nep-ene New Economics Papers
on Energy Economics
Issue of 2021‒03‒22
57 papers chosen by
Roger Fouquet
London School of Economics

  1. Who Values Future Energy Savings? Evidence from American Drivers By Arik Levinson; Lutz Sager
  2. How Different Electricity Pricing Systems Affect the Energy Trilemma: Assessing Indonesia’s Electricity Market Transition By Heffron, Raphael J.; Marc-Fabian Körner, Marc-Fabian; Sumarno, Theresia; Wagner, Jonathan; Weibelzahl, Martin; Fridgen, Gilbert
  3. Hydrogen Infrastructure Requirements for Zero-Emission Freight Applications in California By Li, Guozhen PhD; Ogden, Joan PhD; Miller, Marshall PhD
  4. Sector coupling via hydrogen to lower the cost of energy system decarbonization By Guannan He; Dharik S. Mallapragada; Abhishek Bose; Clara F. Heuberger; Emre Gen\c{c}er
  5. Analysing the Impact of a Renewable Hydrogen Quota on the European Electricity and Natural Gas Markets By Schlund, David; Schönfisch, Max
  6. An Energy Policy for ASEAN? Lessons from the EU Experience on Energy Integration, Security, and Decarbonization By Diaz-Rainey, Ivan; Tulloch, Daniel J.; Ahmed, Iftekhar; McCarten, Matthew; Taghizadeh-Hesary, Farhad
  7. WP 04-20 - Fuel for the future - More molecules or deep electrification of Belgium's energy system by 2050 By Danielle Devogelaer
  8. Optimal Carbon Taxation and Horizontal Equity: A Welfare-Theoretic Approach with Application to German Household Data By Martin C. Hänsel; Max Franks; Matthias Kalkuhl; Ottmar Edenhofer
  9. Environmental performance of shared micromobility and personal alternatives using integrated modal LCA By Anne de Bortoli
  10. Optimal carbon taxation and horizontal equity: A welfare-theoretic approach with application to German household data By Martin C. Hänsel; Max Franks; Matthias Kalkuhl; Ottmar Edenhofer
  11. Government-Led Urbanization and Natural Gas Demand in China By Cai, Zhengyu; Yu, Chin-Hsien; Zhu, Chunhui
  12. Winners and losers: the distributional impact of a carbon tax in Brazil By Maria Alice Moz-Christofoletti; Paula Carvalho Pereda
  13. Smart Cap By Larry S. Karp; Christian P. Traeger; Christian Träger
  14. Climate Royalty Surcharges By Brian C. Prest; James H. Stock
  15. Residential solar water heating: California adopters and their experiences By Sanguinetti, Angela; Outcault, Sarah; Alston-Stepnitz, Eli; Moezzi, Mithra; Ingle, Aaron
  16. WP 08-19 - Analyse de la pollution de l’air liée à la consommation des ménages en Belgique en 2014 : le cas des émissions de gaz à effet de serre By Gertjan Cooreman; Jean-Maurice Frère; Tim Goedemé; Petra Zsuzsa Lévay; Josefine Vanhille; Gerlinde Verbist
  17. Reviewing methods and assumptions for high-resolution large-scale onshore wind energy potential assessments By Russell McKenna; Stefan Pfenninger; Heidi Heinrichs; Johannes Schmidt; Iain Staffell; Katharina Gruber; Andrea N. Hahmann; Malte Jansen; Michael Klingler; Natascha Landwehr; Xiaoli Guo Lars\'en; Johan Lilliestam; Bryn Pickering; Martin Robinius; Tim Tr\"ondle; Olga Turkovska; Sebastian Wehrle; Jann Michael Weinand; Jan Wohland
  18. Climate Change Mitigation Policies: Aggregate and Distributional Effects By Cavalcanti, T.; Hasna, Z.; Santos, C.
  19. Prepaid electricity and in-home displays: an alternative for the most vulnerable households in Colombia By Cardona, M; Gallego, J; Garcia, J; Franco, J
  20. Reconsidering Climate Mitigation Policy in the UK By Nicolas Arregui; Ian Parry
  21. Output-Based Allocation and Output-Based Rebates: A survey By Philippe Quirion
  22. Output-Based Allocation and Output-Based Rebates: A survey By Philippe Quirion
  23. Relation between emitted CO2, asset expenditures, produced energy from renewables and energy consumption. Evidence from Bulgaria By Metodieva, Tsvetana Harizanova; Bartos, Hristina Harizanova
  24. Emission Targets and Coalition Options for a Small, Ambitious Country: An Analysis of Welfare Costs and Distributional Impacts for Norway By Hidemichi Yonezawa; Taran Faehn
  25. Will industrial and agricultural subsidies ever be reformed? By Gary Clyde Hufbauer
  26. Electrification and welfare for the marginalized: Evidence from India By Ashish Kumar Sedai; Tooraj Jamasb; Rabindra Nepal; Ray Miller
  27. Nudging consumers toward greener air travel by adding carbon to the equation in online flight search By Sanguinetti, Angela; Amenta, Nina
  28. Environmental and Energy Implications of Meat Consumption Pathways in Sub-Saharan Africa By Giacomo Falchetta; Nicolò Golinucci; Michel Noussan; Matteo Vincenzo Rocco
  29. Carbon Pricing of Basic Materials: Incentives and Risks for the Value Chain and Consumers By Jan Stede; Stefan Pauliuk; Gilang Hardadi; Karsten Neuhoff
  30. The impact of online machine-learning methods on long-term investment decisions and generator utilization in electricity markets By Alexander J. M. Kell; A. Stephen McGough; Matthew Forshaw
  31. The Climate Extended Risk Model (CERM) By Josselin Garnier
  32. Oil and fiscal policy regimes By Hilde C. Bjørnland; Roberto Casarin; Marco Lorusso; Francesco Ravazzolo
  33. On the Effects of COVID-19 Safer-At-Home Policies on Social Distancing, Car Crashes and Pollution By Brodeur, Abel; Cook, Nikolai; Wright, Taylor
  34. Pandemic Meets Pollution: Poor Air Quality Increases Deaths by COVID-19 By Ingo E. Isphording; Nico Pestel
  35. Quantifying the Impact of Economic Sanctions on International Trade in the Energy and Mining Sectors By Serge Shikher; Mario Larch; Constantinos Syropoulos; Yoto V. Yotov
  36. Are autocracies bad for the environment? Global evidence from two centuries of data By Apra Sinha; Ashish Kumar Sedai; Abhishek Kumar; Rabindra Nepal
  37. Modeling the Volatility of Returns on Commodities: An Application and Empirical Comparison of GARCH and SV Models By Jean Pierre Fernández Prada Saucedo; Gabriel Rodríguez
  38. Uncertain prospects for sovereign wealth funds of Gulf countries By Julien Maire; Adnan Mazarei; Edwin M. Truman
  39. A whole-economy carbon price for Europe and how to get there By Ottmar Edenhofer; Mirjam Kosch; Michael Pahle; Georg Zachmann
  40. How do oil shocks transmit through the US economy? Evidence from a large BVAR model with stochastic volatility By Renée Fry-McKibbin; Beili Zhu
  41. Cross-Economy Dynamics in Energy Productivity: Evidence from 47 Economies over the Period 2000–2015 By Liu, Yang; Zhong, Sheng
  42. Household heterogeneity in valuation of heating energy costs By Sahari, Anna
  43. Differentiated green loans By Louis-Gaëtan Giraudet; Anna Petronevich; Laurent Faucheux
  44. Long-term greenhouse gas emissions strategies: a synthesis of best practice By Frank Jotzo; Zeba Anjum; Jorrit Gosens; Subho Banerjee
  45. Health Shocks under Hospital Capacity Constraints: Evidence from Air Pollution in São Paulo, Brazil By Bruna Morais Guidetti; Paula Carvalho Pereda, Edson Roberto Severnini
  46. Globalization, Governance and the Green Economy in Sub-Saharan Africa: Policy Thresholds By Simplice A. Asongu; Joseph Nnanna
  47. Is Environmentalism the Right Strategy to Decarbonize the World? By Marini, Marco A.; Tarola, Ornella; Thisse, Jacques-Francois
  48. Analysis of Forecasting Models in an Electricity Market under Volatility By Uddin, Gazi Salah; Tang, Ou; Sahamkhadam, Maziar; Taghizadeh-Hesary, Farhad; Yahya, Muhammad; Cerin, Pontus; Rehme, Jakob
  49. How to Be a Good Forerunner in Carbon Neutral Trucking By Christina Littlejohn; Stef Proost
  50. On the Water-Energy-Food Nexus: Is there Multivariate Convergence? By Carlo Andrea Bollino; Marzio Galeotti; Axel Pierru
  51. A new approach for evaluation of the economic impact of decentralized electrification projects By Jean-Claude Berthélemy; Mathilde Maurel
  52. Artificial Intelligence and Energy Intensity in China’s Industrial Sector: Effect and Transmission Channel By Liu, Liang; Yang, Kun; Fujii, Hidemichi; Liu, Jun
  53. Patriarchy, pandemics and the gendered resource curse thesis: evidence from petroleum geology By Jubril Animashaun; Ada Wossink
  54. he Welfare Cost of Ignoring the Beta By Christian Gollier
  55. The Impact of the COVID-19 Crisis on Nebraska's Ethanol Industry By Beghin, John C.; Timalsina, Sushant
  56. Urban Sprawl and Air Quality in European Cities: an Empirical Assessment By Federica Cappelli; Gianni Guastella; Stefano Pareglio
  57. The Funding of Important Emerging and Evolving Technologies by the Public and Private Sectors By Richard G. Lipsey

  1. By: Arik Levinson (Department of Economics, Georgetown University); Lutz Sager (McCourt School of Public Policy, Georgetown University)
    Abstract: Regulators attest that tightened energy efficiency standards save consumers money. Efficient light bulbs, appliances, and vehicles cost more upfront but reduce energy expenses by more than enough to compensate. We use survey data on American cars and their drivers to examine whether individual drivers have indeed underinvested in fuel economy, given the gas prices they face and the miles they drive. We find that may be true, but only on average. Some drivers could likely have saved money by spending more upfront for efficient cars. But many others could have saved money purchasing less expensive, less fuel-efficient cars. In fact we find little correlation between individual drivers’ annual fuel expenditures and their fuel economy choices: a driver’s income, sex, age, and education are far more closely associated with their vehicle’s fuel economy. We can rule out several explanations for the disconnect. Rich car purchasers do not seem to consider fuel expenses any more than poorer ones, undermining arguments that borrowing constraints prevent low-income consumers from investing in fuel efficiency. And the disconnect between fuel expenses and vehicle choice holds whether we examine anticipated or realized mileage, ruling out mistaken expectations about future driving as an explanation.
