nep-ene New Economics Papers
on Energy Economics
Issue of 2021‒02‒15
38 papers chosen by
Roger Fouquet
London School of Economics

  1. Environmental preferences and technological choices: is market competition clean or dirty? By Aghion, Philippe; Bénabou, Roland; Martin, Ralf; Roulet, Alexandra
  2. Inequality, Finance and Renewable Energy Consumption in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  3. Inequality and Renewable Energy Consumption in Sub-Saharan Africa: Implication for High Income Countries By Simplice A. Asongu; Nicholas M. Odhiambo
  4. The Green Economy and Inequality in Sub-Saharan Africa: Avoidable Thresholds and Thresholds for Complementary Policies By Simplice A. Asongu; Nicholas M. Odhiambo
  5. Renewable Energy Law and Auctions in Vietnam By Minh Ha-Duong; Ngo To Nhien
  6. Biomass co-firing and renewable portfolio standard scenarios to 2030 By Minh Ha-Duong; an Ha Truong; Hoang Anh Tran
  7. Capturing economic and social value from hydrocarbon gas flaring: evaluation of the issues By Etienne Romsom; Kathryn McPhail
  8. Efficiency and Equity Impacts of Energy Subsidies By Robert W. Hahn; Robert D. Metcalfe
  9. Pricing Energy Storage in Real-time Market By Cong Chen; Lang Tong; Ye Guo
  10. Climate Actions and Stranded Assets: The Role of Financial Regulation and Monetary Policy By Francesca Diluiso; Barbara Annicchiarico; Matthias Kalkuhl; Jan C. Minx
  11. Capturing economic and social value from hydrocarbon gas flaring and venting: solutions and actions By Etienne Romsom; Kathryn McPhail
  12. Oil price shocks, fuel subsidies and macroeconomic (in)stability in Nigeria By Omotosho, Babatunde S.
  13. De Energie-Investeringsafrek: Freeriding Binnen de Perken By Vollebergh, Herman
  14. Globalization and Greenhouse Gas Emissions: Evidence from the United States By Claire Brunel; Arik Levinson
  15. Efficacité économique et effets distributifs de long-terme des politiques de rénovation énergétique des logements By Louis-Gaëtan Giraudet; Cyril Bourgeois; Philippe Quirion
  16. Les « terres rares », au coeur des conflits économico-politiques de demain By Jacques Fontanel
  17. Strategic Export Motives and Linking Emission Markets By Fabio Antoniou; Panos Hatzipanayotou; Nikos Tsakiris
  18. Clean versus Dirty Energy: Empirical Evidence from Fuel Adoption and Usage by Households in Ghana By Alhassan A. Karakara; Evans S. Osabuohien
  19. Wind Generation and the Dynamics of Electricity Prices in Australia By Muthe Mathias Mwampashi; Christina Sklibosios Nikitopoulos; Otto Konstandatos; Alan Rai
  20. Price Limits in a Tradable Performance Standard By Banban Wang; William A. Pizer; Clayton Munnings
  21. The Market Measure of Carbon Risk and its Impact on the Minimum Variance Portfolio By Th\'eo Roncalli; Th\'eo Le Guenedal; Fr\'ed\'eric Lepetit; Thierry Roncalli; Takaya Sekine
  22. Volatility of International Commodity Prices in Times of Covid-19: Effects of Oil Supply and Global Demand Shocks By Hillary C. Ezeaku; Simplice A. Asongu; Joseph Nnanna
  23. Effectiveness of Multiple-Policy Instruments: Evidence from the Greenhouse Gas Reduction Policy in Japan By Naonari Yajima; Toshi H. Arimura
  24. Robustness of the international oil trade network under targeted attacks to economies By N. Wei; W. -J. Xie; W. -X. Zhou
  25. Where is Pollution Moving? Environmental Markets and Environmental Justice By Joseph S. Shapiro; Reed Walker
  26. The grandkids aren't alright: the intergenerational effects of prenatal pollution exposure By Colmer, Jonathan; Voorheis, John
  27. The Economic Impact of Volatility Persistence on Energy Markets By Christina Sklibosios Nikitopoulos; Alice Thomas; Jianxin Wang
  28. An Exploration of Barriers Female Engineers Face in the Workplace By Tyene Houston
  29. Beyond cost reduction: Improving the value of energy storage in electricity systems By Maximilian Parzen; Fabian Neumann; Addrian H. Van Der Weijde; Daniel Friedrich; Aristides Kiprakis
  30. The Impact of Low-Carbon Policy on Stock Returns By Rania Hentati-Kaffel; Alessandro Ravina
  31. Won't Get Fooled Again: A Supervised Machine Learning Approach for Screening Gasoline Cartels By Douglas Silveira; Silvinha Vasconcelos; Marcelo Resende; Daniel O. Cajueiro
  32. Macro-Fiscal Gains from Anti-Corruption Reforms in the Republic of Congo By Giovanni Melina; Hoda Selim; Concepcion Verdugo-Yepes
  33. A Computational Approach to Sequential Decision Optimization in Energy Storage and Trading By Paolo Falbo; Juri Hinz; Piyachat Leelasilapasart; Cristian Pelizzari
  34. "Placebo Tests" for the Impacts of Air Pollution on Health: The Challenge of Limited Healthcare Infrastructure By Guidetti, Bruna; Pereda, Paula; Severnini, Edson R.
