nep-ene New Economics Papers
on Energy Economics
Issue of 2021‒10‒11
thirty-six papers chosen by
Roger Fouquet
London School of Economics

  1. Market integration of power-to-gas during the energy transition—Assessing the role of carbon pricing By Bucksteeg, Michael; Mikurda, Jennifer; Weber, Christoph
  2. The transformation of integrated electricity and heat systems—Assessing mid-term policies using a model comparison approach By Bucksteeg, Michael; Wiedmann, Michael; Pöstges, Arne; Haller, Markus; Böttger, Diana; Ruhnau, Oliver; Schmitz, Richard
  3. Saving for a Dry Day: Coal, Dams, and the Energy Transition By Michele Fioretti; Jorge Tamayo
  4. Inequality in Electricity Consumption and Economic Growth: Evidence from a Small Area Estimation Study By Nguyen, Cuong Viet; Nguyen, Khuong Duc; Tran, Tuyen Quang
  5. Congestion pricing, air pollution, and individual-level behavioral responses By Isaksen, Elisabeth T.; Johansen, Bjørn G.
  6. Methodology for estimation of Energy Physical Supply and Use Tables based on IEA's World Energy Balances By Joaquim Martins Guilhoto; Nick Johnstone; Francesco Mattion; Faidon Papadimoulis; Roberta Quadrelli; Colin Webb
  7. Crude Oil Price Changes and Inflation: Evidence for Asia and the Pacific Economies By Jiranyakul, Komain
  8. Options for achieving a close-to climateneutral EU industry and their implications By Herbst, Andrea; Fleiter, Tobias; Neuwirth, Marius; Rehfeldt, Matthias; Wachsmuth, Jakob
  9. Is high-speed rail green? Evidence from a quasi-natural experiment in China By Liang Nie; ZhongXiang Zhang
  10. Endogenous preferences and environmental policy By Halvor Briseid Storrøsten
  11. Oil prices and fiscal policy in an oil-exporter country: empirical evidence from Oman By Aljabri, Salwa; Raghavan, Mala; Vespignani, Joaquin
  12. Who Profits from Windfalls in Oil Tax Revenue? Inequality, Protests, and the Role of Corruption By Michael Alexeev; Nikita Zakharov
  13. Public Charging Infrastructure and Electric Vehicles in Norway By Schulz, Felix; Rode, Johannes
  14. “We've already done our part!” Territorial environmental justice and willingness to pay for renewable energies By Martin FAULQUES; Jean BONNET; Sébastien BOURDIN; Marine JUGE; Jonas PIGEON; Charlotte RICHARD
  15. Perception of monetary and non-monetary effects on the energy transition: Results of a mixed method approach By Burghard, Uta; Breitschopf, Barbara; Wohlfarth, Katharina; Müller, Fabian; Keil, Julia
  16. Optimal pricing for electricity retailers By Rom\'an P\'erez-Santalla; Miguel Carri\'on; Carlos Ruiz
  17. New insights into price drivers of crude oil futures markets: Evidence from quantile ARDL approach By Hao-Lin Shao; Ying-Hui Shao; Yan-Hong Yang
  18. Reactive Power Markets for the Future Grid By Adam Potter; Rabab Haider; Anuradha M. Annaswamy
  19. Joint optimization of sales-mix and generation plan for a large electricity producer By Paolo Falbo; Carlos Ruiz
  20. Bonding Requirements for Oil and Gas Wells in Pennsylvania: Cost-Based Recommendations By Weber, Jeremy
  21. Oil Prices, Exchange Rates and Sectoral Stock Returns in the BRICS-T Countries: A Time-Varying Approach By Guglielmo Maria Caporale; Abdurrahman Nazif Catik; Gül Serife Huyugüzel Kisla; Mohamad Husam Helmi; Coskun Akdeniz
  22. Does institutional quality mitigate the effect of Foreign Direct Investment on environmental quality: Evidence of MENA countries By bouchoucha, najeh