    Keywords: Fuel economy, energy efficiency paradox, CAFE
    JEL: Q48 Q58 R48
    Date: 2021–03–11
  2. By: Heffron, Raphael J. (Asian Development Bank Institute); Marc-Fabian Körner, Marc-Fabian (Asian Development Bank Institute); Sumarno, Theresia (Asian Development Bank Institute); Wagner, Jonathan (Asian Development Bank Institute); Weibelzahl, Martin (Asian Development Bank Institute); Fridgen, Gilbert (Asian Development Bank Institute)
    Abstract: Many countries have a clear policy objective of increasing their share of renewable energy sources (RESs). However, a major impediment to higher RES penetration often lies in the historically grown structures of a country’s electricity sector. In Indonesia, policy makers have relied on cheap fossil fuels and state control to provide the population with access to both reliable and affordable electricity. However, this focus on only two of the three horns of the energy trilemma, namely energy security and energy equity (and not sustainability), may put Indonesia at risk of missing its ambitious RES targets. In this context, a number of small-scale reform attempts to promote RES integration in recent years have proved to be relatively unsuccessful. Like many other countries, Indonesia needs clear policy directions to avoid an unsustainable lock-in into a fossil fuel future. In the last decades, several other countries have successfully restructured their electricity sectors, for example by introducing a wholesale market for electricity under different electricity pricing systems, including nodal, zonal, or uniform pricing. These countries may hold valuable experiences of overcoming the historically grown barriers to successful RES integration through a greater role for market mechanisms. We develop three generic models that allow policy makers to analyze the impact of introducing either a nodal, a zonal, or a uniform pricing system on the three horns of the energy trilemma in their country. We evaluate our model using a simplified network representation of the Indonesian electricity sector. Our results indicate that each of the pricing systems is able to foster specific horns of the energy trilemma. Considering that any major reform intended to improve energy sustainability in Indonesia will only be a success if it also addresses energy security and energy equity, we also discuss our results from the perspective of energy justice and the need to balance the country’s energy trilemma. Ultimately, we illustrate a transformation pathway for a more sustainable and just transition to a low-carbon economy in Indonesia.
    Keywords: electricity pricing system; electricity market liberalization; energy trilemma; energy justice; Indonesia; renewable energy sources
    JEL: L11 L51 Q40 Q41 Q42 Q48
    Date: 2021–01–18
  3. By: Li, Guozhen PhD; Ogden, Joan PhD; Miller, Marshall PhD
    Abstract: Zero-emission vehicles are seen as key technologies for reducing freight- related air pollution and greenhouse gas emissions. California’s 2016 Sustainable Freight Action Plan established a target of 100,000 zero-emission freight vehicles utilizing renewable fuels by 2030. Hydrogen fuel cell vehicles are a promising zero-emission technology, especially for applications where batteries might be difficult to implement, such as heavy-duty trucks, rail, shipping and aviation. However, California’s current hydrogen infrastructure is sparse, with about 25 stations, primarily sited to serve fuel cell passenger vehicles and buses. New infrastructure strategies will be critical for implementing hydrogen freight applications. The researchers analyzed hydrogen infrastructure requirements, focusing on hydrogen fuel cells in freight applications, using a California-specific EXCEL-based scenario model developed under the Sustainable Transportation Energy Pathways program (STEPS) at the Institute of Transportation Studies at UC Davis (Miller et al, 2017). Hydrogen vehicle adoption and demand was estimated for trucks, rail, shipping, and aviation, for a range of scenarios out to 2050.
    Keywords: Engineering, Zero emission vehicles, hydrogen fuels, fuel cells, freight transportation, heavy duty trucks, service stations, demand, mathematical models
    Date: 2021–03–01
  4. By: Guannan He; Dharik S. Mallapragada; Abhishek Bose; Clara F. Heuberger; Emre Gen\c{c}er
    Abstract: There is growing interest in hydrogen (H$_2$) use for long-duration energy storage in a future electric grid dominated by variable renewable energy (VRE) resources. Modelling the role of H$_2$ as grid-scale energy storage, often referred as "power-to-gas-to-power (P2G2P)" overlooks the cost-sharing and emission benefits from using the deployed H$_2$ production and storage assets to also supply H$_2$ for decarbonizing other end-use sectors where direct electrification may be challenged. Here, we develop a generalized modelling framework for co-optimizing energy infrastructure investment and operation across power and transportation sectors and the supply chains of electricity and H$_2$, while accounting for spatio-temporal variations in energy demand and supply. Applying this sector-coupling framework to the U.S. Northeast under a range of technology cost and carbon price scenarios, we find a greater value of power-to-H$_2$ (P2G) versus P2G2P routes. P2G provides flexible demand response, while the extra cost and efficiency penalties of P2G2P routes make the solution less attractive for grid balancing. The effects of sector-coupling are significant, boosting VRE generation by 12-55% with both increased capacities and reduced curtailments and reducing the total system cost (or levelized costs of energy) by 6-14% under 96% decarbonization scenarios. Both the cost savings and emission reductions from sector coupling increase with H$_2$ demand for other end-uses, more than doubling for a 96% decarbonization scenario as H$_2$ demand quadraples. Moreover, we found that the deployment of carbon capture and storage is more cost-effective in the H$_2$ sector because of the lower cost and higher utilization rate. These findings highlight the importance of using an integrated multi-sector energy system framework with multiple energy vectors in planning energy system decarbonization pathways.
    Date: 2021–03
  5. By: Schlund, David (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Schönfisch, Max (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: We perform a model-based analysis of the impact of a renewable hydrogen quota on EU gas and electricity markets. By comparing a scenario in which a renewable hydrogen quota with tradable certificates is imposed on final gas consumption in the sectors of the economy outside the EU ETS with a reference scenario without a quota, we assess price, quantity and welfare effects. Our model simulations show that the hydrogen quota leads to a significant expansion in renewable energy sources (RES) capacity to produce renewable hydrogen and synthetic methane with Power-to-Gas (PtG) technologies. On the electricity market, the price increases substantially, rising by up to 12%—mostly due to increasing emission allowance prices—leading to a higher surplus for power producers. The quota’s primary beneficiaries in the power sector are renewable energy producers. On the gas market, the quota leads to a small decrease in prices (by a maximum of -3%) and gas producer surpluses. Quota obliged gas consumers, mainly households, commercial and small industrial consumers, carry the largest part of the burden associated with the obligation. Overall, the quota leads to the redistribution of welfare from these consumers to RES and PtG producers and a significant decline in total welfare.
    Keywords: Hydrogen; power-to-gas; quota obligation; renewable energy support
    JEL: C61 Q41 Q42 Q48
    Date: 2021–03–11
  6. By: Diaz-Rainey, Ivan (Asian Development Bank Institute); Tulloch, Daniel J. (Asian Development Bank Institute); Ahmed, Iftekhar (Asian Development Bank Institute); McCarten, Matthew (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute)
    Abstract: The European Union (EU) has redefined the energy sphere in Europe over the last 3 decades. Transnational policies targeting liberalization and integration, energy efficiency, renewables, carbon pricing, and energy security have led to major steps forward in terms of a more secure, integrated, and environmentally friendly energy supply. We explore, through the lenses of a paradigm shift and transition pathways, how the Association of Southeast Asian Nations (ASEAN) grouping might advance its own energy trilemma through greater energy cooperation. We provide evidence that ASEAN has lagged behind in energy transition, representing considerable risks in multiple forms ‒ most notably, political and physical climate risks from failing to meet the Paris Agreement targets and the risk of stranded assets if accelerated transition is achieved. However, accelerated transition could come in many forms. By drawing on the EU experience, we argue that an energy policy for ASEAN should explicitly pursue a dual transition pathway strategy to yield the best outcome in terms of the energy trilemma. First, an "ASEAN supergrid" supported by a single energy market and by common carbon pricing would "green" urban and industrial demand. Second, "distributed smart grids" would help reap the social and economic benefits of providing electricity to the rural/remotely located population that have hitherto not had access to electricity. This is a dual transnational and local approach that contrasts with energy transition defined at national level. This interconnected approach should yield security, environmental, and economic dividends.