  35. Some geopolitical issues of the energy transition By Emmanuel Hache; Samuel Carcanague; Clément Bonnet; Gondia Sokhna Seck; Marine Simoën
  36. Climate change and population: an integrated assessment of mortality due to health impacts By Antonin Pottier; Marc Fleurbaey; Stéphane Zuber
  37. Climate economics support for the UN climate targets By Hansel, Martin C.; Drupp, Moritz A.; Johansson, Daniel A. J.; Nesje, Frikk; Azar, Christian; Freeman, Mark. C.; Groom, Ben; Sterner, Thomas
  38. The Marginal Oil Field By Benini, Giacomo; Brandt, Adam; Dotti, Valerio; El-Houjeiri, Hassan

  1. By: Aghion, Philippe; Bénabou, Roland; Martin, Ralf; Roulet, Alexandra
    Abstract: This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms’ decisions whether to innovate “clean” or “dirty”. We first develop a step-bystep innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices.
    Keywords: environment; product market competition; innovation
    JEL: R14 J01
    Date: 2020–03
  2. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The study investigates linkages between financial development, income inequality and renewable energy consumption from 39 countries in Sub-Saharan Africa. The empirical evidence is based on data for the period 2004-2014, Generalized Method of Moments (GMM) and Quantile Regressions (QR). The GMM results show that financial development unconditionally promotes renewable energy consumption while income inequality counteracts the underlying positive effect. The QR results reveal that the GMM findings only withstand empirical validity in bottom quantiles of the renewable energy consumption distribution. In order to increase room for policy implications for the promotion of renewable energy consumption, critical masses of income inequality that should not be exceeded are computed for bottom quantiles of the renewable energy consumption distribution while income inequality thresholds that should be exceeded are computed for top quantiles of the renewable energy consumption distribution. The study reconciles two strands of the literature. Theoretical, practical and policy implications are discussed.
    Keywords: Renewable energy; Inequality; Finance; Sub-Saharan Africa; Sustainable development
    JEL: H10 Q20 Q30 O11 O55
    Date: 2020–01
  3. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The study investigates conclusions from the scholarly literature that for low and middle-income countries, higher income inequality is linked with lower carbon dioxide (CO2) emissions. Using a sample of 39 sub-Saharan countries consisting of lower- and middle-income countries, this study investigates how increasing inequality affects renewable energy consumption. Three income inequality indicators are used, namely: the Gini coefficient, the Palma ratio and Atkinson index. The empirical evidence is based on quadratic Tobit regressions. The investigated assumption is only partially valid because a net positive impact is apparent only in one of the three income inequality variables used in the study. Hence, it is difficult to establish whether the inequality or equality hypothesis underpinning the nexus between income inequality and renewable energy consumption hold for Sub-Saharan Africa. However, based on the significant results in terms of the threshold, the equality hypothesis is valid when the Atkinson index is below a threshold of 0.6180 while the inequality hypothesis becomes valid when the Atkinson index exceeds the threshold of 0.6180. Hence, as the main policy implication, for the equitable redistribution of income to be promoted and, therefore, for policies that favor income inequality for renewable energy consumption not to be encouraged, policy makers should keep the Atkinson index below a threshold of 0.6180. An implication for Europe and/or high income countries is provided, notably, that the equality hypothesis on the nexus between income inequality and CO2 emissions may not withstand empirical scrutiny but contingent on: (i) the measurements of income inequality and (ii) inequality thresholds when a specific income inequality measurement is retained.
    Keywords: Renewable energy; Inequality; Sub-Saharan Africa; Sustainable development
    JEL: H10 Q20 Q30 O11 O55
    Date: 2020–01
  4. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The study examines nexuses between carbon dioxide (CO2) emissions, renewable energy consumption and inequality in 39 Sub-Saharan African countries for the period 2004-2014. The empirical evidence is based on Quantile regressions. First, in the 25th quantile of the inequality distributions, as long as CO2 emissions metric tons per capita are kept below 4.700 (4.100), the Gini coefficient (Atkinson index) will not increase. These are avoidable CO2 emissions thresholds. Second, renewable energy consumption should be complemented with other policies to: (i) reduce the Gini coefficient when renewable energy consumption is at 50.00% of total final energy consumption and (ii) mitigate the Atkinson index when renewable energy consumption is at 62.500 % of total final energy consumption in the bottom quantiles of the Atkinson index distribution and at 50.00% of total final energy consumption in the 75th quantile of the Atkinson index distribution. These are renewable energy consumption thresholds for complementary policies. The novelty of this study in the light of extant literature is fundamentally premised on providing policy makers with avoidable thresholds of CO2 emissions as well as corresponding thresholds of renewable energy consumption for complementary policies, in the nexus between the green economy and inequality.
    Keywords: Renewable energy; Inequality; Finance; Sub-Saharan Africa; Sustainable development
    JEL: H10 Q20 Q30 O11 O55
    Date: 2020–01
  5. By: Minh Ha-Duong (VIET - Vietnam Initiative for Energy Transition, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Ngo To Nhien (VIET - Vietnam Initiative for Energy Transition)
    Abstract: This policy note examines the rationale for enacting a Renewable Energy Law in Vietnam, and to use an Auction mechanism to replace the Feed In Tariff as the main instrument to develop renewable energy sources electricity production.
