nep-ene New Economics Papers
on Energy Economics
Issue of 2021‒06‒21
35 papers chosen by
Roger Fouquet
London School of Economics

  1. Domestic Energy Consumption in Ghana: Deprivation versus Likelihood of Access By Alhassan A. Karakara; Evans S. Osabuohien; Simplice A. Asongu
  2. Estimating air quality co-benefits of energy transition using machine learning By Da Zhang; Qingyi Wang; Shaojie Song; Simiao Chen; Mingwei Li; Lu Shen; Siqi Zheng; Bofeng Cai; Shenhao Wang
  3. The Norwegian CO2-differentiated motor vehicle registration tax: An extended Cost-Benefit Analysis By Gunnar S. Eskeland; Shiyu Yan
  4. Cost of Plug-in Electric Vehicle Ownership: The Cost of Transitioning to Five Million Plug-In Vehicles in California By Chakraborty, Debapriya; Buch, Koral; Tal, Gil
  5. Returns to Grid Electricity on Firewood Consumption and Mechanism By Ngawang Dendup
  6. How to improve the quality of life of the energy poor? By Jakub Soko³owski; Jan Frankowski
  7. The Winter Choke: Coal-Fired Heating, Air Pollution, and Mortality in China By Maoyong Fan; Guojun He; Maigeng Zhou
  8. Assessing the Impacts of Ageing and Natural Resource Extraction on Carbon Emissions: A proposed Policy Framework for European Economies By Balsalobre, Daniel; Sinha, Avik; Driha, Oana M.; Shujaat Mubarik, Muhammad
  9. Climate Policies after Paris: Pledge, Trade and Recycle Insights from the 36th Energy Modeling Forum Study (EMF36) By Christoph Boehringer; Sonja Peterson; Thomas F. Rutherford; Jan Schneider; Malte Winkler
  10. An Empirical Assessment of the Impact of Subsidies on EV adoption in China: A Difference-in-Differences Approach By Xuemei Zheng; Flavio Menezes; Xiaofeng Zheng; Chengkuan Wu
  11. How to reduce the social costs of coal mine closures? By Jakub Soko³owski; Jan Frankowski; Joanna Mazurkiewicz
  12. Variable time-step: A method for improving computational tractability for energy system models with long-term storage By Paul de Guibert; Behrang Shirizadeh; Philippe Quirion
  13. Covid-19 Outbreak and CO2 Emissions: Macro-Financial Linkages By Julien Chevallier
  14. Non-Price Determinants of Energy Choice for Cooking: Empirical Evidence from Sri Lankan Households By J.M.D. Sandamali Wijayarathne; Gazi M. Hassan; Mark J. Holmes
  15. Public acceptance of new renewable electricity generation and transmission lines By Tong Koecklin, Manuel; Longoria, Genaro; Fitiwi, Desta; DeCarolis, Joseph; Curtis, John
  16. Optimal kilometre tax for electric passenger cars By Börjesson, Maria; Asplund, Disa; Hamilton, Carl
  17. The Incidence of CO2 Emissions Pricing Under Alternative International Market Responses A Computable General Equilibrium Analysis for Germany By Christoph Boehringer; Thomas Rutherford; Jan Schneider
  18. Asset diversification versus climate action By Hambel, Christoph; Kraft, Holger; van der Ploeg, Frederick
  19. On the Green Interest Rate. By Nicholas Z. Muller
  20. Quantifying time-varying forecast uncertainty and risk for the real price of oil By Knut Are Aastveit; Jamie Cross; Herman K. van Dijk
  21. Carbon Tax and Border Tax Adjustments with Technology and Location Choices By Haitao CHENG; ISHIKAWA Jota
  22. Energy potential assessments and investment opportunities for wind energy in Indonesia By Nurry Widya Hesty; Dian Galuh Cendrawati; Rabindra Nepal; Muhammad Indra al Irsyad
  23. Curtailing use of large domestic appliances during the peak electricity load periods By Curtis, John; Grilli, Gianluca; Brazil, William; Harold, Jason
  24. Engines of Power: Electricity, AI, and General-Purpose Military Transformations By Jeffrey Ding; Allan Dafoe
  25. The Mechanics of the Industrial Revolution By Kelly, Morgan; Mokyr, Joel; Ó Gráda, Cormac
  26. Assessing climate change risks at the country level: The EIB scoring model By Ferrazzi, Matteo; Kalantzis, Fotios; Zwart, Sanne
  27. COVID-19, City Lockdowns, And Air Pollution: Evidence from China By Guojun He; Yuhang Pan; Takanao Tanaka
  28. Adding fuel to human capital: Exploring the educational effects of cooking fuel choice from rural India By Shreya Biswas; Upasak Das
  29. Opportunities and threats of the rapidly developing Space sector on sustainability transitions: Towards a research agenda By Xiao-Shan Yap; Bernhard Truffer
  30. Demand response in the workplace: A field experiment By Llerena, D.; Roussillon, B.; Teyssier, S.; Buckley, P.; Delinchant, B.; Ferrari, J.; Laranjeira, T.; Wurtz, F.