  23. A Hierarchical Local Electricity Market for a DER-rich Grid Edge By Vineet Jagadeesan Nair; Venkatesh Venkataramanan; Rabab Haider; Anuradha Annaswamy
  24. Oil Prices, Global Demand Expectations, and Near-Term Global Inflation By Jan J. J. Groen; Adam I. Noble
  25. Green finance in Europe: Strategy, regulation and instruments By Brühl, Volker
  26. Research report on ‘Renewable Energy Cooperative’ in France By Adélie Ranville; Anne-Lorene Vernay
  27. Deep Learning for Principal-Agent Mean Field Games By Steven Campbell; Yichao Chen; Arvind Shrivats; Sebastian Jaimungal
  28. Overcoming coordination gaps between water, energy and agriculture: Future paths to water protection in Weser-Ems By Meergans, Franziska; Aue, Christina; Knieper, Christian; Kochendörfer, Sascha; Lenschow, Andrea; Pahl-Wostl, Claudia
  29. Sustainable investing in times of crisis: evidence from bond holdings and the COVID-19 pandemic By Fatica, Serena; Panzica, Roberto
  30. Effects of Infrastructures on Environmental Quality Contingent on Trade Openness and Governance Dynamics in Africa By Tii N. Nchofoung; Simplice A. Asongu
  31. The Macroeconomic Impact of Recent Political Conflicts in Africa: Generalized Synthetic Counterfactual Evidence By Samba Diop; Simplice A. Asongu; Vanessa S. Tchamyou
  32. The Effects of the Covid-19 Pandemic on Stock Markets, CDS and Economic Activity: Time-Varying Evidence from the US and Europe By Guglielmo Maria Caporale; Abdurrahman Nazif Catik; Mohamad Husam Helmi; Coskun Akdeniz; Ali Ilhan
  33. Uncertain Paternity, Power Utility, and Fractional Moments: The Case of Binomially Distributed Reproductive Success By Dirk Bethmann
  34. Exportperformance von Gütern zur Herstellung erneuerbarer Energien enttäuscht By Matthes, Jürgen; Schaefer, Thilo
  35. Neue Analyse von Online-Stellenanzeigen: Kompetenzen für die Wasserstofftechnologie sind jetzt schon gefragt (Skills demand for the hydrogen technology: Insights from a new analysis of job ads) By Grimm, Veronika; Janser, Markus; Stops, Michael
  36. Cooperation on climate change and ongoing urbanization By Shibly Shahrier; Koji Kotani; Yoshinori Nakagawa

  1. By: Bucksteeg, Michael; Mikurda, Jennifer; Weber, Christoph
    Abstract: The expansion of wind and solar energy has primarily led to the decarbonisation of the electricity sector. Against this background, power-to-gas (PtG) is seen as a solution supporting the decarbonisation of other sectors, such as heating or transport. As the generation mix will transitionally be based on conventional generation technologies, the upcoming integration of PtG into electricity markets comes with several challenges. Notably, the design of environmental levies and carbon pricing should create efficient incentives for the utilisation of PtG, reflecting the value of the CO2 emissions avoided by hydrogen or methane. This contribution studies the role of the regulatory framework in the integration of PtG, with special attention to carbon pricing. We extend an optimisation model by the PtG technology and competing flexibilities, such as storage or demand-side management. We develop several scenarios with regard to levies, levels of CO2 price, techno-economic parameters of flexibilities and shares of variable renewable energy sources for the year 2025. We find that carbon pricing that considers the value of the CO2 emissions avoided by hydrogen or methane supports the market integration of PtG, whereas too low CO2 prices might lead to adverse effects. Subsequently, implications for energy policy are discussed.