    Date: 2019–06–04
  6. By: Minh Ha-Duong (VIET - Vietnam Initiative for Energy Transition, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); an Ha Truong (VIET - Vietnam Initiative for Energy Transition); Hoang Anh Tran (VIET - Vietnam Initiative for Energy Transition)
    Date: 2020–05
  7. By: Etienne Romsom; Kathryn McPhail
    Abstract: Atmospheric emissions urgently need to reduce for natural gas to fulfill its potential role in the energy transition to achieve the Paris Agreement on climate change. This paper establishes the magnitude and trends of flaring and venting in oil and gas operations, as well as their emissions and impact on air quality, health, and climate. While global flaring and venting comprise 7.5 per cent of natural gas produced, their combined impact on health and climate (in terms of Social Cost of Atmospheric Release) accounts for 54 per cent.
    Keywords: energy transition, Gas, Health, Climate, Air, Energy
    Date: 2021
  8. By: Robert W. Hahn; Robert D. Metcalfe
    Abstract: Economic theory suggests that energy subsidies can lead to excessive consumption and environmental degradation. However, the precise impact of energy subsidies is not well understood. We analyze a large energy subsidy: the California Alternate Rates for Energy (CARE). CARE provides a price reduction for low-income consumers of natural gas and electricity. Using a natural field experiment, we estimate the price elasticity of demand for natural gas to be about -0.35 for CARE customers. An economic model of this subsidy yields three results. First, the natural gas subsidy appears to reduce welfare. Second, the economic impact of various policies, such as cap-and-trade, depends on whether prices for various customers move closer to the marginal social cost. Third, benefits to CARE customers need to increase by 6% to offset the costs of the program.
    JEL: D04 D1 D60 Q4
    Date: 2021–01
  9. By: Cong Chen; Lang Tong; Ye Guo
    Abstract: The problem of pricing utility-scale energy storage resources (ESRs) in the real-time electricity market is considered. Under a rolling-window dispatch model where the operator centrally dispatches generation and consumption under forecasting uncertainty, it is shown that almost all uniform pricing schemes, including the standard locational marginal pricing (LMP), result in lost opportunity costs that require out-of-the-market settlements. It is also shown that such settlements give rise to disincentives for generating firms and storage participants to bid truthfully, even when these market participants are rational price-takers in a competitive market. Temporal locational marginal pricing (TLMP) is proposed for ESRs as a generalization of LMP to an in-market discriminative form. TLMP is a sum of the system-wide energy price, LMP, and the individual state-of-charge price. It is shown that, under arbitrary forecasting errors, the rolling-window implementation of TLMP eliminates the lost opportunity costs and provides incentives to price-taking firms to bid truthfully with their marginal costs. Numerical examples show insights into the effects of uniform and non-uniform pricing mechanisms on dispatch following and truthful bidding incentives.
    Date: 2021–01
  10. By: Francesca Diluiso (Mercator Research Institute on Global Commons and Climate Change (MCC)); Barbara Annicchiarico (DEF and CEIS, Università di Roma "Tor Vergata"); Matthias Kalkuhl (Mercator Research Institute on Global Commons and Climate Change (MCC) & University of Potsdam); Jan C. Minx (Mercator Research Institute on Global Commons and Climate Change (MCC) & Priestley International Centre for Climate, university of Leeds)
    Abstract: Limiting global warming to well below 2°C may result in the stranding of carbon-sensitive assets. This could pose substantial threats to financial and macroeconomic stability. We use a dynamic stochastic general equilibrium model with financial frictions and climate policy to study the risks a low-carbon transition poses to financial stability and the different instruments central banks could use to manage these risks. We show that, even for very ambitious climate targets, transition risks are limited for a credible, exponentially growing carbon price, although temporary \green paradoxes" phenomena may materialize. Financial regulation encouraging the decarbonization of the banks' balance sheets via tax-subsidy schemes significantly reduces output losses and inflationary pressures but it may enhance financial fragility, making this approach a risky tool. A green credit policy as a response to a financial crisis originated in the fossil sector can potentially provide an effective stimulus without compromising the objective of price stability. Our results suggest that the involvement of central banks in climate actions must be carefully designed in compliance with their mandate to avoid unintended consequences.
    Keywords: Climate policy, financial instability, financial regulation, green credit policy monetary policy; transition risk
    JEL: E50 H23 Q43 Q50 Q58
    Date: 2020–07–22
  11. By: Etienne Romsom; Kathryn McPhail
    Abstract: This second paper on hydrocarbon gas flaring and venting builds on our first, which evaluated the economic and social cost (SCAR) of wasted natural gas. These emissions must be reduced urgently for natural gas to meet its potential as an energy-transition fuel under the Paris Agreement on Climate Change and to improve air quality and health. Wide-ranging initiatives and solutions exist already; the selection of the most suitable ones is situation-dependent.