  31. Moving home and switching heating fuels By Curtis, John; Grilli, Gianluca
  32. The Preferential Treatment of Green Bonds By Francesco Giovanardi; Matthias Kaldorf; Lucas Radke; Florian Wicknig
  33. Conjuring a cooler world? Blockchains, imaginaries and the legitimacy of climate governance By Campbell-Verduyn, Malcolm
  34. 40 Years of Dutch Disease Literature: Lessons for Developing Countries By Edouard Mien; M Goujon
  35. Does Green Financing help to improve the Environmental & Social Responsibility? Designing SDG framework through Advanced Quantile modelling By Sinha, Avik; Mishra, Shekhar; Sharif, Arshian; Yarovaya, Larisa

  1. By: Alhassan A. Karakara (University of Cape Coast, Ghana); Evans S. Osabuohien (CEPDeR, Covenant University, Ota, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Purpose – This paper analyses the extent to which households are deprived (or otherwise) of clean energy sources in Ghana. Design/methodology/approach – It engages the Ghana Demographic and Health Survey data (GDHS VI). Three different energy deprivation indicators were estimated: cooking fuel deprivation, lighting deprivation and indoor air pollution. The empirical evidence is based on logit regressions that explain whether households are deprived or not. Findings – The results show that energy deprivation or access is contingent on the area of residence. Energy access and deprivation in Ghana show some regional disparities, even though across every region, the majority of households use three fuel types: Liquefied Petroleum Gas (LPG), charcoal and wood cut. Increases in wealth and education lead to reduction in the likelihood of being energy deprived. Thus, efforts should be geared towards policies that will ensure households having access to clean fuels to reduce the attendant deprivations and corresponding effects of using dangerous or dirty fuels. Originality/value – This study complements the extant literature by analysing the extent to which households are deprived (or otherwise) of clean energy sources in Ghana.
    Keywords: Energy deprivation, Ghana, Households, Sustainable development
    JEL: O13 P28 Q42
    Date: 2021–01
  2. By: Da Zhang; Qingyi Wang; Shaojie Song; Simiao Chen; Mingwei Li; Lu Shen; Siqi Zheng; Bofeng Cai; Shenhao Wang
    Abstract: Estimating health benefits of reducing fossil fuel use from improved air quality provides important rationales for carbon emissions abatement. Simulating pollution concentration is a crucial step of the estimation, but traditional approaches often rely on complicated chemical transport models that require extensive expertise and computational resources. In this study, we develop a novel and succinct machine learning framework that is able to provide precise and robust annual average fine particle (PM2.5) concentration estimations directly from a high-resolution fossil energy use data set. The accessibility and applicability of this framework show great potentials of machine learning approaches for integrated assessment studies. Applications of the framework with Chinese data reveal highly heterogeneous health benefits of reducing fossil fuel use in different sectors and regions in China with a mean of \$34/tCO2 and a standard deviation of \$84/tCO2. Reducing rural and residential coal use offers the highest co-benefits with a mean of \$360/tCO2. Our findings prompt careful policy designs to maximize cost-effectiveness in the transition towards a carbon-neutral energy system.
    Date: 2021–05
  3. By: Gunnar S. Eskeland (Norwegian School of Economics); Shiyu Yan (Aarhus University)
    Abstract: In addition to a longstanding CO2 component in fuel taxes, Norway has used two main policy instruments to decarbonise its car fleet. A CO2-differentiated registration tax gives strong and continuous incentives to buy cars with lower registered CO2 intensity (or higher fuel efficiency). Moreover, generous tax incentives, including registration tax and VAT exemptions, are applied to zero-emission cars, and have given Norway the highest electric vehicle sales in the world. This paper analyses effects of the two instruments (the vehicle registration tax and tax exemption) using an excellent and detailed data set.
    Keywords: co-benefits, Cost-benefit analysis, Distributional effects, environmental externality, Greenhouse gas emission reduction, low-emission vehicles, policy instruments, vehicule registration tax
    JEL: L62 Q54 Q41 H23 Q51
    Date: 2021–06–18
  4. By: Chakraborty, Debapriya; Buch, Koral; Tal, Gil
    Abstract: Total cost of ownership (TCO) studies are generally used as a tool to understand how and when plug-in electric vehicle (PEV) technology will reach cost parity with conventional fuel vehicles. Post cost-parity, the PEV market should be able to sustain without government intervention. The researchers present here a detailed analysis of vehicle manufacturing costs and market-level TCO accounting for technology uncertainties, behavioral heterogeneity, and key decision parameters of automakers. Using the estimates of the vehicle manufacturing costs, they estimate the cost of electrification of California’s LDV fleet to achieve the state’s net-zero emission goal by 2045. The results suggest that PEVs may not be cost competitive even in 2030 without stronger policy support and automakers initiative. Moreover, TCO is not a single number, and the cost of electrification will vary across the population based on the cost of vehicles available in the market, their charging capabilities at home and public, and energy costs. The TCO estimates and the cost of fleet electrification analysis not only has important implications for policymakers but can also offer a foundation for understanding the effect of market dynamics on the cost-competitiveness of the PEV technology. View the NCST Project Webpage
    Keywords: Engineering, Social and Behavioral Sciences, Total cost of ownership, zero emission vehicles, teardown analysis, market segments
    Date: 2021–06–01
  5. By: Ngawang Dendup (Waseda University)
    Abstract: The unprecedented stock of greenhouse gases in the atmosphere is changing the traditional role of the forest into that of a carbon sink. However, dependence on firewood for household energy is ubiquitous in developing countries, undermining the carbon services that forests provide. One of the options to address this problem is to provide access to alternatives such as electricity. This study examines the effect of grid electricity on firewood consumption by using an instrumental variable (IV) estimation strategy, and it evaluates the mechanisms underlying the causal effect. I use three waves of large sample household surveys from Bhutan and other administrative data to complement the main results. The results show that grid electricity reduces firewood consumption by approximately 0.37 - 2.65 cubic meters per month and that electrified households are approximately 83 - 90% more likely to use electricity instead of kerosene as lighting fuel. Households respond to electricity provisions by adjusting household technology, particularly in terms of shifting to the newly available source of household fuel and adopting basic electrical appliances.
