–06
  48. By: L.G. Montoya (UCL); Bowei Guo (Faculty of Economics, University of Cambridge); David Newbery (Faculty of Economics, University of Cambridge); P.E. Dodds (UCL); G Lipman (UCL)
    Keywords: Electricity trading efficiency; cross-border allocation; interconnector; market coupling; metrics
    JEL: C81 F14 F15 Q41
    Date: 2019–09
  49. By: Mahmud I Imam (Nigerian Defence Academy Kaduna, Nigeria); Tooraj Jamasb (Durham University Business School); Manuel Llorca (Durham University Business School)
    Keywords: Independent regulation, electricity sector reform, government ideology, dynamic GMM, Sub-Saharan Africa
    JEL: D73 Q48 L51 L94 O55 P16
    Date: 2019–05
  50. By: Abbasi, Kashif; Jiao, Zhilun; Khan, Arman; Shahbaz, Muhammad
    Abstract: This paper explores the asymmetric relationship between renewable energy consumption, non-renewable energy, and terrorism on economic growth of Pakistan. We applied a novel econometric cointegration method known as a nonlinear autoregressive distributed lag modeling (NARDL). Our empirical findings indicate that positive and negative changes have a significant long-run asymmetric relationship between renewable energy, and terrorism on economic growth. We also found a negative and significant effect of non-renewable energy consumption on economic growth. To keep our environment clean and free of emissions, the study specifies policies that rely on renewable energy sources to boost economic growth. However, reduces terrorism has a positive impact on economic growth in the long-run and shows as an influential tool to combat terrorism in Pakistan. These novel results will help policy-makers and government officials to understand better the role of renewable energy and economic growth in Pakistan's development.
    Keywords: Renewable Energy, Non-renewable, Terrorism, Economic Growth, NARDL, Pakistan
    JEL: E0
    Date: 2020–07–01
  51. By: Yang Han (Department of Electrical and Electronic Engineering, the University of Hong Kong); Jacqueline CK Lam (Department of Electrical and Electronic Engineering, the University of Hong Kong); Peiyang Guo (Department of Electrical and Electronic Engineering, the University of Hong Kong); Zhonghua Gou (Griffith University, Brisbane, Australia)
    Keywords: nuclear power, risk perception, government trustworthiness, nuclear safety governance, cross-border nuclear safety, Guangdong China, cross-border region
    JEL: D81 Q42 Q48
    Date: 2019–11
  52. By: Michael Pollitt (EPRG, CJBS, University of Cambridge)
    Keywords: ancillary services, balancing energy, frequency regulation, reactive power, constraint management, reserves
    JEL: L94
    Date: 2019–07
  53. By: Julia Rechlitz; Luis Sarmiento; Aleksandar Zaklan
    Abstract: This paper uses a panel of German individuals and highly granular pollution data to test if air pollution affects adults’ well-being indirectly through the health of their children. Results show that ozone decreases the well-being of individuals with children while not affecting persons without kids. We confirm the same effect for fine particulate matter and sulfur dioxide. Concerning the mechanism, we find that above-median earners drive this effect and that ozone causes losses in workdays to care for a sick child, providing evidence on the children’s health channel to adults’ welfare losses.
    Keywords: Air pollution, ozone, well-being, subjective health, children’s health, parental in- vestments
    JEL: Q53 I31 I18 J22
    Date: 2020
  54. By: Karsten Neuhoff (DIW Berlin); Robert A. Ritz (EPRG, University of Cambridge)
    Keywords: Carbon pricing, cost pass-through, free allocation, full carbon price internalization, international trade, market structure
    JEL: L11 L70 Q54 Q58
    Date: 2019–10
  55. By: Lade, Gabriel; Rudik, Ivan (Cornell University)
    Abstract: Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. We attribute most of the observed flaring reductions at new wells in the state since late 2014 to the regulation. We construct firm-specific marginal abatement cost curves and find that the same quantity of flaring reductions could have been achieved at 44% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the existing public lands royalty rate would achieve 99% of the flaring reductions at 46% lower cost.