    Keywords: energy transition; EU; ASEAN; energy policy; carbon pricing; renewable energy; climate risk; smart grids
    JEL: O44 O52 O53 Q40 Q54
    Date: 2021–02–19
  7. By: Danielle Devogelaer
    Abstract: In this report, the Federal Planning Bureau sets out to scrutinise the place hydrogen can occupy in the future Belgian energy system by 2050. In fact, this publication focuses on two divergent evolutions of energy (end) uses: on the one hand, a far-reaching electrification of the final energy consumption, on the other, a sustained and increased use of gas for transport, (industrial) heating and power generation. Different outcomes of the two future visions are reported such as the required investments in infrastructure (interconnections, electrolysers, storage).
    Keywords: Electricity, Electricity demand, Renewable energy sources, Energy modelling, energy transition, Long-term energy projections, Hydrogen
    JEL: C61 L94 Q41 Q42
    Date: 2020–10–21
  8. By: Martin C. Hänsel; Max Franks; Matthias Kalkuhl; Ottmar Edenhofer
    Abstract: We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then investigate analytically how horizontal equity is considered in the social welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal. Our results show that energy-intensive households should receive more redistributive resources than energy-efficient households if and only if social inequality aversion is sufficiently high. We further find that redistribution of carbon tax revenue via household-specific transfers is the first-best policy. Equal per-capita transfers do not suffer from informational problems, but increase mitigation costs by around 15 percent compared to the first-best for unity inequality aversion. Adding renewable energy subsidies or non-linear energy subsidies, reduces mitigation costs further without relying on observability of households’ energy efficiency.
    Keywords: carbon price, horizontal equity, redistribution, renewable energy subsidies, climate policy, just transition
    JEL: H21 H23 Q52 Q54
    Date: 2021
  9. By: Anne de Bortoli
    Abstract: The environmental performance of shared micromobility services compared to private alternatives has never been assessed using an integrated modal Life Cycle Assessment (LCA) relying on field data. Such an LCA is conducted on three shared micromobility services in Paris - bikes, second-generation e-scooters, and e-mopeds - and their private alternatives. Global warming potential, primary energy consumption, and the three endpoint damages are calculated. Sensitivity analyses on vehicle lifespan, shipping, servicing distance, and electricity mix are conducted. Electric micromobility ranks between active modes and personal ICE modes. Its impacts are globally driven by vehicle manufacturing. Ownership does not affect directly the environmental performance: the vehicle lifetime mileage does. Assessing the sole carbon footprint leads to biased environmental decision-making, as it is not correlated to the three damages: multicriteria LCA is mandatory to preserve the planet. Finally, a major change of paradigm is needed to eco-design modern transportation policies.
    Date: 2021–03
  10. By: Martin C. Hänsel (Potsdam Institute for Climate Impact Research); Max Franks (Potsdam Institute for Climate Impact Research, Technische Universität Berlin); Matthias Kalkuhl (Mercator Institute on Global Commons and Climate Change (MCC), University of Potsdam); Ottmar Edenhofer (Potsdam Institute for Climate Impact Research, Mercator Institute on Global Commons and Climate Change (MCC), Technische Universität Berlin)
    Abstract: We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then investigate analytically how horizontal equity is considered in the social welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal. Our results show that energy-intensive households should receive more redistributive resources than energy-efficient households if and only if social inequality aversion is sufficiently high. We further find that redistribution of carbon tax revenue via household-specific transfers is the first-best policy. Equal per-capita transfers do not suffer from informational problems, but increase mitigation costs by around 15 percent compared to the first- best for unity inequality aversion. Adding renewable energy subsidies or non-linear energy subsidies, reduces mitigation costs further without relying on observability of households’ energy efficiency.
    Keywords: carbon price, horizontal equity, redistribution, renewable energy subsidies, climate policy, just transition
    Date: 2021–03
  11. By: Cai, Zhengyu; Yu, Chin-Hsien; Zhu, Chunhui
    Abstract: The Chinese government is actively promoting urbanization to stimulate its economic growth while facing increasingly prominent environmental concerns. The main objective of this research is to assess whether the Chinese government is making efforts to promote cleaner energy demand while pushing for urbanization. This study employs system GMM models to empirically investigate the causal relationship between urbanization and natural gas demand by using a sample of 30 provinces in China over the period 2005–2018. The estimates of the preferred specifications show that government-led urbanization has a positive impact on natural gas demand conditional on total energy use. By attaching natural gas facilities to new structures through the use of administrative power, the government induces natural gas demand while promoting urbanization. Robustness checks indicate that adding more potentially influential factors will not qualitatively change the results from the baseline. A constrained two-step static panel data estimation is used to estimate the depreciation rates of natural gas and of all fuel appliances, suggesting that the promotion of natural gas demand provides a relatively economical way to balance the trade-off between economic growth and the reduction of emissions. The empirical results also show that the dynamic model outperforms its static counterpart in predictions. Based on the results, policy recommendations are made towards the goals of the Fourteenth Five-Year Plan for the National Economic and Social Development of China.
    Keywords: Natural gas,urbanization,dynamic panel model,China
    JEL: Q41 Q47 Q48 R11 R12
    Date: 2021
  12. By: Maria Alice Moz-Christofoletti; Paula Carvalho Pereda
    Abstract: Through its NDC, Brazil pledged to reduce its GHG emissions by 43% below 2005 levels in 2030, respectively. Carbon pricing could play a key role in meeting this objective. However, a range of issues can emerge when introducing it. Among these issues, the distributional impact has been frequently highlighted as an obstacle to the public acceptance of such a mitigation policy. This paper examines the short-run welfare and emission effects of an economy-wide carbon tax on Brazilian households. The distributional impact is examined by estimating the tax burden relative to annual expenditures and changes in total GHG emissions across income levels, using tax rates consistent with the Paris Agreement and considering a lump-sum rebate that keeps the government revenue neutral. For this, we calculate energy-related GHG emissions coefficients from fossil fuel burning for the whole household consumption basket, and price and expenditure elasticities which account for the zero-expenditure and underdeclaration problems. Our results indicate that the incidence of the carbon tax is effective in reducing emissions in the short run, but imposes welfare losses, especially on the poor. The consideration of compensation mechanisms is critical when designing this type of environmental tax, specially in the context of a highly complex tax-system.
    Keywords: Carbon Taxation; Censored QUAIDS; Hybrid Input Output
    JEL: H23 K32 O13
    Date: 2021–03–12
  13. By: Larry S. Karp; Christian P. Traeger; Christian Träger
    Abstract: We introduce a “smart” cap and trade system that eliminates the welfare costs of asymmetric information (“uncertainty”). This cap responds endogenously to technology or macroeconomic shocks, relying on the market price of certificates to aggregate information. It allows policy makers to modify existing institutions to achieve more efficient emission reductions. The paper also shows that the efficient carbon price is more sensitive to technological innovations than usually assumed. The lasting impact and slow diffusion of these innovations typically make the optimal carbon price a much steeper function of emissions than suggested by the social cost of carbon.
    Keywords: pollution, climate change, taxes, quantities, regulation, smart cap, uncertainty, technology diffusion, dynamic programming, integrated assessment, DICE
    JEL: Q00 Q50 H20 D80
    Date: 2021
  14. By: Brian C. Prest; James H. Stock
    Abstract: In 2019, production on federal lands comprised 40% of domestic coal, 22% of domestic oil, and 12% of domestic natural gas production. Currently, the federal fossil fuel leasing program does not consider the climate costs of burning federal fossil fuels. One way to do so is through a climate royalty surcharge in addition to the current royalty rate, set in 1920, of 12.5% (18.75% offshore). We consider determining this surcharge by maximizing revenue, maximizing welfare, or setting royalties to achieve 80% of the emissions reductions of an outright leasing ban. Using the model in Prest (2021), we calculate the resulting surcharges and their implications. We estimate that all three approaches would lead to meaningful declines in global emissions, and the first two would substantially increase royalty receipts, which are split with the state of production. For example, we estimate that choosing a common royalty rate to maximize revenues yields a climate royalty surcharge of 39%, increases annual royalty receipts by $6.2B, and reduces global emissions by 37 to 63 MMton CO2e/year.