    Keywords: energy transition, Gas, Health, Climate, Air, Energy
    Date: 2021
  12. By: Omotosho, Babatunde S.
    Abstract: This paper studies the macroeconomic implications of oil price shocks and the extant fuel subsidy regime for Nigeria. To do this, we develop and estimate a New-Keynesian DSGE model that accounts for pass-through effect of international oil price into the retail price of fuel. Our results show that oil price shocks generate significant and persistent impacts on output, accounting for about 22 percent of its variations up to the fourth year. Under our benchmark model (i.e. with fuel subsidies), we show that a negative oil price shock contracts aggregate GDP, boosts non-oil GDP, increases headline inflation, and depreciates the exchange rate. However, results generated under the model without fuel subsidies indicate that the contractionary effect of a negative oil price shock on aggregate GDP is moderated, headline inflation decreases, while the exchange rate depreciates more in the short-run. Counterfactual simulations also reveal that fuel subsidy removal leads to higher macroeconomic instabilities and generates non-trivial implications for the response of monetary policy to an oil price shock. Thus, this study cautions that a successful fuel subsidy reform must necessarily encompass the deployment of well-targeted safety nets as well as the evolution of sustainable adjustment mechanisms.
    Keywords: Fuel subsidies, oil price shocks, business cycle
    JEL: E31 E32 E52 E62
    Date: 2020
  13. By: Vollebergh, Herman (Tilburg University, School of Economics and Management)
    Date: 2020
  14. By: Claire Brunel; Arik Levinson
    Abstract: The US has been a global leader in regulating local air pollution and a global laggard in regulating greenhouse gases (GHGs). For decades, critics of US policy have expressed fears that stringent US regulations on local air pollution would lead to pollution havens overseas. Prior research, suggests that has not happened. But what about the converse fear? Are the less stringent US climate regulations causing the US to become a pollution haven for other countries’ GHG-intensive industries? We provide a decomposition of US manufacturing GHG emissions and find no evidence of offshoring either to or from the United States since 1990.
    JEL: F18 Q56
    Date: 2021–01
  15. By: Louis-Gaëtan Giraudet; Cyril Bourgeois; Philippe Quirion (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Cet article évalue l'impact entre 2012 et 2050 des principales politiques d'amélioration énergétique du parc de logements privés et sociaux en France. Cette étude utilise le modèle technico-économique Res-IRF, qui simule l'évolution de la demande d'énergie pour le chauffage des logements sous l'effet de la construction neuve et de la rénovation énergétique des logements.
    Date: 2020
  16. By: Jacques Fontanel (CESICE - Centre d'études sur la sécurité internationale et les coopérations européennes - UPMF - Université Pierre Mendès France - Grenoble 2 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble)
    Abstract: Rare-earth are essential for the development of modern technologies. They have exceptional natural qualities for making clean electricity and for producing new information and communication technologies. These productions require the use of rare metals, which have three drawbacks: firstly, they are available or listed in limited quantities in relation to potential demand; they are therefore today assumed to be rapidly exhaustible; secondly, their extraction is both expensive and highly polluting. Finally, most of these metals are poorly distributed throughout the world, to the great advantage of China, which is currently taking advantage of this form of monopoly to attract numerous high value-added activities dependent on rare metals to its territory. Economic, political and military conflicts can arise from this scarcity and the balance of power between states.
    Abstract: Les terres rares sont essentielles au développement des technologies modernes. Elles présentent des qualités naturelles exceptionnelles pour fabriquer une électricité propre et pour produire les nouvelles technologies de l'information et de la communication. Ces productions nécessitent l'utilisation de métaux rares qui présentent trois inconvénients : d'abord, ils sont disponibles ou répertoriés en quantité limitée au regard de la demande potentielle ; ils sont donc aujourd'hui supposés rapidement épuisables ; ensuite leur extraction est à la fois onéreuse et très polluante. Enfin, la plupart de ces métaux sont mal répartis dans le monde, au grand avantage actuel de la Chine qui profite largement de cette forme de monopole pour attirer sur son territoire de nombreuses activités à fortes valeurs ajoutées dépendantes des métaux rares. Les conflits économiques, politiques, militaires peuvent surgir de cette rareté et des rapports de force entre les Etats.
    Keywords: Rare-earth,conflicts,pollution,environment,scarcity,new technologies,Terres rares,Conflits,environnement,rareté,nouvelles technologies
    Date: 2021–01–02
  17. By: Fabio Antoniou; Panos Hatzipanayotou; Nikos Tsakiris
    Abstract: We explore the possibility of achieving a cooperative outcome when governments act non-cooperatively in a strategic environmental policy model where emission permit markets are linked. We introduce a specific distribution scheme of the permit revenues between the exporting countries so as to sustain the cooperative outcome as a subgame perfect Nash equilibrium. Participation in the scheme is endogenized and we show that it constitutes a subgame perfect Nash equilibrium as long as the countries are not too asymmetric. Our results are robust once we allow for multiple pollutants, different modes of competition and market power in the permits market.
    Keywords: strategic environmental policy, internationally tradable permits, cross-border pollution, imperfect competition, welfare
    JEL: Q58 F12 F18
    Date: 2021
  18. By: Alhassan A. Karakara (CEPDeR, Covenant University, Ota, Nigeria); Evans S. Osabuohien (CEPDeR, Covenant University, Ota, Nigeria)
    Abstract: There are few studies on the determinants of energy consumption of households in Africa, particularly in Ghana. Thus, this study identifies the drivers of households’ fuel consumption for domestic purposes and examines two fuel categories (‘clean’ fuels versus ‘dirty’ fuels). The study used Demographic and Health Survey data that has a sample of 11,835 households across Ghana. Binary categorical models (binary logistic and binary probit) were used to investigate whether a household uses ‘clean fuel’ or ‘dirty fuel’, which are estimated with socio-economic variables and spatial disparity (regional location). The results suggest that households’ energy consumption is affected by socio-economic variables and rural households are more deprived than urban households in adopting clean fuels. Also, male-headed households have a higher likelihood than female-headed households to adopt clean fuels. Many households choose clean fuels for lighting than they do for cooking as wealth status improves. However, solid fuels such as charcoal and firewood remain the dominant fuel used for cooking by the majority of households. The use of these dirty fuels could hamper the health status of households because of indoor pollution. The study recommends that policies should be geared towards the provision of clean and better energy sources to households.