    Keywords: electricity, firewood, household technology, instrumental variables, electrical appliances
    JEL: O12 Q5
    Date: 2021–05
  6. By: Jakub Soko³owski; Jan Frankowski
    Abstract: The living conditions of the energy poor in Poland are unacceptable. One of the core factors for this is living in old and uninsulated buildings. This deteriorates health and poses a higher likelihood of musculoskeletal and cardiovascular diseases development. Additionally, heating with inefficient coal or wood-fired stoves is associated with a higher risk of developing respiratory diseases. We propose two instruments that may improve quality of life among the energy-poor population. Firstly, the introduction of a targeted fuel allowance for clean heating. Secondly, a full subsidy for thermal retrofit and heat source replacement as well as connecting multi-family dwellings to gas and heating networks. As a result, this will translate into a comprehensive reduction of energy poverty.
    Keywords: energy poverty, life quality
    JEL: D10 I14 I32 Q53
    Date: 2021–01
  7. By: Maoyong Fan (Department of Economics, Ball State University, Whitinger Business Building, Room 201, 2000 W. University Avenue, Muncie, IN 47306); Guojun He (Division of Social Science, Division of Environment and Sustainability, and Department of Economics, The Hong Kong University of Science and Technology, HK, China); Maigeng Zhou (National Center for Chronic and Noncommunicable Disease Control and Prevention, Chinese Center for Disease Control and Prevention, China)
    Abstract: China’s coal-fired winter heating systems generate large amounts of hazardous emissions that significantly deteriorate air quality. Exploiting regression discontinuity designs based on the exact starting dates of winter heating across different cities, we estimate the contemporaneous impact of winter heating on air pollution and health. We find that turning on the winter heating system increased the weekly Air Quality Index by 36% and caused 14% increase in mortality rate. This implies that a 10-point increase in the weekly Air Quality Index causes a 2.2% increase in overall mortality. People in poor and rural areas are particularly affected by the rapid deterioration in air quality; this implies that the health impact of air pollution may be mitigated by improved socio- economic conditions. Exploratory cost-benefit analysis suggests that replacing coal with natural gas for heating can improve social welfare.
    Keywords: Winter Heating Policy, Air Pollution, Mortality, Coal to Gas, Regression Discontinuity
    JEL: Q53 I18 Q48
    Date: 2020–03
  8. By: Balsalobre, Daniel; Sinha, Avik; Driha, Oana M.; Shujaat Mubarik, Muhammad
    Abstract: Given the rise in ageing population and rising globalization, the European nations are facing difficulties in encountering the climate action and ascertaining energy security. For diffusing the energy innovations and curtailing natural resource extraction, with an objective of reducing carbon emissions, the existing policy framework in these nations might need a reorientation, and there comes the role of the study. This study recommends a policy framework for exploring the effect of natural resource extraction and age dependence on carbon emissions in top-5 European countries (EU-5) for the period of 1990-2017. By applying the Second Generation Panel Modeling approach, the empirical results indicate that the associations of carbon emissions with natural resource extraction, globalization index, and economic growth and ageing population follow an inverted U-shaped relationship, in keeping with the framework of Environmental Kuznets Curve (EKC) hypothesis. Based on the findings of the study, a multipronged Sustainable Development Goal (SDG) framework has been designed, and through this framework, SDG 7, SDG 13, and thereafter SDG 8 have been evaluated. While these three SDGs are the central focus of the study, the SDG framework has also suggested a way to evaluate several tangential SDGs.