    JEL: H23 Q35 Q38 Q54 Q58
    Date: 2021–03
  15. By: Sanguinetti, Angela; Outcault, Sarah; Alston-Stepnitz, Eli; Moezzi, Mithra; Ingle, Aaron
    Abstract: Solar water heating provides domestic hot water with lower greenhouse gas emissions compared to more typical natural-gas water heating. Solar water heating has a long history, particularly in places where the climate is favorable, such as California where state-backed incentive programs have been successful in creating small bursts of adoption. However, widespread adoption of solar water heating has not occurred in California despite these conditions. This research surveyed 227 single-family households with solar water heating across the state of California to understand their motivations and experiences, and draw implications regarding barriers to adoption. The survey explored households’ experiences across five stages of adoption, as outlined in Rogers’ Diffusion of Innovation theory: Knowledge, Persuasion, Decision, Implementation, and Confirmation. Findings revealed challenges at each stage. Most notably, prevalent disappointment in lower-than-expected energy and bill savings (31%) and high rates of technical problems (41%) appear to be the most significant issues.
    Keywords: Social and Behavioral Sciences, solar water heating, residential water heating, household water, consumer adoption, barriers
    Date: 2021–06–01
  16. By: Gertjan Cooreman; Jean-Maurice Frère; Tim Goedemé; Petra Zsuzsa Lévay; Josefine Vanhille; Gerlinde Verbist
    Abstract: This Working Paper examines which socioeconomic household characteristics determine greenhouse gas emissions in Belgium. The analysis is based on the PEACH2AIR database, which links the air pollution data with consumption expenditure of Belgian households as recorded in the 2014 Household Budget Survey.
    Keywords: Sustainable development, Household consumption, Environmental economic accounts
    JEL: C67 C81 D12 Q53 Q56
    Date: 2019–09–05
  17. By: Russell McKenna; Stefan Pfenninger; Heidi Heinrichs; Johannes Schmidt; Iain Staffell; Katharina Gruber; Andrea N. Hahmann; Malte Jansen; Michael Klingler; Natascha Landwehr; Xiaoli Guo Lars\'en; Johan Lilliestam; Bryn Pickering; Martin Robinius; Tim Tr\"ondle; Olga Turkovska; Sebastian Wehrle; Jann Michael Weinand; Jan Wohland
    Abstract: The rapid uptake of renewable energy technologies in recent decades has increased the demand of energy researchers, policymakers and energy planners for reliable data on the spatial distribution of their costs and potentials. For onshore wind energy this has resulted in an active research field devoted to analysing these resources for regions, countries or globally. A particular thread of this research attempts to go beyond purely technical or spatial restrictions and determine the realistic, feasible or actual potential for wind energy. Motivated by these developments, this paper reviews methods and assumptions for analysing geographical, technical, economic and, finally, feasible onshore wind potentials. We address each of these potentials in turn, including aspects related to land eligibility criteria, energy meteorology, and technical developments relating to wind turbine characteristics such as power density, specific rotor power and spacing aspects. Economic aspects of potential assessments are central to future deployment and are discussed on a turbine and system level covering levelized costs depending on locations, and the system integration costs which are often overlooked in such analyses. Non-technical approaches include scenicness assessments of the landscape, expert and stakeholder workshops, willingness to pay / accept elicitations and socioeconomic cost-benefit studies. For each of these different potential estimations, the state of the art is critically discussed, with an attempt to derive best practice recommendations and highlight avenues for future research.
    Date: 2021–03
  18. By: Cavalcanti, T.; Hasna, Z.; Santos, C.
    Abstract: We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its original Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. In the US, workers with a comparative advantage in dirty energy sectors who do not reallocate suffer a welfare loss 12 times higher than workers in non-dirty sectors, but constitute less than 1% of the labor force.
    Keywords: Climate change, carbon taxes, worker heterogeneity, labor reallocation
    JEL: E13 H23 J24
    Date: 2021–03–09
  19. By: Cardona, M; Gallego, J; Garcia, J; Franco, J
    Abstract: Exploiting the implementation of a Prepaid Electricity Program in the region of Antioquia (Colombia), we estimate the impact that switching to a prepaid program has on users’ energy consumption behavior. In particular, we focus the analysis on those that are more vulnerable from a socio-economic perspective. The results show that the new metering scheme and the information provision is associated with a decline in electricity consumption.This scheme allow users to improve their consumption paths, while their access to public electricity services is guaranteed, minimizing disconnection risks and the associated costs.
    Keywords: Prepaid schemes; In-home displays; Electricity consumption; Smart meters; Energy efficiency
    JEL: L94
    Date: 2020–06–01
  20. By: Nicolas Arregui; Ian Parry
    Abstract: The UK has pledged to cut greenhouse gases 68 percent below 1990 levels by 2030, to be emissions neutral by 2050, and to phase out internal combustion engine vehicles by 2030. Much progress has been made, but fully achieving these ambitious objectives with the current policy framework will be challenging as it involves multiple and overlapping pricing schemes with significant sectoral differences in carbon prices and may be difficult to scale up on political and administrative grounds. This paper discusses an alternative framework consisting of: (i) a comprehensive carbon price (ideally a tax) rising to at least £60 (US $75) per ton by 2030; and (ii) reinforcing sectoral policies, most importantly feebates for the transport, industrial, and building sectors. This framework could implement mitigation targets, while limiting burdens on households and firms to enhance acceptability, and still raise revenues of 0.8 percent of GDP in 2030. The UK could also leverage its COP26 presidency to promote dialogue on international carbon price floors and pricing of international transport emissions.
    Keywords: climate change, net-zero, UK climate mitigation, carbon pricing, feebate, international carbon price floor
    JEL: Q48 Q54 Q58 H23
    Date: 2021
  21. By: Philippe Quirion (CNRS, CIRED)
    Abstract: Output-based refunding consists in distributing the value of taxes on pollution, or that of tradable emission allowances, to operators of emitting facilities, in proportion of their current production level. It is called output-based rebating in the case of taxes and output-based allocation in the case of tradable emission allowances. This practice is widespread, especially in climate policies, and has important economic consequences. We analyse these consequences, first in a deterministic setting and then accounting for uncertainty. While output-based refunding is detrimental to welfare in a deterministic, closed economy without prior distortions, it also provides some benefits. In particular, it is an efficient way to limit carbon leakage. Then, we present the implementation of output-based allocation in the European Union, California, China, New-Zealand and Alberta, and discuss whether it should be maintained or phased out in the coming decades.
    Keywords: output-based allocation, leakage, output-based rebate, output-based refunding, Emission trading
    JEL: Q58 Q52
    Date: 2021–03
  22. By: Philippe Quirion (CNRS, CIRED)
    Abstract: Output-based refunding consists in distributing the value of taxes on pollution, or that of tradable emission allowances, to operators of emitting facilities, in proportion of their current production level. It is called output-based rebating in the case of taxes and output-based allocation in the case of tradable emission allowances. This practice is widespread, especially in climate policies, and has important economic consequences. We analyse these consequences, first in a deterministic setting and then accounting for uncertainty. While output-based refunding is detrimental to welfare in a deterministic, closed economy without prior distortions, it also provides some benefits. In particular, it is an efficient way to limit carbon leakage. Then, we present the implementation of output-based allocation in the European Union, California, China, New-Zealand and Alberta, and discuss whether it should be maintained or phased out in the coming decades.
    Keywords: output-based allocation, leakage, output-based rebate, output-based refunding, Emission trading
    JEL: Q58 Q52
    Date: 2021–03
  23. By: Metodieva, Tsvetana Harizanova; Bartos, Hristina Harizanova
    Abstract: The paper explores the relation between emitted CO2 in the atmosphere, asset expenditure, produced energy from renewables and energy consumption. ARDL model was developed on the basis of data for Bulgaria (2000 – 2018). As a whole the increase in asset expenditures leads to increase in emitted carbon dioxide in the short-run and in the long-run. The increase in the produced energy from renewables leads to decrease in the emitted carbon dioxide in a long-run, while in the short-run the relation is insignificant. In a short-run the energy consumption and emitted carbon dioxide are in a positive relation: the increase in energy consumption leads to increase in the emitted pollutant.
    Keywords: ARDL model, emitted CO2, asset expenditures, produced energy from renewables, energy consumption.
    JEL: C32 Q50
    Date: 2020–11–19
  24. By: Hidemichi Yonezawa; Taran Faehn
    Abstract: We theoretically and numerically analyse the impacts for a small, open country with carbon abatement ambitions of joining a coalition with allowance trading. Besides welfare impacts for both the coalition and the small, open economy joining the coalition, we scrutinise how the studied policy options differ with respect to their distributional impacts across domestic income groups. Our example is the EU 2030 policies and Norway’s linking to it. In spite of theoretical ambiguity, the findings suggest that the tighter the links with the EU, the lower the abatement costs for Norway. The distributional profile of the welfare costs tends to be progressive regardless of the choice of linking options; however, the less progressive, the lower the overall welfare cost. This indicates a trade-off between efficiency and distribution concerns. A national cap-and-trade system without linking to the EU is the least cost-effective option for Norway but also the most progressive as the higher income deciles face lower capital return and wages.