    Keywords: ‘Clean’ fuels, ‘Dirty’ fuels, household fuel adoption, household fuel consumption, Energy usage, Ghana
    JEL: O13 P28 Q42
    Date: 2020–01
  19. By: Muthe Mathias Mwampashi (Finance Discipline Group, UTS Business School, University of Technology Sydney); Christina Sklibosios Nikitopoulos (Finance Discipline Group, UTS Business School, University of Technology Sydney); Otto Konstandatos (Finance Discipline Group, UTS Business School, University of Technology Sydney); Alan Rai (University of Technology Sydney)
    Abstract: Australia's National Electricity Market (NEM) is experiencing one of the world's fastest and marked transitions toward variable renewable energy generation. This transformation poses challenges to system security and reliability and has triggered increased variability and uncertainty in electricity prices. By employing an exponential generalized autoregressive conditional heteroskedasticity (eGARCH) model, we gauge the effects of wind power generation on the dynamics of electricity prices in the NEM. We find that a 1 GWh increase in wind generation decreases daily prices up to 1.3 AUD/MWh and typically increases price volatility up to 2%. Beyond consumption and gas prices, hydro generation also contributes to an increase in electricity prices and their volatility. The cross-border interconnectors play a significant role in determining price levels and volatility dynamics. This underscores the important role of strategic provisions and investment in the connectivity within the NEM to ensure the reliable and effective delivery of renewable energy generation. Regulatory interventions, such as the carbon pricing mechanism and nationwide lockdown restrictions due to COVID-19 pandemic, also had a measurable impact on electricity price dynamics.
    Keywords: wind generation; electricity price volatility; merit order effect; hydro generation; interconnectors; carbon pricing mechanism; COVID-19
    JEL: C22 C58 Q40 Q42
    Date: 2020–12–01
  20. By: Banban Wang; William A. Pizer; Clayton Munnings
    Abstract: Tradable performance standards are widely used sectoral regulatory policies. Examples include the US lead phasedown, fuel economy standards for automobiles, renewable portfolio standards, low carbon fuel standards, and—most recently—China’s new national carbon market. At the same time, theory and experience with traditional cap-and-trade programs suggests an important role for price limits in the form of floors, ceilings, and reserves. In this paper we develop a simple analytical model to derive the welfare comparison between tradable performance standards and a price-based alternative. This works out to be is a simple variant of the traditional Weitzman prices-versus-quantities result. We use this result to show that substantial gains could arise from shifting two programs, China’s new national carbon market (~60% gain) and the California Low Carbon Fuel Standard (~20% gain), to a price mechanism. This will generally be true when the coefficient of variation in the price under a TPS is larger than 50%. We end with a discussion of implementation issues, including full and partial consignment auctions based on actual and expected output.
    JEL: D82 Q54 Q58
    Date: 2021–01
  21. By: Th\'eo Roncalli; Th\'eo Le Guenedal; Fr\'ed\'eric Lepetit; Thierry Roncalli; Takaya Sekine
    Abstract: Like ESG investing, climate change is an important concern for asset managers and owners, and a new challenge for portfolio construction. Until now, investors have mainly measured carbon risk using fundamental approaches, such as with carbon intensity metrics. Nevertheless, it has not been proven that asset prices are directly impacted by these fundamental-based measures. In this paper, we focus on another approach, which consists in measuring the sensitivity of stock prices with respect to a carbon risk factor. In our opinion, carbon betas are market-based measures that are complementary to carbon intensities or fundamental-based measures when managing investment portfolios, because carbon betas may be viewed as an extension or forward-looking measure of the current carbon footprint. In particular, we show how this new metric can be used to build minimum variance strategies and how they impact their portfolio construction.
    Date: 2021–01
  22. By: Hillary C. Ezeaku (Caritas University, Enugu, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: This study examines the effects of oil supply and global demand shocks on the volatility of commodity prices in the metal and agricultural commodity markets using the SVAR model. The empirical evidence is based on real time daily closing international commodity prices covering the period 2 December 2019 to 1 October 2020. The findings are presented in cumulative impulse responses and variance decompositions. The former is utilized to examine the accumulated influence of structural shocks on the volatility of agricultural and metal commodities whereas the latter reflect the share of variation in the volatility of each commodity arising from each structural shock. Various patterns are provided on how metal and agricultural commodity prices have been influenced by the COVID-19 pandemic. Policy implications are discussed.