    Keywords: electricity market model,carbon pricing,power-to-gas,energy policy
    JEL: Q4 Q5
    Date: 2021
  2. By: Bucksteeg, Michael; Wiedmann, Michael; Pöstges, Arne; Haller, Markus; Böttger, Diana; Ruhnau, Oliver; Schmitz, Richard
    Abstract: The development of European power markets is highly influenced by integrated electricity and heat systems. Therefore, decarbonization policies for the electricity and heat sectors, as well as numerical models that are used to guide such policies, should consider cross-sectoral interdependencies. However, although many model-based policy assessments for the highly interconnected European electricity system exist, international studies that consider interactions with the heat sector are rare. In this contribution, we systematically study the potential benefits of integrated heat and power systems by conducting a model comparison experiment. Five large-scale market models covering electricity and heat supply were utilized to study the interactions between a rather simple coal replacement scenario and a more ambitious policy that supports decarbonization through power-to-heat. With a focus on flexibility provision, emissions reduction, and economic efficiency, although the models agree on the qualitative effects, there are considerable quantitative differences. For example, the estimated reductions in overall CO2 emissions range between 0.2 and 9.0 MtCO2/a for a coal replacement scenario and between 0.2 and 25.0 MtCO2/a for a power-to-heat scenario. Model differences can be attributed mainly to the level of detail of CHP modeling and the endogeneity of generation investments. Based on a detailed comparison of the modeling results, implications for modeling choices and political decisions are discussed.
    Keywords: Combined heat and power,power-to-heat,coal phase-out,renewable energy,energy system transformation,electricity market modeling,model comparison
    JEL: Q4 Q5
    Date: 2021
  3. By: Michele Fioretti (Département d'économie); Jorge Tamayo (Harvard Business School)
    Abstract: Renewable generation creates a tradeoff between current and future energy production as generators produce energy by releasing previously stored resources. Studying the Colombian market, we find that diversified firms strategically substitute fossil fuels for hydropower before droughts. This substitution mitigates the surge in market prices due to the lower hydropower capacity available during dry periods. Diversification can increase prices, instead, if it results from mergers steepening a firm’s residual demand. Thus, integrating production technologies within firms can smooth the clean-energy transition by offsetting higher prices during scarcity periods if the unaffected technologies help store renewables more than exercise market power.
    Keywords: Energy transition; Renewables; Hydropower generation; Diversified production technologies; Energy storage; Wholesale electricity markets
    JEL: L25 Q21 D47
    Date: 2021–08
  4. By: Nguyen, Cuong Viet; Nguyen, Khuong Duc; Tran, Tuyen Quang
    Abstract: Our study uses a small area estimation method to estimate the average and inequality of per capita kWh consumption for small areas in Vietnam. It shows evidence of a large spatial heterogeneity in the electric power consumption between districts and provinces in Vietnam. Households in the mountains and highlands consumed remarkably less electricity than those in the delta and coastal areas. Notably, we find a U-shaped relationship between the inequality of electricity consumption and economic levels in Vietnam. In poor districts and provinces, there is very high inequality in electricity consumption. Inequality is lower in middle-income districts and provinces.
    Keywords: Electricity consumption,Energy inequality,Economic growth,Small area estimation,Vietnam
    JEL: O13 Q43 D63
    Date: 2021
  5. By: Isaksen, Elisabeth T. (Ragnar Frisch Centre for Economic Research); Johansen, Bjørn G. (The Institute of Transport Economics)
    Abstract: This paper shows that differentiating driving costs by time of day and vehicle type help improve urban air quality, lower driving, and induce adoption of electric vehicles. By taking advantage of a congestion charge that imposed spatial and temporal variation in the cost of driving a conventional vehicle, we find that economic incentives lower traffic and concentrations of NO2. Exploiting a novel dataset on car ownership, we find that households exposed to congestion charging on their way to work were more likely to adopt an electric vehicle. Heterogeneity analyses show strong socioeconomic gradients in the transition towards low-emission cars.
    Keywords: air pollution; electric vehicles; transportation policies; congestion charging
    JEL: C33 H23 Q53 Q55 Q58 R41 R48
    Date: 2021–05–04
  6. By: Joaquim Martins Guilhoto (OECD); Nick Johnstone (International Energy Agency); Francesco Mattion (International Energy Agency); Faidon Papadimoulis (International Energy Agency); Roberta Quadrelli (International Energy Agency); Colin Webb (OECD)
    Abstract: This paper develops a methodology for the estimation of Energy Physical Supply and Use Tables (E-PSUTs) based on the IEA’s World Energy Balances (WEB). The tables are similar to those proposed by the United Nations System of Environmental Economic Accounting. However, they fully exploit, and are consistent, with the information on fuel transformation processes available in the WEB.The E-PSUTs can be used to derive energy indicators in physical units. Additionally, they can be used in a hybrid methodological approach to link global energy production and consumption in physical units with global production and consumption in monetary units, allowing the development of indicators to better understand the multiple links between energy and the economy, contributing to climate change discussions.Furthermore, complementary analyses can be undertaken by linking the MF-IO model with variables such as industry value added and employment data. And, used to estimate energy-related CO2 emissions indicators.