    Keywords: carbon policies, distributional impact, Emission Trading System, Effort Sharing Regulation, Computable General Equilibrium model
    JEL: C68 Q43 Q48 Q54 Q58
    Date: 2021
  25. By: Gary Clyde Hufbauer (Peterson Institute for International Economics)
    Abstract: One economic argument for government subsidies is that they are necessary to compensate firms and industries for benefits they provide to society at large but cannot capture in the prices they charge for goods or services. For example, subsidies to renewable energy are defended because renewable energy limits carbon emissions. When a major economy subsidizes extensively, however, its trading partners are drawn into the game, with losses all around. As the prisoner’s dilemma suggests, a better outcome would entail mutual restraint. But the goal of mutual restraint is no less difficult in international trade than it is in international arms control. Both the European Union and the US federal system try, in different ways, to regulate industrial subsidies. Hufbauer examines efforts to contain unjustifiable subsidies and proposes modest improvements, bearing in mind that as countries struggle to overcome the global economic downturn resulting from the COVID-19 pandemic, there is little appetite for restoring a free market economy—one in which firms compete with minimum government assistance or regulation. Selective upgrading of the rulebook may nevertheless be possible.
    Date: 2021–03
  26. By: Ashish Kumar Sedai; Tooraj Jamasb; Rabindra Nepal; Ray Miller
    Abstract: Uneven electrification can be a source of welfare disparity. Given the recent progress of electrification in India, we analyze the differences in access and reliability of electricity, and its impact on household welfare for marginalized and dominant social groups by caste and religion. We carry out longitudinal analysis from a national survey, 2005-2012, using OLS, fixed effects, and panel instrumental variable regressions. Our analysis shows that marginalized groups (Hindu Schedule Caste/Schedule Tribe and Muslims) had higher likelihood of electricity access compared to the dominant groups (Hindu forward castes and Other Backward Caste). In terms of electricity reliability, marginalized groups lost less electricity hours in a day as compared to dominant groups. Results showed that electrification enabled marginalized households to increase their consumption, assets and move out of poverty; the effects were more pronounced in rural areas. The findings are robust to alternative ways of measuring consumption, and use of more recent data set, 2015-2018. We posit that electrification improved the livelihoods of marginalized groups. However, it did not reduce absolute disparities among social groups.
    Keywords: Electricity access, Electricity reliability, Instrumental variables, Marginalized groups, Welfare
    JEL: D12 D31 E12 I32
    Date: 2021–02
  27. By: Sanguinetti, Angela; Amenta, Nina
    Abstract: This study explores the potential to promote lower-emissions air travel by providing consumers with information about the carbon emissions of alternative flight choices in the context of online flight search and booking. We surveyed over 450 employees of the University of California, Davis, asking them to choose among hypothetical flight options for university-related business trips. Emissions estimates for flight alternatives were prominently displayed alongside cost, layovers and airport, and the lowest-emissions flight was labeled “Greenest Flight”. We found an impressive rate of willingness to pay for lower-emissions flights: around $200/ton of CO2E saved, a magnitude higher than that seen in carbon offsets programs. In a second step of analysis, we estimated the carbon and cost impacts if the university were to adopt a flight-search interface that prioritizes carbon emissions information and displays alternatives from multiple regional airports in their employee travel-booking portal. We estimated potential annual savings of 79 tons of CO2E, while reducing airfare costs by $56,000, mainly due to an increased willingness of travelers to take advantage of cheaper nonstop (lower-emissions) flights from a more distant airport in the region over indirect flights from their preferred airport for medium-distance flights. Institutionalizing this “nudge” within organizations with large travel budgets could have an industry-wide impact in aviation.
    Keywords: Social and Behavioral Sciences, Carbon Emissions, Air Travel, Flight Search, Interface Design, Online Travel Booking
    Date: 2021–01–01
  28. By: Giacomo Falchetta (Fondazione Eni Enrico Mattei (FEEM), Free University of Bozen-Bolzano); Nicolò Golinucci (Fondazione Eni Enrico Mattei (FEEM), Politecnico di Milano); Michel Noussan (Fondazione Eni Enrico Mattei (FEEM)); Matteo Vincenzo Rocco (Politecnico di Milano)
    Abstract: In sub-Saharan Africa (SSA) diets are largely based on cereal or root staple crops. Together with socio-cultural change, economic and demographic growth could boost the demand for meat, with significant environmental repercussions. We model meat consumption pathways to 2050 for SSA based on several scenarios calibrated on historical demand drivers. To assess the consequent environmental impact, we adopt an environmentally-extended input-output (EEIO) framework and apply it on the EXIOBASE 3.3 hybrid tables. We find that, depending on the interplay of resources efficiency and demand growth, by 2050 global greenhouse gases emissions could grow by 1.4 [0.9-1.9] Gt CO2e/yr (~175% of current regional agriculture-related emissions), cropping and grazing-related land may cover additional 15 [12.5-21] · 106 km2 (one quarter of today’s global agricultural land), blue water consumption could rise by 36 [29-47] Gm3 /yr (nearly doubling the current regional agricultural consumption), the eutrophication potential could grow by 7.6 [4.9-9.5] t PO4e/yr and additional 0.9 [0.5-1.4] EJ/yr of fossil fuels and 49 [32-73] TWh/yr of electricity may be consumed. These results suggest that – in the absence of drastic resource efficiency or technological improvements – meat demand in SSA is bound to become a major sustainability challenge. We show that a partial substitution of the protein intake with plant-based alternatives carries significant potential for mitigating these impacts. The policies affecting farming practices and dietary choices will thus have a significant impact on regional and global environmental flows.
    Keywords: Meat Consumption, Economic Development, Environmental Impact Assessment, Environmentally Extended Input-output Analysis, Sub-Saharan Africa
    JEL: O13 Q01 Q21 Q56
    Date: 2021–03
  29. By: Jan Stede; Stefan Pauliuk; Gilang Hardadi; Karsten Neuhoff
    Abstract: For the European Union to realise its ambition of carbon neutrality, emissions from basic material production need to be reduced through low-carbon production processes, material efficiency and substitution, as well as enhanced recycling. Different reform options for the EU ETS are discussed that ensure a consistent carbon price incentive for all these mitigation options, while avoiding the risk of carbon leakage. This paper offers a first quantification of potential carbon leakage risks, distributional implications and additional revenues associated with different mechanisms: an import- only border carbon adjustment (BCA), a symmetric BCA, and an excise for embodied carbon emissions at a fixed benchmark level in combination with continued free allocation. We estimate the product-level carbon intensities for about 4,400 commodity groups, including basic materials, material products, and manufactured goods and compute implied price changes and cost increases relative to gross value added to assess the scale of carbon leakage risks.
    Keywords: emissions trading, border carbon adjustment (BCA), excise duty, carbon intensity, carbon leakage, distributional effects, fiscal revenues
    JEL: F18 C67
    Date: 2021
  30. By: Alexander J. M. Kell; A. Stephen McGough; Matthew Forshaw
    Abstract: Electricity supply must be matched with demand at all times. This helps reduce the chances of issues such as load frequency control and the chances of electricity blackouts. To gain a better understanding of the load that is likely to be required over the next 24h, estimations under uncertainty are needed. This is especially difficult in a decentralized electricity market with many micro-producers which are not under central control. In this paper, we investigate the impact of eleven offline learning and five online learning algorithms to predict the electricity demand profile over the next 24h. We achieve this through integration within the long-term agent-based model, ElecSim. Through the prediction of electricity demand profile over the next 24h, we can simulate the predictions made for a day-ahead market. Once we have made these predictions, we sample from the residual distributions and perturb the electricity market demand using the simulation, ElecSim. This enables us to understand the impact of errors on the long-term dynamics of a decentralized electricity market. We show we can reduce the mean absolute error by 30% using an online algorithm when compared to the best offline algorithm, whilst reducing the required tendered national grid reserve required. This reduction in national grid reserves leads to savings in costs and emissions. We also show that large errors in prediction accuracy have a disproportionate error on investments made over a 17-year time frame, as well as electricity mix.
    Date: 2021–03
  31. By: Josselin Garnier
    Abstract: This paper is directed to the financial community and focuses on the financial risks associated with climate change. It, specifically, addresses the estimate of climate risk embedded within a bank loan portfolio. During the 21st century, man-made carbon dioxide emissions in the atmosphere will raise global temperatures, resulting in severe and unpredictable physical damage across the globe. Another uncertainty associated with climate, known as the energy transition risk, comes from the unpredictable pace of political and legal actions to limit its impact. The Climate Extended Risk Model (CERM) adapts well known credit risk models. It proposes a method to calculate incremental credit losses on a loan portfolio that are rooted into physical and transition risks. The document provides detailed description of the model hypothesis and steps. This work was initiated by the association Green RWA (Risk Weighted Assets). It was written in collaboration with Jean-Baptiste Gaudemet, Anne Gruz, and Olivier Vinciguerra (, who contributed their financial and risk expertise, taking care of its application to a pilot-portfolio. It extends the model proposed in a first white paper published by Green RWA (
    Date: 2021–03
  32. By: Hilde C. Bjørnland; Roberto Casarin; Marco Lorusso; Francesco Ravazzolo
    Abstract: We analyse fiscal policy responses in oil rich countries by developing a Bayesian regimes-witching panel country analysis. We use parameter restrictions to identify procyclical and countercyclical fiscal policy regimes over the sample in 23 OECD and non-OECD oil producing countries. We find that fiscal policy is switching between pro- and countercyclial regimes multiple times. Furthermore, for all countries, fiscal policy is more volatile in the countercyclical regime than in the procyclical regime. In the procyclical regime, however, fiscal policy is systematically more volatile and excessive in the non-OECD (including OPEC) countries than in the OECD countries. This suggests OECD countries are able to smooth spending and save more than the non-OECD countries. Our results emphasize that it is both possible and important to separate a procyclical regime from a countercyclical regime when analysing fiscal policy. Doing so, we have encountered new facts about fiscal policy in oil rich countries.