    Date: 2020–05–13
  56. By: Sinan Küfeoglu (EPRG, CJBS, University of Cambridge); Gaomin Liu (Department of Engineering, University of Cambridge); Karim Amaya (EPRG, CJBS, University of Cambridge); Michael G. Pollitt (EPRG, CJBS, University of Cambridge)
    Keywords: Feed-in tariff, Distribution System Platform, Peer-to-Peer, Blockchain
    JEL: L94
    Date: 2019–06
  57. By: bahri, muhamad
    Abstract: The reservoir usually has multiple functions such as hydropower and water distribution for different end users. Multiple functions and multiple agents also mean there are tradeoffs among multiple functions among different end users. Through feedback loops, the system dynamics tools concern on the interdependency and the complexity of the nexus elements. This paper applies the system archetypes in investigating water-energy-food-land nexus (WEFLN) in the Jatiluhur reservoir, the largest reservoir in Indonesia. Using the system archetypes. It is found that there are growth engines to support industrial, residential, and fisheries sectors. However, water availability will be a crucial issue that possibly bounds the growth engines. This situation is called the limits to growth archetype. Another system archetype, the success to successful, is also identified. This archetype reminds us the distribution of water and power should be adjusted accordingly to sustain the growth in all sectors including industry, residence, and fisheries.
    Date: 2020–01–30
  58. By: Burgess, Robin; Greenstone, Michael; Ryan, Nicholas; Sudarshan, Anant
    Abstract: This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. We present evidence that these shortfalls are a consequence of electricity being treated as a right and that this sets off a vicious four-step circle. In step 1, because a social norm has developed that all deserve power independent of payment, subsidies, theft, and nonpayment are widely tolerated. In step 2, electricity distribution companies lose money with each unit of electricity sold and in total lose large sums of money. In step 3, government-owned distribution companies ration supply to limit losses by restricting access and hours of supply. In step 4, power supply is no longer governed by market forces and the link between payment and supply is severed, thus reducing customers' incentives to pay. The equilibrium outcome is uneven and sporadic access that undermines growth.
    Keywords: Electricity distribution
    JEL: O3
    Date: 2020–02
  59. By: Umed Temursho (Loyola University Andalusia); Manuel Alejandro Cardenete (Loyola University Andalusia); Krzysztof Wojtowicz (European Commission - JRC); Luis Rey (European Commission - JRC); Matthias Weitzel (European Commission - JRC); Toon Vandyck (European Commission - JRC); Bert Saveyn (European Commission - JRC)
    Abstract: This technical report describes a multi-regional generalized RAS (MR-GRAS) procedure to update/project input-output tables or social accounting matrices. The method is able to incorporate a number of constraints on row and columns sums as well as specific flows between economic sectors and specific taxes in an input-output table. This feature is particularly useful to reconcile information coming from different data sets. In the application described in this report, the method is tailored towards constraints with regard to the energy system. Specifically, we specify constraints in the updating/projecting algorithm that are able to reproduce the economic values reflected in an energy balance from an energy system model. Here, we show that the method is able to generate input-output tables that are forward projected until 2050 and can be used as a baseline in a computable general equilibrium model like JRC-GEM-E3.
    Keywords: Input-output tables, baseline, MR-GRAS, CGE
    Date: 2020–05
  60. By: Cecilia Bellora; Lionel Fontagné (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)
    Abstract: The new European Commission has announced policies to reduce greenhouse gas emissions drastically. Reaching an ambitious target for a global good – the climate – would require a common price for carbon worldwide. This however clashes with the free-riding problem. Furthermore, unilateral policies are not efficient since they lead to carbon leakages and distort competitiveness. To tackle these issues, the European Union can rely on different policies. Firstly, a carbon pricing of imports can combined with an export rebate to constitute a ‘complete CBA' (Carbon Border Adjustment) solution. Alternatively, a simple tariff at the border can compensate for differences in carbon prices between domestic and imported products. A consumption-based carbon taxation can al so be contemplated. Last, a uniform tariff on imports from countries not imposing (equivalent) carbon policies may help solving the free-riding problem.
    Keywords: Carbon Border Adjustment,Climate Change,International Trade,Tariffs
    Date: 2020–04–14
  61. By: Matteo Fontana; Massimo Tavoni; Simone Vantini
    Abstract: Complex computational models are increasingly used by business and governments for making decisions, such as how and where to invest to transition to a low carbon world. Complexity arises with great evidence in the outputs generated by large scale models, and calls for the use of advanced Sensitivity Analysis techniques. To our knowledge, there are no methods able to perform sensitivity analysis for outputs that are more complex than scalar ones and to deal with model uncertainty using a sound statistical framework. The aim of this work is to address these two shortcomings by combining sensitivity and functional data analysis. We express output variables as smooth functions, employing a Functional Data Analysis (FDA) framework. We extend global sensitivity techniques to function-valued responses and perform significance testing over sensitivity indices. We apply the proposed methods to computer models used in climate economics. While confirming the qualitative intuitions of previous works, we are able to test the significance of input assumptions and of their interactions. Moreover, the proposed method allows to identify the time dynamics of sensitivity indices.