    Keywords: Energy, Physical Supply and Use Tables, World Energy Balances
    Date: 2021–10–08
  7. By: Jiranyakul, Komain
    Abstract: This paper examines the influence of crude oil price on inflation in eight Asian and two of the pacific economies, which are oil-importing countries. The period of investigation is from 1987M5 to 2019M12. The results of bounds testing for cointegration reveal that there is a stable positive long-run relationship between the consumer price index and crude oil price in most of these countries during the period of low and less fluctuating oil prices. However, the stable long-run relationship is found in eight countries, but this stable relationship is found only in one country during the period of high and more fluctuating oil prices. The long-run pass-through of crude oil prices to consumer prices is partial. In the short run, the relationship between a crude oil price change and inflation indicates that the short-run pass-through is low in most cases, but this pass-through is more apparent during the period of high and more fluctuating oil prices. Therefore, the structural break seems to matter in the pass-through of crude oil price to consumer prices in both the long and short run. The findings suggest accommodative monetary policy measures to alleviate the inflation rate.
    Keywords: Crude oil price, inflation rate, structural break, oil-importing countries
    JEL: Q43
    Date: 2021–06
  8. By: Herbst, Andrea; Fleiter, Tobias; Neuwirth, Marius; Rehfeldt, Matthias; Wachsmuth, Jakob
    Abstract: Industry is a critical sector for the achievement of European climate goals, in particular specific energy-intensive products/processes (e.g. steel, cement, ethylene, ammonia). A reduction target of over 90% for industry requires a wide variety of reduction options. While the EU Low-Carbon Roadmap 2011 for the industry sector was still limited to energy efficiency, biomass and CCS, the new long-term climate protection strategy includes further options such as electrification, renewable synthetic energy sources, ambitious recycling management, material efficiency along the value chain and innovative manufacturing processes. For many industries, this transition involves fundamental process changes. Against this background, the paper aims to take a closer look at the implications for the individual sectors. In addition, a more in-depth assessment of material efficiency, substitution and recycling measures in the building sector and the use of hydrogen in the chemical and steel sectors is provided. The paper served as a basis for an input to the event "Decarbonizing industry - Energy and CO2 Saving Potentials in the short and longer term" at the EUSEW 2020 (EUSEW 2020) and is based on previous similar works.
    Date: 2021
  9. By: Liang Nie (Ma Yinchu School of Economics, China Academy of Energy); ZhongXiang Zhang (Ma Yinchu School of Economics, China Academy of Energy)
    Abstract: Existing studies have investigated the environmental dividends of substituting high-speed rail for other energy-intensive vehicles from an engineering standpoint, but they have yet to explore the economic effects of high-speed rail and the associated carbon emission reduction benefits. To fill the research gap, we use panel data from 285 Chinese cities between 2004 and 2014, and employ a difference-in-difference model to empirically examine the impact of high-speed rail opening on CO2 emissions. Our results show that the opening of high-speed rail reduces local carbon emissions significantly. This finding is robust and is unaffected by outliers, control group selection, time trends, geography and expectation factors, or endogeneity. The mechanism test reveals that the structure, innovation, and FDI effects are three intermediate influence channels. Further research finds that the emission reduction benefit rises as the intensity of high-speed rail opening climbs the ladder, and high-speed rail service has a spillover effect within an 80-kilometer radius. Moreover, the carbon benefit of the Beijing-Shanghai high-speed rail line far surpasses its carbon footprint, indicating that the line is green. Based on these findings, we recommend that China should support the expansion of high-speed rail in order to reduce carbon emissions in a scientific and responsible manner.