    Keywords: Dynamic Panel Model, Mixed-Frequency, Markov Switching, Bayesian Inference, Fiscal Policy, Resource Rich Countries, Oil Prices
    JEL: C13 C14 C51 C53 E62 Q43
    Date: 2021–01
  33. By: Brodeur, Abel; Cook, Nikolai; Wright, Taylor
    Abstract: This paper investigates the impacts of COVID-19 safer-at-home polices on collisions and pollution. We find that statewide safer-at-home policies lead to a 20% reduction in vehicular collisions and that the effect is entirely driven by less severe collisions. For pollution, we find particulate matter concentration levels approximately 1.5µg/m3 lower during the period of a safer-at-home order, representing a 25% reduction. We document a similar reduction in air pollution following the implementation of similar policies in Europe. We calculate that as of the end of June 2020, the benefits from avoided car collisions in the U.S. were approximately $16 billion while the benefits from reduced air pollution could be as high as $13 billion.
    Keywords: COVID-19,safer-at-home,lockdowns,air pollution,car crashes
    JEL: P48 Q53 Q58
    Date: 2021
  34. By: Ingo E. Isphording; Nico Pestel
    Abstract: We study the impact of short-term exposure to ambient air pollution on the spread and severity of COVID-19 in Germany. We combine data on county-by-day level on confirmed cases and deaths with information on local air quality and weather conditions. Following Deryugina (2019) we instrument short-term variation in local concentrations of particulate matter (PM10) by region-specific daily variation in wind directions. We find significant positive effects of PM10 concentration on death numbers from four days before to ten days after the onset of symptoms. Specifically, for elderly patients (80+ years) an increase in ambient PM10 concentration by one standard deviation between two and four days after developing symptoms increases deaths by 19 percent of a standard deviation. In addition, higher levels air pollution raise the number of confirmed cases of COVID-19 for all age groups. The timing of effects surrounding the onset of illness suggests that air pollution affects the severity of already realized infections. We discuss implications of our results for immediate policy levers to reduce the exposure and level of ambient air pollution, as well as for cost-benefit considerations of policies aiming at sustainable longer-term reductions of pollution levels.
    Keywords: COVID-19, health, air pollution, Germany
    JEL: I12 I18 Q53
    Date: 2021–01
  35. By: Serge Shikher; Mario Larch; Constantinos Syropoulos; Yoto V. Yotov
    Abstract: Capitalizing on the latest developments in the gravity literature, we utilize two new datasets on sanctions and trade to study the impact of economic sanctions on international trade in the mining sector, which includes oil and natural gas. We demonstrate that the gravity equation is well suited to model bilateral trade in mining and find that sanctions have been effective in impeding mining trade. Our analysis reveals that complete trade sanctions have reduced bilateral mining trade by about 44 percent on average. We also document the presence of significant heterogeneity in the effects of sanctions on mining trade across mining industries and across sanction episodes/cases, depending on the sanctioning and sanctioned countries, the type of sanctions used, and the direction of trade flows. We take a close look at the impact of recent sanctions on Iran and Russia.
    Keywords: structural gravity, sanctions, mining, oil, trade effects
    JEL: F10 F13 F14 F50 F51 H50 N40
    Date: 2021
  36. By: Apra Sinha; Ashish Kumar Sedai; Abhishek Kumar; Rabindra Nepal
    Abstract: This study examines the effects of the rule of law on carbon-dioxide emissions using a large sample of countries for over a century. In principle, the turning point of the Environmental Kuznets Curve (EKC) is compared for a range of countries lying between autocracy and democracy. Using decadal data for 220 years (1790-2010) and 150 countries, we use country fixed effects estimation technique to quantify the absolute and interactive effects of autocracy-democracy index on carbon-dioxide emissions. Results show that democracies emit less carbon-dioxide for one unit increase in per-capita income, leading to lower turning point and thus lower emission. The turning point in case of autocracies are more than twice of the turning point for democracies. Electoral autocracies have lower turning point in comparison to closed autocracies. Point estimates are robust to alternative estimation techniques and are not likely to be influenced by omitted variable biases. Strengthening rule enforcement and improving access to justice can be critical in decreasing carbon-dioxide emissions.
    Keywords: EKC, Turning Point, Rule of law, Democracy, Autocracy
    JEL: Q50 Q53 Q58
    Date: 2021–02
  37. By: Jean Pierre Fernández Prada Saucedo (Pontificia Universidad Católica del Perú); Gabriel Rodríguez (Departamento de Economía de la Pontificia Universidad Católica del Perú / Fiscal Council of Peru)
    Abstract: Seven GARCH and stochastic volatility (SV) models are used to model and compare empirically the volatility of returns on four commodities: gold, copper, oil, and natural gas. The results show evidence of fat tails and random jumps created by supply/demand imbalances, international instability episodes, geopolitical tensions, and market speculation, among other factors. We also find evidence of a leverage effect in oil and copper, resulting from their dependence on world economic activity; and of an inverse leverage effect in gold and natural gas, consistent with the formerís role as safe asset and with uncertainty about the latterís future supply. Additionally, in most cases there is no evidence of an impact of volatility on the mean. Finally, we find that the best-performing return volatility models are GARCH-t for gold, SV-t for copper and oil, and SV with leverage effects (SV-L) for natural gas. JEL Classification-JEL: : C11, C52, G15.
    Keywords: Returns, Volatility, GARCH, Stochastic Volatility, Commodities, Bayesian Estimation, Fat Tails, Jumps, Leverage.
    Date: 2020
  38. By: Julien Maire (Peterson Institute for International Economics); Adnan Mazarei (Peterson Institute for International Economics); Edwin M. Truman (Peterson Institute for International Economics)
    Abstract: Among the best-known sovereign wealth funds (SWFs)—government-owned or controlled investment vehicles—are those funded by hydrocarbon revenues in the member economies of the Gulf Cooperation Council (GCC), which comprises all the Arab countries in the Persian Gulf except Iraq, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This Policy Brief compares the GCC SWFs with each other and with other funds in terms of their transparency and accountability on the fifth SWF scoreboard, available here. Several factors, including the decline in oil prices in recent years, have slowed the growth of the GCC’s SWFs. This slower growth could further diminish their governance and transparency standards, which are already weaker than those of other SWFs. Efforts to improve their governance and accountability will be important to garner public support for these SWFs.
    Date: 2021–02
  39. By: Ottmar Edenhofer; Mirjam Kosch; Michael Pahle; Georg Zachmann
    Abstract: The European Union’s plan for climate neutrality by 2050 reopens the question of the role carbon pricing can and should play. Carbon pricing should not – and ultimately cannot – only be an enforcement tool or backstop that ensures targets are met, while the heavy-lifting of decarbonisation comes from directed technological change policies. Instead, a technologyneutral carbon price must become the main element, providing signals for decarbonised operations, investment and...
    Date: 2021–03
  40. By: Renée Fry-McKibbin; Beili Zhu
    Abstract: This paper employs a large BVAR model with common stochastic volatility to examine the effects of oil supply shocks, global oil demand shocks and precautionary oil shocks on 17 U.S. macroeconomic and financial market variables from 1986Q1 to 2019Q2. Generalized impulse response functions calculated using stochastic volatility provide a time-varying account of the impacts of the shocks occurring in each quarter. We also compute standard impulse response functions for shocks of the sizes evident in 2019Q2 and 2008Q4. The magnitudes of the generalized impulse response functions vary over time, but the fluctuations are not particularly different except during the global financial crisis. All oil shocks have permanent inflationary effects; there is evidence of long-run adverse effects on several macroeconomic variables because of global oil demand shocks despite rising GDP, and all oil shocks negatively affect the U.S. stock and currency markets in the long term, but the effects on the bond market differ.
    Keywords: Generalised impulse responses, Sign restrictions
    JEL: C32 E31 E32
    Date: 2021–01
  41. By: Liu, Yang (Asian Development Bank Institute); Zhong, Sheng (Asian Development Bank Institute)
    Abstract: We investigate the long-run cross-economy dynamics in energy productivity across the world. We construct a data set comprising value-added and energy use data on 18 productive sectors in 47 economies over the period 2000–2015. First, we analyze the cross-economy distribution of energy productivity. Compared with 2000, this distribution shifted more toward the world average level in 2015. By using an index decomposition approach, we disentangle energy efficiency effect and economic structure effect as key determinants of the overall energy productivity improvement. Our results show that energy productivity progress is to a large extent driven by technological change but offset by economic structural change. Second, we explore the long-run distribution of energy productivity. Diverse patterns of energy productivity changes across these economies contradict the implicit assumption of standard convergence analysis. To address this issue, we adopt the Markov chain transition matrix. In a long-run steady state, around 64% of sample economies upgrade toward the upper end of the whole distribution, with their energy productivity performing better than the world average. Around 18% of sample economies remain at a level lower than the world average. The results suggest the persistent gap in energy efficiency across economies.