    Date: 2020–06
  62. By: Bortz, Pablo Gabriel; Toftum, Nicole
    Abstract: The paper reviews the alternatives available to Emerging Market Economies (EMEs) to finance investment required to mitigate and adapt to climate change. It also takes into account the financial needs to achieve the Sustainable Development Goals (SDGs). Since the requirements dwarfs the financial capabilities of the public sector in EMEs, the paper explores possible funding channels focusing on international financial markets. The paper identifies potential obstacles to a smooth and sustainable finance provision, including the influence of the global financial cycle on credit supply, risks related to currency mismatch and creditworthiness assessment, and mispricing of risks. The review also identifies the challenges to the exporting profile and therefore the sustainability of the balance of payments of EMEs. Finally, the paper provides some reflections on the limits of domestic private capital markets to bridge the “environmental financial gap”, and calls for the deeper involvement of specialized and official financial institutions.
    Keywords: Climate Change, Sustainable Development Goals, Financial requirements, international capital markets, green bonds, sustainable finance
    JEL: E44 F64 G23 O13 Q58
    Date: 2020–07–09
  63. By: Matthew E Khan (Department of Economics, University of Southern California); Kamiar Mohaddes (Faculty of Economics, University of Cambridge); Ryan N.C. Ng (Faculty of Economics, University of Cambridge); Hashem Pesaran (University of Southern California and Trinity College); Mehdi Raisse (IMF)
    Keywords: Climate change, economic growth, adaptation, counterfactual analysis.
    JEL: C33 O40 O44 O51 Q51 Q54
    Date: 2019–07
  64. By: Pierre Dupraz (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - INRA - Institut National de la Recherche Agronomique); Abdoul Nasser Seyni Abdou (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - INRA - Institut National de la Recherche Agronomique); Thomas Coisnon (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - INRA - Institut National de la Recherche Agronomique); Bertille Thareau (LARESS - ESA - Ecole Superieure Agronomique)
    Abstract: In addition to their role in maintaining biodiversity, producing many ecosystem services or contributing to the landscape quality of the areas, hedgerows have the capacity to store carbon in their above-and below-ground biomass, an environmental function that can provide an opportunity for companies wishing to offset voluntarily their CO2 emissions. In this paper, we examine the conditions for the existence and development of voluntary carbon offset markets as a new way to improve hedge maintenance and mitigate climate change. Through a series of surveys conducted among companies and farmers in Western France, we aimto determine the existence of a space for negotiation between these actors by adopting a discrete choiceexperimentmethod. The results show acertain heterogeneity in the expression of willingness to pay and willingness to receive, but a space for negotiation is well identified for a category of actors and for some modalitiesof the scheme. From a methodological point of view, our work shows ina new way thatthe choice experiment method can be used to identify the conditions of existence of a market for environmental goods.
    Keywords: Willingness to pay,Willingness to receive,discrete choice experiment,conditional logit,mixed logit,voluntary carbon market,hedges
    Date: 2019–12–12
  65. By: Luis Sarmiento
    Abstract: I assert that air pollution from nitrogen oxides affects the productivity of employees in Mexican court hearings. This is the first article analyzing this connection and the first to disentangle work-breaks from the productivity of white-collar workers. I merge hourly pollution with granular hearing data under the assumption that the length of the hearing approximates productivity and identify causality from panel and instrumental variable techniques. Results show a loss of 3.83 workdays during the sample period due to the productivity shock stemming from comparing exposure at the hours with the highest and lowest concentration of nitrogen oxides in the data-set.
    Keywords: Air pollution, nitrogen oxides, productivity, labor market effects
    JEL: C23 J24 Q53
    Date: 2020
  66. By: Côme Billard (University of Paris-Dauphine / Climate Economics Chair); Anna Creti (University of Paris-Dauphine / Climate Economics Chair); Antoine Mandel (University of Paris-I Pantheon Sorbonne / Paris School of Economics)
    Abstract: In this paper, we reconstruct the network of environmental policies diffusion across American states from 1974 to 2018. Our results highlight an inefficient structure, suggesting lags in policy spreading. We identify Minnesota, California and Florida to be the main "facilitators" of the dynamics. Targeting them ensures the maximum likelihood of policy diffusion across the country. We then evaluate the determinants of the inferred network. Our results emphasize the role of contiguity and wealth in policy transmission. We also find sustainable economic systems as well as state’s expected economic losses due to climate change as critical factors of environmental policy flows.
    Keywords: Network, United States, Environmental Policy Diffusion, Cascades.
    Date: 2020–05

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