    Keywords: Natural Resources; Globalization; Energy Innovation; Ageing; Carbon Emissions
    JEL: Q5
    Date: 2021
  9. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Sonja Peterson (Kiel Institute for the World Economy (IfW), Germany); Thomas F. Rutherford (University of Wisconsin, USA); Jan Schneider; Malte Winkler (University of Oldenburg, Department of Economics)
    Keywords: Paris Agreement; emissions pricing and trading; revenue recycling
    Date: 2021–05
  10. By: Xuemei Zheng (School of Economics, Southwestern University of Finance and Economics, Chengdu, China); Flavio Menezes (School of Economics, University of Queensland, Brisbane, Australia); Xiaofeng Zheng (Industrial Bank Company Ltd., Taiyuan, China); Chengkuan Wu (School of Economics, Southwestern University of Finance and Economics, Chengdu, China)
    Abstract: It is widely recognized that Electric vehicles (EVs) will play a crucial role in the electrification of transport, which is necessary for reaching a net-zero emissions economy. This recognition is reflected in the number of initiatives introduced worldwide to promote the EV industry, ranging from purchase subsidies to the provision of charging infrastructure and direct industry assistance. In this context, the Chinese government introduced a comprehensive program of government subsidies to support the sale of EVs. This paper estimates the impacts of these subsidies on EV sales in China using the difference-in-differences (DID) and propensity score matching (PSM) approach. Based on the panel data at city level from 2009 to 2018, we show that subsidies were the major contributor to the increase in EV sales. Our results suggest that the provision of infrastructure such as charging piles is also an important contributing factor. These findings are robust across model specifications and regression approaches. The heterogeneity analysis indicates that the treatment effect is heterogeneous across EV types, city sizes and regions. Our results provide empirical support for the current policy settings designed to promote EV sales in China.
    Keywords: Electric vehicles, subsidy policies, difference-in-differences approach, China.
    JEL: Q48 C13 C54
    Date: 2021–06–07
  11. By: Jakub Soko³owski; Jan Frankowski; Joanna Mazurkiewicz
    Abstract: As a result of decarbonisation, the number of jobs in coal mining and mining-relatedindustries will drop. However, the risk of increased unemployment related to this process can be minimised. To that end, in order to mitigate the consequences of the transition away from coal, it is necessary to halt the inflow of new workers, to allow older employees to work until they reach retirement eligibility, and to provide support in advance for younger workers in mining and mining-relatedindustries so that they can take up jobs outside of the sector. To achieve that, we suggest three instruments: (1) relocating workers to coking coal mines, (2) retraining, and (3) support in starting up and running a business. With these instruments, it is possible to help accelerate decarbonisation while retaining a well-qualified workforce in the regional labour market
    Keywords: energy and climate, labour market
    JEL: J21 L71 Q43
    Date: 2021–03
  12. By: Paul de Guibert; Behrang Shirizadeh; 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: Optimizing an energy system model featuring a large proportion of variable (non-dispatchable) renewable energy requires a fine temporal resolution and a long period of weather data to provide robust results. Many models are optimized over a limited set of 'representative' periods (e.g. weeks) but this precludes a realistic representation of long-term energy storage. To tackle this issue, we introduce a new method based on a variable time-step. Critical periods that may be important for dimensioning part of the electricity system are defined, during which we use an hourly temporal resolution. For the other periods, the temporal resolution is coarser. This method brings very accurate results in terms of system cost, curtailment, storage losses and installed capacity, even though the optimization time is reduced by a factor of around 60. Results are less accurate for battery volume. We conclude that further research into this 'variable time-step' method would be worthwhile.
    Keywords: complexity reduction,time series aggregation,renewable energies,computational tractability,Energy system model
    Date: 2020–12
  13. By: Julien Chevallier
    Abstract: In the Dynamic Conditional Correlation with Mixed Data Sampling (DCC-MIDAS) framework, we scrutinize the correlations between the macro-financial environment and CO2 emissions in the aftermath of the Covid-19 diffusion. The main original idea is that the economy?s lock-down will alleviate part of the greenhouse gases? burden that human activity induces on the environment. We capture the time-varying correlations between U.S. Covid-19 confirmed cases, deaths, and recovered cases that were recorded by the Johns Hopkins Coronavirus Center, on the one hand; U.S. Total Industrial Production Index and Total Fossil Fuels CO2 emissions from the U.S. Energy Information Administration on the other hand. High-frequency data for U.S. stock markets are included with five-minute realized volatility from the Oxford-Man Institute of Quantitative Finance. The DCC-MIDAS approach indicates that Covid-19 confirmed cases and deaths negatively influence the macro-financial variables and CO2 emissions. We quantify the time-varying correlations of CO2 emissions with either Covid-19 confirmed cases or Covid-19 deaths to sharply decrease by ?15% to ?30%. The main takeaway is that we track correlations and reveal a recessionary outlook against the background of the pandemic.
    Keywords: Covid-19; CO2 emissions; time-varying correlations; macroeconomy; stock markets; DCC MIDAS
    JEL: G01 F30 Q54
    Date: 2021–01–01
  14. By: J.M.D. Sandamali Wijayarathne (University of Waikato); Gazi M. Hassan (University of Waikato); Mark J. Holmes (University of Waikato)
    Abstract: The United Nations' seventh Sustainable Development Goal (SDG) ensures universal access to affordable, reliable, and modern energy services for all by 2030. Modern or clean energy is perceived to be the golden thread that connects economic growth, human development, and environmental sustainability. However, one-third of the world's population still uses solid fuels for cooking, indicating the importance of switching from solid to clean fuels. This paper, therefore, analyses demographic, socioeconomic, and housing characteristics that affect household-level cooking energy choices in Sri Lanka. Further, it identifies the synergies between SDG 4, SDG 6, and SDG 7. The data is obtained from the Sri Lankan Households Income and Expenditure Survey (HIES) for 2009 - 2016, covering about 58,000 households. The results of the random effects panel multinomial logit model identify that household income, household wealth, education of head, age and education of spouse, household size, number of children, housing characteristics (number of bedrooms, water facilities, type of wall, floor, and roof), and residential sector are vital in the selection of clean cooking fuel. More specifically, Advanced Sustainability Analysis (ASA) results show SDG 4 and SDG 6 have a strong synergetic effect on SDG 7. The findings suggest the importance of taking the determinants of energy choice and the synergetic gains of the SDGs into account in formulating a comprehensive national energy policy.