    Keywords: Covid-9; Commodity Prices
    JEL: H12 I12 O10
    Date: 2020–01
  23. By: Naonari Yajima (Waseda INstitute of Political EConomy, Waseda University); Toshi H. Arimura (Faculty of Political Science and Economics, Waseda University; Research Institute for Environmental Economics and Management, Waseda University)
    Abstract: “Management-based regulation” has no tangible incentives and such regulations may not be effective. Therefore, a mixed policy that uses both “management-based regulation” and with some clear incentives may be effective and necessary. In this paper, we investigate the effectiveness of combination of “management-based regulation”, some economic incentives and/or information provision on climate change actions. We focus on the “Emissions Reduction Program” (ERP) in Japan, which is one of “management-based regulation”, aiming to promote large facilities reducing greenhouse gas (GHG) emissions. Using the prefecture-industry level aggregated data, we find that information provision, reward for good practices and designation of responsible department for climate change has positive impacts on GHG emissions reduction under ERP.
    Keywords: Management-based regulation; Provincial-level policy; Greenhouse gas reduction
    Date: 2019–09
  24. By: N. Wei; W. -J. Xie; W. -X. Zhou
    Abstract: In the international oil trade network (iOTN), trade shocks triggered by extreme events may spread over the entire network along the trade links of the central economies and even lead to the collapse of the whole system. In this study, we focus on the concept of "too central to fail" and use traditional centrality indicators as strategic indicators for simulating attacks on economic nodes, and simulates various situations in which the structure and function of the global oil trade network are lost when the economies suffer extreme trade shocks. The simulation results show that the global oil trade system has become more vulnerable in recent years. The regional aggregation of oil trade is an essential source of iOTN's vulnerability. Maintaining global oil trade stability and security requires a focus on economies with greater influence within the network module of the iOTN. International organizations such as OPEC and OECD established more trade links around the world, but their influence on the iOTN is declining. We improve the framework of oil security and trade risk assessment based on the topological index of iOTN, and provide a reference for finding methods to maintain network robustness and trade stability.
    Date: 2021–01
  25. By: Joseph S. Shapiro; Reed Walker
    Abstract: Do US air pollution offset markets disproportionately relocate pollution to or from low-income or minority communities? Concerns about an equal distribution of environmental quality across communities—environmental justice—have growing policy influence. We relate prices and quantities of offset transactions to demographics of the communities surrounding polluting plants. We find little association of offset prices or offset-induced movements in pollution with the share of a community that is Black, Hispanic, or with mean household income. This analysis of twelve prominent offset markets suggests that they do not substantially increase or decrease the equity of environmental outcomes.
    JEL: H22 Q50 Q52 Q53
    Date: 2021–01
  26. By: Colmer, Jonathan; Voorheis, John
    Abstract: Evidence shows that environmental quality shapes human capital at birth with long-run effects on health and welfare. Do these effects, in turn, affect the economic opportunities of future generations? Using newly linked survey and administrative data, providing more than 150 million parent-child links, we show that regulationinduced improvements in air quality that an individual experienced in the womb increase the likelihood that their children, the second generation, attend college 40-50 years later. Intergenerational transmission appears to arise from greater parental resources and investments, rather than heritable, biological channels. Our findings suggest that within-generation estimates of marginal damages substantially underestimate the total welfare effects of improving environmental quality and point to the empirical relevance of environmental quality as a contributor to economic opportunity in the United States.
    Keywords: air pollution; environmental regulation; social mobility; human capital
    JEL: H23 Q53 J00
    Date: 2020–12
  27. By: Christina Sklibosios Nikitopoulos (Finance Discipline Group, UTS Business School, University of Technology Sydney); Alice Thomas (Finance Discipline Group, UTS Business School, University of Technology Sydney); Jianxin Wang (Finance Discipline Group, UTS Business School, University of Technology Sydney)
    Abstract: This study examines the role of daily volatility persistence in determining future volatility in energy markets. In crude oil and natural gas markets, the impact of returns and variances is primarily transmitted to future volatility via the daily volatility persistence. Macro-economic factors, such as the VIX, the credit spread and the Baltic exchange dirty index, also impact future volatility, but this impact is again channeled via the volatility persistence. The dependence of volatility persistence on macro-economic conditions is termed conditional volatility persistence (CVP). The variation in daily CVP is economically significant, contributing up to 17% of future volatility and accounting for 25% of the model's explanatory power. Inclusion of the CVP in the model significantly improves volatility forecasts. Based on the utility benefits of volatility forecasts, the CVP adjusted volatility models provide up to 160 bps benefit to investors compared to the HAR models, even after accounting for transaction costs and varying trading speeds.
    Keywords: Realized Volatility; Volatility Persistence; Energy Markets; HAR; Forecasting
    JEL: C22 C53 C58 Q40
    Date: 2020–12–01
  28. By: Tyene Houston (InsightConsultingGroup LLC/Pepperdine University, USA)
    Abstract: The global focus to attract more females to the engineering profession and oil and gas companies are of paramount importance. There is a dire need to train and cultivate female engineers to increase economic advancement and innovation. Worldwide, the demand for those equipped with engineering expertise exceeds the talent pool pipeline. Despite laws enacted to mitigate gender discrimination, implicit gender bias persists in the workplace. Correspondingly, these challenges permeate against a backdrop of a crippling shortage of qualified engineers, and the high number of those who will retire within the next decade. To power future engineering and energy projects, it will require educators, policymakers, industry leaders, and philanthropists alike working collaboratively to infuse effective strategies that are drivers for pipelining talented female engineers. While the body of knowledge is extant around the shortage of women pursuing careers in science, technology, engineering, and mathematics (STEM) fields, the management literature has gaps regarding strategies successful female engineers employ to lead rewarding careers. The purpose of this research informed by Bandura’s (1986) Self-Efficacy Theory is to understand the beliefs, attitudes, and outcome expectations of successful female engineers who experience barriers in the workplace.