    Keywords: energy productivity; decomposition; transition matrix; convergence
    JEL: O13 Q01 Q56
    Date: 2021–01–29
  42. By: Sahari, Anna
    Abstract: This paper studies consumer heterogeneity in the valuation of lifetime heating energy costs. The valuation is expressed as the willingness to pay higher upfront costs to obtain savings over the lifetime of the heating system. The analysis relies on administrative register data on new residential houses built by private persons in Finland during 2010-2011. The data allow estimating the WTP as a function of several observable household characteristics. The median WTP in the estimation sample is e8, with a range of e2 to e15. Households with higher income and education are estimated to have higher WTP. Other characteristics that impact the WTP are household debt, family type and size, current dwelling status and previous experience of building a house.
    Keywords: Willingness to pay, Energy efficiency, Consumer heterogeneity, Environment, energy and climate policy, D12, Q41,
    Date: 2021
  43. By: Louis-Gaëtan Giraudet (ENPC - École des Ponts ParisTech, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Université Paris-Saclay - AgroParisTech - EHESS - École des hautes études en sciences sociales - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Anna Petronevich (Banque de France - Banque de France - Banque de France); Laurent Faucheux (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Université Paris-Saclay - AgroParisTech - EHESS - École des hautes études en sciences sociales - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Scaling up home energy retrofits requires that associated loans be priced efficiently. Using a unique dataset of posted loan prices scraped from online simulators made available by French credit institutions, we examine the differentiation of interest rates in relation to project risk. Crucially, our data are immune from sorting bias based on borrower characteristics. We find that greener, arguably less risky, automobile projects carry lower interest rates, but greener home retrofits do not. On the other hand, conventional automobiles carry lower interest rates than do conventional home retrofits, despite arguably similar risk. Our results are robust to a range of robustness checks, including placebo tests. They together suggest that lenders use underlying assets to screen borrower's unobserved willingness to pay, which can cause under-investment in home energy retrofits. We thereby point to a new form of the energy efficiency gap. This has important policy implications in that it can explain low uptake of zero-interest green loan programs.
    Keywords: personal loan,home energy retrofit,screening,data scraping,online prices,energy efficiency gap
    Date: 2021–02
  44. By: Frank Jotzo (Crawford School of Public Policy, Australian National University); Zeba Anjum (Crawford School of Public Policy, Australian National University); Jorrit Gosens (Crawford School of Public Policy, Australian National University); Subho Banerjee (Crawford School of Public Policy, Australian National University)
    Abstract: Long-term strategies (LTS) to cut greenhouse gas emissions are important tools for understanding possible pathways towards long-term emissions goals and their implications. High-quality LTS can guide decision-making in policy, investment and society, and provide a comprehensive foundation of evidence for broader public debate. Some countries have submitted or are preparing official LTS to the Paris Agreement process, others have strategies to underpin long-term emissions goals, prepared either by governments or other bodies. They take a range of forms, include a variety of elements, and use different processes. This paper provides a conceptual synthesis and empirical analysis of LTS, and identifies elements of best practice in process, design and implementation. It illustrates these best-practice elements by drawing on examples of LTS and LTS-type studies and processes. Taken together, the best-practice elements can be considered a benchmark for national or sub-national LTS frameworks.
    Date: 2021–02
  45. By: Bruna Morais Guidetti; Paula Carvalho Pereda, Edson Roberto Severnini
    Abstract: When a health shock hits a location, the healthcare infrastructure needs to be adjusted to meet the increased demand. is may be a challenge in developing countries because of limited hospital capacity. In this study, we examine the consequences of health shocks induced by air pollution in a megacity in the developing world: São Paulo, Brazil. Using daily data from 2015-2017, and an instrumental variable approach based on wind speed, we provide evidence that exposure to particulate matter (PM10) causes an increase in pediatric hospitalizations for respiratory diseases, which in turn leads to a decrease in hospital admissions for elective care – phimosis surgery and epilepsy-related procedures such as video-EEG (electroencephalograph) monitoring. Importantly, emergency procedures such as appendectomy and bone fracture repair are not affected. While strained Sao Paulo hospitals seem to absorb the increased demand induced by poor air quality, our results imply that the common practice of using health outcomes unrelated to pollution as “placebo tests'' in studies on the effects of air pollution might be inadequate in settings with limited healthcare infrastructure. This is often the case in developing countries, where severe pollution is also ubiquitous, but also happens in deprived areas in the developed world.
    Keywords: Air Pollution; Health Outcomes; Hospitalization for Respiratory Diseases and Other Causes; Healthcare Infrastructure; Hospital Capacity Constraint
    JEL: I15 Q53 Q56 O13
    Date: 2021–03–12
  46. By: Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: This study assesses how globalization modulates the effect of governance on CO2 emissions in sub-Saharan African countries. The empirical evidence is based on Generalized Method of Moments. The minimum level (or negative threshold) of FDI required for it to interact with political stability and contribute towards the green economy is 45% of GDP, while 90% of GDP is the maximum level (or positive threshold) required for trade to complement “voice & accountability†in mitigating CO2 emissions. 76 % of GDP and 80 % of GDP are respectively negative trade thresholds for government effectiveness and economic governance. The corresponding negative trade thresholds for the rule of law, corruption-control and institutional governance are respectively, 230% of GDP, 63.5% of GDP and 106.5% of GDP. Actionable openness policy thresholds are provided to inform policy makers on how governance interacts with globalization to promote the green economy.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2021–01
  47. By: Marini, Marco A.; Tarola, Ornella; Thisse, Jacques-Francois
    Abstract: We study how the supply of environmentalism, which is defined by psychic benefits (costs) associated with the purchase of high-environmental (low-environmental) qualities, affects the way firms choose their prices and products and the ensuing consequences for the global level of pollution. Contrary to general belief, a high supply of environmentalism does not necessarily give rise to a better environmental outcome because it endows the green firms with more market power which they use to charge higher prices. Nonetheless, environmentalism can be used to effectively complement more traditional policy instruments such as a minimum environmental standard.
    Keywords: environmentalism, psychic costs and benefits, vertical product differentiation, environmental policy
    JEL: D0 L2 L22 L23 Q5 Q52 Q56
    Date: 2021–02–01
  48. By: Uddin, Gazi Salah (Asian Development Bank Institute); Tang, Ou (Asian Development Bank Institute); Sahamkhadam, Maziar (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute); Yahya, Muhammad (Asian Development Bank Institute); Cerin, Pontus (Asian Development Bank Institute); Rehme, Jakob (Asian Development Bank Institute)
    Abstract: Short-term electricity price forecasting has received considerable attention in recent years. Despite this increased interest, the literature lacks a concrete consensus on the most suitable forecasting approach. We conduct an extensive empirical analysis to evaluate the short-term price forecasting dynamics of different regions in the Swedish electricity market (SEM). We utilized several forecasting approaches ranging from standard conditional volatility models to wavelet-based forecasting. In addition, we performed out-of-sample forecasting and back-testing, and we evaluated the performance of these models. Our empirical analysis indicates that an ARMA-GARCH framework with the student’s t-distribution significantly outperforms other frameworks. We only performed wavelet-based forecasting based on the MAPE. The results of the robust forecasting methods are capable of displaying the importance of proper forecasting process design, policy implications for market efficiency, and predictability in the SEM.
    Keywords: forecasting; Swedish electricity market; GARCH modeling; multi-scale analysis
    JEL: C53 G17
    Date: 2021–01–13
  49. By: Christina Littlejohn; Stef Proost
    Abstract: EU countries want to decarbonize their road freight transport quickly. Long-haul electric trucks are a promising technology. There are several competing designs but at present the trade-off is between e-trucks with very large batteries and e-trucks with a smaller battery but combined with motorways electrified via catenary lines. In the latter case a combination of public investment (catenary lines on major motorways) and private investment (electric trucks) is required. As long-haul truck transport is partly international this raises problems of coordination among countries. We study the possible pricing and investment strategy of one forerunner country that faces lagging neighbors. The forerunner can make the use of electric trucks mandatory on its own territory by using very high road charges for diesel trucks. If it has opted for a catenary system, it faces still the choice of how it will price the use of its electric motorways. International diesel trucks, when crossing the border of a forerunner country, have to choose between paying high charges and transferring the load into an e-truck. We study the outcome of this international coordination game exploring the non-cooperative outcome varying the relative size of the forerunner in international truck traffic and varying the cost of electric highways.