    Keywords: energy;clean fuel;solid fuel;cooking;Sustainable Development Goal; SDG;synergies
    JEL: C25 F24 O13 Q01 Q42 R20
    Date: 2021–06–10
  15. By: Tong Koecklin, Manuel; Longoria, Genaro; Fitiwi, Desta; DeCarolis, Joseph; Curtis, John
    Date: 2021
  16. By: Börjesson, Maria (Swedish National Road & Transport Research Institute (VTI)); Asplund, Disa (Swedish National Road & Transport Research Institute (VTI)); Hamilton, Carl (Swedish National Road & Transport Research Institute (VTI))
    Abstract: We simulate the external costs from road transport in a 2040 scenario where all gasoline vehicles are replaced by EV’s, and we do this for the densest regions of Sweden with a similar degree of urbanization to many other European countries, including cities, suburbs, towns and rural areas. We analyse the optimal kilometre tax based on three motives for taxing use and ownership of EVs: internalizing external cost, cost recovery of the public spending on the road sector, and fiscal taxation for raising revenue over and above what is justified by the two previous principles. We conclude that the optimal Pigouvian tax will be too low to justify the cost of a nationwide GPS-based kilometre tax for many years ahead, for which enforcement would drive the cost. Taxes collected based on roadside equipment systems in the big cities and surrounding highways would be a substantially cheaper way of internalizing most of the congestion cost. A shift from fuel taxes to national congestion taxes would, however, imply a large transfer of resources from the biggest city or cities to the rest of the country, where most of the kilometres are driven
    Keywords: Kilometre tax; Milage tax; Congestion charges; Equity; Infrastructure investments; Electric cars; Fiscal taxes; Benefit principle
    JEL: R12 R41 R42
    Date: 2021–06–07
  17. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Thomas Rutherford (University of Wisconsin); Jan Schneider (University of Oldenburg, Department of Economics)
    Abstract: We investigate the economic impacts of CO2 emissions pricing for Germany in the context of the Paris Agreement where we highlight the role of international market responses for the incidence across heterogeneous households. We consider three settings for international spillover eects: (i) a small-open-economy framework where international commodity prices remain constant, (ii) a multi-region-trade framework with endogenous terms of trade where only Germany undertakes emission pricing, and (iii) a multi-region-trade framework where all other regions also price CO2 emissions. In all three settings Germany complies to a given domestic CO2 emissions reduction target through economy-wide uniform CO2 emissions pricing. CO2 revenues are recycled lump-sum to households on an equal-per-household basis. We nd that the small-openeconomy setting in the case of Germany not only overstates overall economic adjustment costs to CO2 emissions pricing, but also understates the degree of progressiveness of CO2 revenue recycling. The reason is that in the multi-region-trade frameworks Germany is able to pass through part of its economic adjustment costs to trading partners via higher export prices. As a consequence, the CO2 prices required to achieve the domestic emissions reduction target are higher, yielding more CO2 revenues that are recycled to households.
    Keywords: computable general equilibrium; incidence; environmental taxes
    Date: 2021–05
  18. By: Hambel, Christoph; Kraft, Holger; van der Ploeg, Frederick
    Abstract: Asset pricing and climate policy are analyzed in a global economy where consumption goods are produced by both a green and a carbon-intensive sector. We allow for endogenous growth and three types of damages from global warming. It is shown that, initially, the desire to diversify assets complements the attempt to mitigate economic damages from climate change. In the longer run, however, a trade-off between diversification and climate action emerges. We derive the optimal carbon price, the equilibrium risk-free rate, and risk premia. Climate disasters, which are more likely to occur sooner as temperature rises, significantly affect asset prices.
    Keywords: asset prices; carbon price; Climate finance; decarbonization; disaster risk; Diversification; green assets
    JEL: D81 G01 G12 Q5 Q54
    Date: 2020–06
  19. By: Nicholas Z. Muller
    Abstract: This paper demonstrates how a central bank might operationalize an expanded role inclusive of managing risks from environmental pollution. The analysis introduces the green interest rate (rg) which depends on temporal changes in the pollution intensity of output. This policy instrument reallocates consumption from periods when output is pollution intensive to when output is cleaner. In economies on a cleaning-up path, rg exceeds r*. For those growing more polluted, rg is less than r*. In the U.S. economy from 1957 to 2016, rg exceeded r* by 50 basis points. Federal environmental policy reversed the orientation between rg and r*.