    Keywords: Female engineer, career barriers, gender bias, a global economy, oil and gas company
    Date: 2020–10
  29. By: Maximilian Parzen; Fabian Neumann; Addrian H. Van Der Weijde; Daniel Friedrich; Aristides Kiprakis
    Abstract: An energy storage technology is valuable if it makes energy systems cheaper. Traditional ways to improve storage technologies are to reduce their costs; however, the cheapest energy storage is not always the most valuable in energy systems. This paper reviews techno-economic storage valuation methods and expands them by the new "market potential method" which derives a system-value by examining the capacities obtained from a long-term investment planning optimisation. We apply and compare this method to other cost metrics in a renewables-based European power system model, covering diverse energy storage technologies. We find that characteristics of high-cost hydrogen storage can be equally or even more valuable than low-cost hydrogen storage. Additionally, we show that modifying the freedom of storage sizing and component interactions can make the energy system 10% cheaper and impact the value of technologies. The results suggest to look beyond the pure cost reduction paradigm and focus on developing technologies with value approaches that can lead to cheaper electricity systems in future. One practical and useful value method to guide energy storage innovation could be the market potential method.
    Date: 2021–01
  30. By: Rania Hentati-Kaffel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Alessandro Ravina (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper assesses the impact of low-carbon policy on stock returns by means of an environmental extension of Fama and French's (2015) five factor model. This paper makes four major contributions. Firstly, for the first time a factor, GMC (green minus carbon), meant to provide the premium which results from not paying a carbon price is constructed. The GMC factor is obtained by means of a sample of 182 firms from 19 European countries operating in 35 sectors: from January 2008 to December 2018 the value-weight returns of 91 firms regulated by the 2003/87/CE directive are subtracted from the value-weight returns of 91 firms exempted by the 2003/87/CE directive upon which the EU-ETS is based. Secondly, we provide evidence that the addition of the GMC factor improves the performance of the 5 factor model in Europe in the 2008-2018 time span. Thirdly, results show that there is a high green premium rather than a carbon premium as it was asserted by parts of the literature, and that this green premium is highly statistically significant. Fourthly, after performing a carbon stress test, we show the effects of EU-ETS average price shocks on both carbon and green firms for each market cap tranche.
    Keywords: Low-carbon transition risks,EU-ETS,CO2 emissions,asset pricing model,green premium
    Date: 2020–02–10
  31. By: Douglas Silveira; Silvinha Vasconcelos; Marcelo Resende; Daniel O. Cajueiro
    Abstract: In this article, we combine machine learning techniques with statistical moments of the gasoline price distribution. By doing so, we aim to detect and predict cartels in the Brazilian retail market. In addition to the traditional variance screen, we evaluate how the standard deviation, coefficient of variation, skewness, and kurtosis can be useful features in identifying anti-competitive market behavior. We complement our discussion with the so-called confusion matrix and discuss the trade-offs related to false-positive and false-negative predictions. Our results show that in some cases, false-negative outcomes critically increase when the main objective is to minimize false-positive predictions. We offer a discussion regarding the pros and cons of our approach for antitrust authorities aiming at detecting and avoiding gasoline cartels.
    Keywords: cartel screens, price dynamics, fuel retail market, machine learning
    JEL: C21 C45 C52 K40 L40 L41
    Date: 2021
  32. By: Giovanni Melina; Hoda Selim; Concepcion Verdugo-Yepes
    Abstract: This paper argues that oil revenue management and public investment in Congo are vulnerable to corruption as a result of limited transparency and accountability. Corruption has potentially contributed to poor macro-fiscal outcomes. The paper acknowledges the authorities’ anti-corruption efforts made so far and proposes further critical reforms to reduce remaining vulnerabilities. Using a dynamic stochastic general equilibrium model results show that, depending on the reforms adopted, the potential additional growth can range between 0.8 to 1.8 percent per year over the next 10 years, and debt can decline by 2.25 to 3 percent of GDP per year over the same period. These results suggest that macrofiscal gains from anti-corruption reforms could be substantial even under conservative reform scenarios.
    Keywords: Oil;Corruption;Public investment spending;Public investment and public-private partnerships (PPP);Oil, gas and mining taxes;WP,government,investment,firm,investment efficiency,government contract
    Date: 2019–06–03
  33. By: Paolo Falbo; Juri Hinz (University of Technology Sydney); Piyachat Leelasilapasart (University of Technology Sydney); Cristian Pelizzari
    Abstract: Due to recent technical progress, using battery energy storages are becoming a viable option in the power sector. Their optimal operational management focuses on load shift and shaving of price spikes. However, this requires optimally responding to electricity demand, intermittent generation, and volatile electricity prices. More importantly, such optimization must take into account the so-called deep discharge costs, which have a significant impact on battery lifespan. We present a solution to a class of stochastic optimal control problems associated with these applications. Our numerical techniques are based on efficient algorithms which deliver a guaranteed accuracy.