    Keywords: electric trucks, freight transport, climate policy, tax exporting, distance charging
    Date: 2021
  50. By: Carlo Andrea Bollino (University of Perugia, King Abdullah Petroleum Studies and Research (KAPSARC)); Marzio Galeotti (University of Milan, King Abdullah Petroleum Studies and Research (KAPSARC)); Axel Pierru (King Abdullah Petroleum Studies and Research (KAPSARC))
    Abstract: This paper provides new evidence on the convergence process of energy, water and food per capita consumption levels for 108 countries from 1971 to 2018, using a common data set, with VAR and panel data approach. We establish a new notion of multivariate sigma and beta-convergence. The results reveal that there is evidence of sigma- absolute beta- and conditional beta-convergence process for the countries. Moreover, the multivariate approach reveals that there are spillover effects with complex positive impact of each variable on the others in the analyzed countries. The speed of convergence is simulated to assess when the desired levels according to the prescription of the SDG of per water, energy and food capita consumption is reached by each country. Results have important policy implications for interventions on macro variables. Investment has a positive accelerating effect on water convergence. In addition, investment, openness to foreign trade and inflow of foreign direct investment have a positive accelerating effect on food convergence as well as on energy convergence.
    Keywords: Water, Energy, Food Nexus, Multivariate Convergence, Sustainable Development Goals, Worldwide Countries Data Set
    JEL: C33 Q43 O11 O13 R11
    Date: 2021–03
  51. By: Jean-Claude Berthélemy (UP1 - Université Paris 1 Panthéon-Sorbonne, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Mathilde Maurel (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: This paper proposes a new methodology for evaluating off-grid electrification projects, based upon Nighttime Light (NTL) observations, obtained by a combination of Defense Meteorological Satellite Program (DMSP) data and Visible Infrared Imaging Radiometer Suite (VIIRS) data. The methodology consists of comparing NTL data before and after the implementation of the projects. The projects are selected from FERDI's Collaborative Smart Mapping of Mini-grid Action (CoSMMA) analysis, which documents existing project evaluations reported in published papers. Such reported evaluations are of uneven quality, with few evaluations which meet scientific standards. Our results suggest that our new methodology can contribute to fill this gap. For each project, we compute the NTL deviation with respect to its counterfactual, which provides us a proxy for the off-grid electricity-induced rate of NTL growth.
    Keywords: Decentralized electrification,sustainable development,impact assessment,Nighttime Light,DMSP,VIIRS
    Date: 2021–03–02
  52. By: Liu, Liang; Yang, Kun; Fujii, Hidemichi; Liu, Jun
    Abstract: The continued development of artificial intelligence (AI) has changed production methods but may also pose challenges related to energy consumption; in addition, the effectiveness of AI differs across industries. Thus, to develop efficient policies, it is necessary to discuss the effect of AI adoption on energy intensity and to identify industries that are more significantly affected. Using data on industrial robots installed in 16 Chinese industrial subsectors from 2006 to 2016, this paper investigates both the effect of AI on energy intensity and the channel through which this effect is transmitted. The empirical results show, first, that boosting applications of AI can significantly reduce energy intensity by both increasing output value and reducing energy consumption, especially for energy intensities at high quantiles. Second, compared with the impacts in capital-intensive sectors (e.g., basic metals, pharmaceuticals, and cosmetics), the negative impacts of AI on energy intensity in labor-intensive sectors (e.g., textiles and paper) and technology-intensive sectors (e.g., industrial machinery and transportation equipment) are more pronounced. Finally, the impact of AI on energy intensity is primarily achieved through its facilitation of technological progress; this accounts for 78.3% of the total effect. To reduce energy intensity, the Chinese government should effectively promote the development of AI and its use in industry, especially in labor-intensive and technology-intensive sectors.
    Keywords: artificial intelligence; energy intensity; energy consumption; industrial robot; China
    JEL: L6 O13 O14 O32
    Date: 2021–03
  53. By: Jubril Animashaun; Ada Wossink
    Date: 2020
  54. By: Christian Gollier (Toulouse School of Economics, University of Toulouse-Capitole)
    Abstract: Because of risk aversion, any sensible investment valuation system should value less projects that contribute more to the aggregate risk, i.e., that have a larger income elasticity of net benefits. In theory, this is done by adjusting discount rates to consumption betas. But in reality, for various reasons (Arrow-Lind and WACC fallacies, market failures), most public and private institutions and people use a discount rate that is rather insensitive to the risk profile of their investment projects. I show in this paper that the economic consequences of the implied misallocation of capital are dire. To do this, I calibrate a Lucas model in which the investment opportunity set contains a myriad of projects with different expected returns and risk profiles. The welfare loss of using a single discount rate is equivalent to a permanent reduction in consumption that lies somewhere between 15% and 45%, depending upon which familiar discounting system is used. Economists should devote more energy to support a reform of public discounting systems in favor of what has been advocated by the normative interpretation of modern asset pricing theories over the last four decades.
    Keywords: Discounting, Investment Theory, Asset Pricing, Carbon Pricing, Arrow-Lind Theorem, WACC Fallacy, Rare Disasters, Capital Budgeting
    JEL: G12 H43 Q54
    Date: 2021–03
  55. By: Beghin, John C.; Timalsina, Sushant
    Keywords: Farm Management, Production Economics
    Date: 2020–05–27
  56. By: Federica Cappelli (Roma Tre University); Gianni Guastella (Università Cattolica del Sacro Cuore, Fondazione Eni Enrico Mattei); Stefano Pareglio (Università Cattolica del Sacro Cuore, Fondazione Eni Enrico Mattei)
    Abstract: In this paper we estimate the relationship between urban sprawl and a measure of air quality, namely the number of days in which the PM10 concentration exceeds safeguard limits in European Union cities. Building on a multidimensional representation of sprawl, the paper employs several indicators to account for built-up area development, population density, and residential discontinuity. The paper employs generalised additive models to disentangle the non-linear effects in the variables and the interaction effects of the three sprawl dimensions. A significant and robust effect of urban morphology emerges after controlling for socio-economic, demographic, and climatic factors and the geographical location of the city. We find that urban sprawl impacts positively on pollutant concentration, but the effect is highly context-specific because of threshold effects and interactions.
    Keywords: Air Pollution, Urban Sprawl, European Cities, Additive Models
    JEL: Q53 R14 C21
    Date: 2021–03
  57. By: Richard G. Lipsey (Simon Fraser University)
    Abstract: We examine the sources of the finance that has enabled technological evolution, distinguishing between sources in the private, or for-profit, sector (FPS) and sources in the public or not-for-profit sector (NPS). We investigate the roles that agents in each sector have played, both directly and indirectly, in financing the creation and evolution of twelve major technologies that were innovated between the late 19th and early 21st centuries, many of which have been labelled GPTs. To document this, we describe the development of our selected technologies in some considerable detail. Although much of this is already well known, what has not been done, to the best of our knowledge, is to emphasise for all these developments the extent to which agents in the NPS and FPS provided the supporting finance. Studies of the physical location of R&D, inventions and innovations typically give heavy weight to the FPS and much less to the NPS. However, when we study the sources of the finance that enabled these tenological developments, this greatly increases the relative weight attached do the NPS compared with that of the FPS. We distinguish four trajectories in the evolution of any new technology: the invention trajectory covers the scientific and technological developments that precede the emergence of an identifiable technology; the efficiency trajectory is the time path of the cost of producing a unit of the service provided by the technology; the applications trajectory is comprised of the technological products, processes, and forms of organization that depend on it; the diffusion trajectory is the spread of the technology to uses in other places and other times, both nationally and internationally. For each of these trajectories in each of our 12 technologies we indicate which developments were financed mainly by the NPS, mainly by the FPS, or by some combination of both. We divide our technologies into five main groups (groups that were discerned after completing our case studies rather than being imposed a priori): Group 1, little NPS support except for the applications trajectory, the internal combustion engine; Group 2, NPS support mainly for the invention trajectory, refrigeration; Group 3, NPS support mainly for the efficiency and applications and diffusion trajectories, railways, automobiles, aircraft and agriculture; Group 4, NPS support mainly for the invention and efficiency trajectories, the iron steam ship; Group 5, NPS Support for all trajectories, electricity, computers, the Internet, and lasers. After reporting on each of our 12 technologies, we suggest lessons that are drawn from them and are appropriate to industrial policy. For example, when there is much uncertainty about the technology early on, as it is so often and was with refrigeration, certain practical components of it need to be demonstrated by agents in the NPS before those in the FPS can foresee profitable investments in the technology. In such cases NPS support is needed early in the invention trajectory. After completing our case studies, we draw several lessons that seem appropriate to most or all of them. Two examples follow. First, the more does a technology depend on science, the larger the place for NPS support for the relevant trajectories. Second, major technologies have significant co-evolutionary complementarities amongst themselves. As a result, NPS support in the development trajectories of any one technology has significant positive and often difficult-to- 3 foresee, impacts, on the development trajectories of other technologies, including some that were not directly supported by NPS themselves. NPS investments can also help to create positive feedbacks through these indirect impacts by creating further complementarities that subsequently operate on the originally supported technology. Thus, calculations of the “return to NPS support†for a particular technology typically underestimate that return, unless they take account of the impact on the entire interconnected, complementary system. The work concludes that dismissing industrial policy with statements such as ‘governments cannot pick winners’ relies on an empty slogan to avoid detailed consideration of the actual complicated, multifaceted relationships between the private and public sectors in encouraging the inventions and innovations that are the root of economic growth.
    Date: 2021–02

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