    JEL: E21 E43 E63 Q51 Q53 Q54 Q56 Q58
    Date: 2021–06
  20. By: Knut Are Aastveit (BI Norwegian Business School); Jamie Cross (BI Norwegian Business School); Herman K. van Dijk (Erasmus University Rotterdam)
    Abstract: We propose a novel and numerically efficient quantification approach to forecast uncertainty of the real price of oil using a combination of probabilistic individual model forecasts. Our combination method extends earlier approaches that have been applied to oil price forecasting, by allowing for sequentially updating of time-varying combination weights, estimation of time-varying forecast biases and facets of miscalibration of individual forecast densities and time-varying inter-dependencies among models. To illustrate the usefulness of the method, we present an extensive set of empirical results about time-varying forecast uncertainty and risk for the real price of oil over the period 1974-2018. We show that the combination approach systematically outperforms commonly used benchmark models and combination approaches, both in terms of point and density forecasts. The dynamic patterns of the estimated individual model weights are highly time-varying, reflecting a large time variation in the relative performance of the various individual models. The combination approach has built-in diagnostic information measures about forecast inaccuracy and/or model set incompleteness, which provide clear signals of model incompleteness during three crisis periods. To highlight that our approach also can be useful for policy analysis, we present a basic analysis of profit-loss and hedging against price risk.
    Keywords: Oil price, Forecast density combination, Bayesian forecasting, Instabilities, Model uncertainty
    Date: 2021–06–13
  21. By: Haitao CHENG; ISHIKAWA Jota
    Abstract: We develop a simple international duopoly model to analyze unilateral taxes on greenhouse-gas emissions and border tax adjustments (BTAs) where firms can abate emissions by adopting a clean technology. We specifically explore three policy regimes: i) carbon taxes alone (no BTAs); ii) carbon taxes accompanied by carbon-content tariffs (partial BTAs); and iii) carbon taxes coupled with emission-tax refunds for exports and carbon-content tariffs (full BTAs). We find that carbon taxes are not effective in decreasing global emissions in certain circumstances. Interestingly, an increase in the carbon tax rate can increase global emissions. High tax rates may discourage the adoption of a clean technology. When firm locations are fixed, full BTAs eliminate cross-border carbon leakage. However, partial BTAs can be more effective in reducing global emissions than full BTAs. When firm locations are endogenous, firms tend to produce in foreign countries to avoid the home carbon tax. BTAs discourage production in foreign countries. This effect is stronger with full BTAs than with partial BTAs.
    Date: 2021–04
  22. By: Nurry Widya Hesty; Dian Galuh Cendrawati; Rabindra Nepal; Muhammad Indra al Irsyad
    Abstract: Indonesia has a target of achieving 23% of renewable energy share in total energy mix in 2025. However, as commonly observed across developing economies, Indonesia also does not have accurate and comprehensive database of renewable energy potentials, especially wind energy. Therefore, this article aims to assess the theoretical potential of wind speed and to visualize the wind speed by province based on wind map using GIS for the entire Indonesia. Our assessment integrates advanced analytical techniques, i.e., Weather Research and Forecasting (WRF) model, method geographic information system (GIS), Newtonian relaxation assimilation technique, and Variational Analysis Method (VAM). The robustness of our analysis is confirmed by using high resolution data from the National Aeronautics and Space Administration (NASA) database and Cross-Calibrated Multi-Platform (CCMP) Reanalysis satellite data. Wind resource measurement data in Jayapura, Bantaeng and Sukabumi sites are used to validate the modelling results. The biases of the modelled data are 0.324, 0.368, and 0.324 in Jayapura, Bantaeng and Sukabumi respectively. This conclusion has two global implications. First, this study shows the WRF method is a feasible option to estimate wind speed data in developing countries commonly lacking meteorological stations to measure the wind energy resources. Second, the yearly wind mapping by province level produces mean wind speed map that is a useful information to indicate the profile of wind energy resource as the input for the wind energy system planning. We then match the wind energy potentials with other factors influencing wind warm feasibility, e.g., renewable energy tariffs, and parameters of power system flexibility.
    Keywords: Wind energy, Indonesia, Renewable Resources, Weather Research and Forecasting
    Date: 2021–03
  23. By: Curtis, John; Grilli, Gianluca; Brazil, William; Harold, Jason
    Date: 2020
  24. By: Jeffrey Ding; Allan Dafoe
    Abstract: Major theories of military innovation focus on relatively narrow technological developments, such as nuclear weapons or aircraft carriers. Arguably the most profound military implications of technological change, however, come from more fundamental advances arising from general purpose technologies, such as the steam engine, electricity, and the computer. With few exceptions, political scientists have not theorized about GPTs. Drawing from the economics literature on GPTs, we distill several propositions on how and when GPTs affect military affairs. We call these effects general-purpose military transformations. In particular, we argue that the impacts of GMTs on military effectiveness are broad, delayed, and shaped by indirect productivity spillovers. Additionally, GMTs differentially advantage those militaries that can draw from a robust industrial base in the GPT. To illustrate the explanatory value of our theory, we conduct a case study of the military consequences of electricity, the prototypical GPT. Finally, we apply our findings to artificial intelligence, which will plausibly cause a profound general-purpose military transformation.