    Keywords: Approximate dynamic programming; energy trading; optimal control; power sector
    Date: 2021–01–01
  34. By: Guidetti, Bruna (University of Michigan); Pereda, Paula (University of Sao Paulo); Severnini, Edson R. (Carnegie Mellon University)
    Abstract: When examining the impacts of exposure to air pollution on health outcomes, researchers usually carry out "placebo tests" to provide evidence in support of their identification assumption. In general, this exercise targets health conditions seemingly unrelated to air pollution. In this study, we argue that one should proceed with caution when running such falsification tests. If healthcare infrastructure is limited, when we observe health shocks such as those driven by air pollution, the infrastructure needs to be adjusted to meet the increased demand by canceling or rescheduling elective and non-urgent procedures, for example. As a result, even health conditions seemingly unrelated to air pollution may be indirectly affected by pollution.
    Keywords: placebo tests, air pollution, healthcare infrastructure, health outcomes, hospitalization for respiratory diseases and other causes
    JEL: I15 Q53 Q56 O13
    Date: 2021–01
  35. By: Emmanuel Hache (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Samuel Carcanague (IRIS - Institut de Relations Internationales et Stratégiques); Clément Bonnet (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Gondia Sokhna Seck (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Marine Simoën (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles)
    Abstract: Why should geopolitics focus on energy transition issues? In many parts of the world, the decarbonisation of the energy and electricity mix has become a priority in order to meet international climate objectives and address local pollution issues. Investments made in renewable energies (REs) represented around $332 billion in 20181 (Figure 1) and those needed to meet the targets set in Paris in 2015 at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) could reshape the concept of energy security. The expression "Geopolitics of Renewable Energies" is not widely used at present, and the geopolitical implications of new energy policies and investments in REs are not very well explored.
    Date: 2019–03
  36. By: Antonin Pottier (Centre International de Recherche sur l'Environnement et le Développement - CIRED, EHESS); Marc Fleurbaey (Paris School of Economics; Centre International de Recherche sur l'Environnement et le Développement - CIRED); Stéphane Zuber (Paris School of Economics, Centre d'Economie de la Sorbonne)
    Abstract: We develop an integrated assessment model with endogenous population dynamics accouting for the impact of global climate change on mortality through five channels (heat, diarrhoeal disease, malaria, dengue, undernutrition). An age-dependent endogenous mortality rate, which depends linearly on global temperature increase, is introduced and calibrated. We consider three emission scenarios (business-as-usual, 3°C and 2°C scenarios) and find that the five risks induce deaths in the range from 160,000 per annum (in the near term) to almost 350,000 (at the end of the century) in the business-as-annual. We examine the number of life-years lost due to the five selected risks and find figures ranging from 5 to 10 millions annually. These numbers are too low to impact the aggregate dynamics and we do not find significant feedback effects of climate mortality to production, and thus emissions and temperature increase. But we do find interesting evolution patterns. The number of life-years lost is constant (business-as-usual) or decreases over time (3°C and 2°C). For the stabilisation scenarios, we find that the number of life-years lost is higher today than in 2100, due to improvements in generic mortality conditions, the bias of those improvements towards the young, and an ageing population. From that perspective, the present generation is found to bear the brunt of the considered climate change impacts
    Keywords: Climate change; Impacts; Integrated assessment model; Mortality risk; Endogenous population
    JEL: Q51 Q54 J11
    Date: 2020–11
  37. By: Hansel, Martin C.; Drupp, Moritz A.; Johansson, Daniel A. J.; Nesje, Frikk; Azar, Christian; Freeman, Mark. C.; Groom, Ben; Sterner, Thomas
    Abstract: Under the UN Paris Agreement, countries committed to limiting global warming to well below 2 °C and to actively pursue a 1.5 °C limit. Yet, according to the 2018 Economics Nobel laureate William Nordhaus, these targets are economically suboptimal or unattainable and the world community should aim for 3.5 °C in 2100 instead. Here, we show that the UN climate targets may be optimal even in the Dynamic Integrated Climate–Economy (DICE) integrated assessment model, when appropriately updated. Changes to DICE include more accurate calibration of the carbon cycle and energy balance model, and updated climate damage estimates. To determine economically ‘optimal’ climate policy paths, we use the range of expert views on the ethics of intergenerational welfare. When updates from climate science and economics are considered jointly, we find that around three-quarters (or one-third) of expert views on intergenerational welfare translate into economically optimal climate policy paths that are consistent with the 2 °C (or 1.5 °C) target.
    Keywords: climate science; economics; intergenerational welfare; policy
    JEL: N0
    Date: 2020–07–13
  38. By: Benini, Giacomo; Brandt, Adam; Dotti, Valerio; El-Houjeiri, Hassan
    Abstract: The recent diffusion of novel oil technologies has increased the variability of petroleum resources. Today, it is possible to mine oil sands, to extract liquids from tight rocks and to produce high-viscosity oils. Using the Rystad dataset, we examine the sensitivity of 14343 deposits to a marginal change in oil prices or in marginal extraction costs. According to our estimates the variations in the crude properties combined with the value combined with the differences in the marginal extraction costs shift the (median) value of an extra barrel from $29.00 to $64.63 depending upon the type of oil. The range between these two extremes suggests that different oils could respond differently to common as well as specific shocks. Our findings are relevant for the design of Pigouvian taxes affecting the oil sector.
    Keywords: Oil Economics, Shadow-Prices, Empirical Analysis of Firm Behaviour, Panel Data, Linear Mixed Models.
    JEL: C14 C23 D22 L23 Q35
    Date: 2020–02

This nep-ene issue is ©2021 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.