    Date: 2021–06
  25. By: Kelly, Morgan; Mokyr, Joel; Ó Gráda, Cormac
    Abstract: For contemporaries, Britain's success in developing the technologies of the early Industrial Revolution rested in large part on its abundant supply of artisan skills, notably in metalworking. In this paper we outline a simple process where successful industrialization occurs in regions that start with low wages and high mechanical skills, and show that these two factors strongly explain the growth of the textile industry across the 41 counties of England between the 1760s and 1830s. By contrast, literacy and access to capital have no power in predicting industrialization, nor does proximity to coal. Although unimportant as a source of power for early textile machinery, Britain's coal was vital as a source of cheap heat that allowed it over centuries to develop a unique range of sophisticated metalworking industries. From these activities came artisans, fromwatchmakers to iron founders, whose industrial skillswere in demand not just in Britain but across all of Europe. Against the view that living standards were stagnant during the Industrial Revolution, we find that real wages rose sharply in the industrializing north and collapsed in the previously prosperous south.
    Date: 2020–06
  26. By: Ferrazzi, Matteo; Kalantzis, Fotios; Zwart, Sanne
    Abstract: Assessing climate change risks at the country levelThe EIB Climate Change Risk Country Scoring Model provides a way to comprehensively assess the climate change risks faced by more than 180 countries. The two sets of scores for physical and transition risks aggregate exposures to various risk factors, taking into account the adaptation and mitigation capacity of each country. The scores confirm that climate risk is a relevant challenge for all countries. However, low-income economies are more vulnerable to physical risk - in particular to acute events, rising sea levels and excessive heat - and in parallel have lower ability to mitigate the challenges posed by the energy transition. High-income economies generally face higher risks from the transition to a low-carbon future. Countries more dependent on fossil fuel revenues are also among the most exposed to transition risk. This paper provides insights into the model as it is currently being developed. Understanding the relative climate risks faced by countries support the management of climate risks at the country level, as well as helping to understand the environmental and policy conditions faced by firms in each country. It can also help to identify mitigation and adaptation priorities and related financing needs. Taken together, a better understanding of the risks and the consequent adaptation and mitigation needs will help to ensure that opportunities to enhance climate resilience are not missed.
    Date: 2021
  27. By: Guojun He (Division of Social Science, Division of Environment and Sustainability, and Department of Economics, The Hong Kong University of Science and Technology, HK, China); Yuhang Pan (Division of Environment and Sustainability, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong); Takanao Tanaka (Division of Social Science, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong.)
    Abstract: The rapid spread of COVID-19 is a global public health challenge. To prevent the escalation of its transmission, China locked down one-third of its cities and strictly restricted personal mobility and economic activities. Using timely and comprehensive air quality data in China, we show that these counter-COVID-19 measures led to a remarkable improvement in air quality. Within weeks, the Air Quality Index and PM2.5 concentrations were brought down by 25%. The effects are larger in colder, richer, and more industrialized cities. We estimate that such improvement would avert 24,000 to 36,000 premature deaths from air pollution on a monthly basis.
    Keywords: COVID-19, coronavirus, PM2.5, lockdown, health
    JEL: Q53 Q52 I18 I15
    Date: 2020–03
  28. By: Shreya Biswas; Upasak Das
    Abstract: The study examines the effect of cooking fuel choice on educational outcomes of adolescent children in rural India. Using multiple large-scale nationally representative datasets, we observe household solid fuel usage to adversely impact school attendance, years of schooling and age-appropriate grade progression among children. This inference is robust to alternative ways of measuring educational outcomes, other datasets, specifications and estimation techniques. Importantly, the effect is found to be more pronounced for females in comparison to the males highlighting the gendered nature of the impact. On exploring possible pathways, we find that the direct time substitution on account of solid fuel collection and preparation can explain the detrimental educational outcomes that include learning outcomes as well, even though we are unable to reject the health channel. In the light of the micro and macro level vulnerabilities posed by the COVID-19 outbreak, the paper recommends interventions that have the potential to fasten the household energy transition towards clean fuel in the post-covid world.
    Date: 2021–06
  29. By: Xiao-Shan Yap (Eawag, Swiss Federal Institute of Aquatic Science and Technology, Switzerland); Bernhard Truffer (Eawag, Swiss Federal Institute of Aquatic Science and Technology, Switzerland)
    Abstract: Sustainability transitions research has increasingly adopted global perspectives on how to deal with sustainability challenges. However, “global” has so far been limited to Earth’s surface and atmosphere. We argue that transitions research should include developments that relate to the orbit and outer space (hereinafter also Space). The Space sector has grown substantially over the last decade in terms of the number of rocket launches, the diversity of actors involved or new essential services that depend on Space-based infrastructures. This entails fundamentally new opportunities to manifold industrial sectors, and enables developing countries to potentially leapfrog polluting industrial development pathways. At the same time, the expansion of the Space sector creates manifold sustainability pressures like atmospheric pollution, high energy consumption, or Space debris in the orbit. This led to recent surges in arguably “green” innovations such as reusable rockets, but also the development of new governance arrangements protecting outer space as a finite resource for humankind. This research note sketches major recent developments in the Space sector and points to promising avenues of research for innovation and transition studies, not only in terms of a new empirical application field but also as an inspiration for new theoretical insights and innovation policies.
    Keywords: Outer space; Sustainability transitions; Mission; Governance; Commons; Beyond national jurisdiction
    Date: 2021
  30. By: Llerena, D.; Roussillon, B.; Teyssier, S.; Buckley, P.; Delinchant, B.; Ferrari, J.; Laranjeira, T.; Wurtz, F.
    Abstract: To increase the share of intermittent renewable energy in our production mix, occupants of buildings can be called upon to lower, anticipate or postpone their consumption according to the network balance. This article presents a small-scale field experiment aimed at introducing demand response in the workplace. We test the impact of load-shedding signals assorted with incentives on energy consumption of workers in the tertiary sector. Two incentive schemes are tested: a honorary contest and a monetary tournament. The results show a reduction in workers’ power demand during the load-shedding periods when the incentives are based on the honorary contest. At the opposite, the monetary tournament where workers could win money according to their behavior seems to have had no impact. The results also suggest that few workers can be responsible for a large part of energy consumption while the building is partially automatically controlled.
    JEL: C93 Q40 Q51
    Date: 2021
  31. By: Curtis, John; Grilli, Gianluca
    Date: 2021
  32. By: Francesco Giovanardi (University of Cologne, Center for Macroeconomic Research); Matthias Kaldorf (University of Cologne, Center for Macroeconomic Research. Sibille-Hartmann-Str. 2-8, 50969 Cologne, Germany); Lucas Radke (University of Cologne, Center for Macroeconomic Research); Florian Wicknig (University of Cologne, Center for Macroeconomic Research)
    Abstract: We study the preferential treatment of green bonds in the Central Bank collateral framework as an environmental policy instrument. We propose a macroeconomic model with environmental and financial frictions, in which green and conventional entrepreneurs issue defaultable bonds to banks that use them as collateral. Collateral policy solves a financial stability trade-off between increasing bond issuance and subsidizing entrepreneur default risk. In a calibration to the Euro Area, optimal collateral policy features substantial preferential treatment, implying a green-conventional bond spread of 73bp. This increases the green bond share by 0.69 percentage points, while the green capital share increases by 0.32 percentage points, which in turn reduces pollution. The limited response of green investment is caused by higher risk taking of green entrepreneurs. When optimal Pigouvian taxation is available, collateral policy does not feature preferential treatment, but still improves welfare by addressing adverse effects of taxation on financial stability.
    Keywords: Green Investment, Central Bank Policy, Collateral Framework, Corporate De-fault Risk, Environmental Policy
    JEL: E44 E58 E63 Q58
    Date: 2021–06
  33. By: Campbell-Verduyn, Malcolm
    Abstract: Meeting on the second anniversary of the Paris Agreement signing in 2017, the United Nations Climate Change Secretariat founded the Climate Chain Coalition (CCC). Backed by a number of multi-stakeholder groups like the Blockchain for Climate Foundation, the Ottawa-based CCC promotes the 'blockchainization' of the Paris Agreement. What kind of 'cooler' world do blockchain-based climate governance projects conjure? This paper scrutinizes the shared visions materializing across climate finance experiments, locating them largely within existing individualistic imaginaries rather than more collectivistic alternatives. It finds the imaginaries of 'cool' technological experimentation to fall short in materializing broader input and more effective output required to overcome the legitimacy crisis facing market-led climate governance.
    Keywords: Blockchain,Technology,Finance,Governance,Legitimacy
    Date: 2021
  34. By: Edouard Mien (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); M Goujon (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper surveys the literature on the "Dutch disease" caused by natural resources revenues in developing countries. It describes the original model of Dutch disease and some important extensions proposed in the theoretical literature, focusing on the ones that meet the developing countries' conditions. It then reviews the main empirical studies that have been conducted since the 1980s, aiming to understand the methodological issues and to highlight the current gaps in the literature. There is evidence that the Dutch disease is still a topical issue for many developing countries, particularly in Africa. However, there remains large gaps in the theoretical and empirical literature in the understanding of the most adequate policy instruments to cope with, specifically in the least developed countries that are new producers of commodities.
    Keywords: Dutch disease,Natural resources,Resource curse,Structural transformations,Real exchange rate
    Date: 2021–06
  35. By: Sinha, Avik; Mishra, Shekhar; Sharif, Arshian; Yarovaya, Larisa
    Abstract: Striving to achieve the Sustainable Development Goals (SDGs), countries are increasingly embracing a sustainable financing mechanism via green bond financing. Green bonds have attracted the attention of the industrial sector and policymakers, however, the impact of green bond financing on environmental and social sustainability has not been yet been confirmed. There is no empirical evidence on how this financial product can contribute to achieving the goals set out in Agenda 2030. In this study, we empirically analyze the impact of green bond financing on environmental and social sustainability by considering the S&P 500 Global Green Bond Index and S&P 500 Environmental and Social Responsibility Index, from 1st October 2010 to 31st July 2020 using a combination of advanced quantile modelling approaches. Our results reveal that green financing mechanisms might have gradual negative transformational impacts on environmental and social responsibility. Furthermore, we attempt to design a policy framework to address the relevant SDG’s objectives.
    Keywords: green financing; green bonds; Agenda 2030; environmental and social responsibility, wavelet, quantile
    JEL: Q5
    Date: 2021

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.