    Keywords: High-speed rail, CO2 emissions, Impact mechanism, Difference-in-difference, China
    JEL: Q54 Q56 O13 R11 P28
    Date: 2021–10
  10. By: Halvor Briseid Storrøsten (Statistics Norway)
    Abstract: This paper investigates environmental policy in the presence of endogenous preferences. The optimal time trajectory is achieved if and only if the consumer is perfectly time-consistent. The suboptimal trajectories do not only differ from the optimal path during the transition between two equilibria, but also the new stationary states differ. A key difference is more pollution in the suboptimal equilibrium. If the consumer is less than perfectly time-consistent, the standard Pigou tax can be complimented with taxes and subsidies to implement the optimal time trajectory. If this option is unavailable to the regulator, a second-best option is a single tax that is above the Pigouvian level. The results in this paper indicate that the integrated assessment models used by the Intergovernmental Panel on Climate Change (IPCC) to derive optimal emission paths may recommend too high carbon emissions.
    Keywords: Regulation; Endogenous preferences; habits
    JEL: H23 H31 D15 Q54
    Date: 2021–10
  11. By: Aljabri, Salwa (Tasmanian School of Business & Economics, University of Tasmania); Raghavan, Mala (Tasmanian School of Business & Economics, University of Tasmania); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This paper studies the impact of oil price shocks on fiscal policy and real GDP in Oman using new unexplored data. We find that an oil price shock explains around 22% and 46% of the variation in the government revenue and GDP, respectively. Decomposing the government revenue and GDP further into petroleum and non-petroleum related components, we find that an oil price shock explains around 26% of the variation in petroleum revenue and 90% of the petroleum-GDP. Though petroleum and non-petroleum GDP respond positively to oil price shocks, government expenditure is not affected by oil prices but is affected by government revenue. The results suggest that the Omani government uses its reserve fund and local and international debt to smooth and reduce the impact of oil price fluctuations
    Keywords: oil price shocks, fiscal policy, GDP, SVAR
    JEL: C32 E17 E62 N15
    Date: 2021
  12. By: Michael Alexeev (Indiana University); Nikita Zakharov (University of Freiburg - Department of Economics)
    Abstract: We investigate the relationship between oil windfalls and income inequality using the subnational data of one of the resource-richest and most unequal countries in the world – Russia. While previous literature has produced contradictory findings due to the use of an aggregate measure of oil rents in mainly cross-national settings, we focus exclusively on the oil rents that accrue to the subnational governments across one country. Our estimation strategy takes advantage of the two unique features of Russian oil taxation: 1) the change in oil-tax policy when sharing oil-extraction taxes with local budgets was discontinued; 2) the oil-tax formula tied directly to the international oil prices allowing to use the oil price shocks as an exogenous change in oil rents. When we look at the period with oil-tax revenues shared with the regional governments, we find that oil windfalls had increased income inequality and benefited the wealthiest quintile of the population in regions with more intense rent-seeking. Further, the positive oil price shocks combined with increased rent-seeking reduced the share of labor income but increased the income share from unidentified sources traditionally attributed to corruption. These effects of oil windfalls disappear after the Russian government discontinued oil-tax revenue sharing with regional governments. Finally, we examine the potential political implications of the rising inequality due to the appropriation of the oil windfalls. We find its positive effect on the frequency of protests associated with grievances among the poor and disadvantaged social groups; this effect, however, exists only in relatively democratic regions.
    Keywords: Oil, Decentralized Revenues, Income Inequality, Corruption, Protest, Russia
    Date: 2021–09
  13. By: Schulz, Felix; Rode, Johannes
    Abstract: We study whether public charging infrastructure drives battery electric vehicle adoption. Our analysis is based on granular, annual information on the location of public charging infrastructure and the battery electric vehicle ownership rate across 356 Norwegian LAU-2 municipalities between 2009 and 2019. We focus on areas in which the first public charging infrastructure was installed in this time period. In these mostly rural areas, the establishment of a first public charging station initiated adoption. We find, on average, an increase of the local electric vehicle ownership rate by 1.5 percentage points or 200% over 5 years. Our results are robust to anticipatory effects. They also remain unaffected from different treatment thresholds: the median number of public chargers in a municipality between 2009 and 2019 or the median density of public charging points per 1,000 inhabitants in the same time frame. While we cannot fully rule out reverse effects, we identify public charging infrastructure to serve as a stimulus to the diffusion of battery electric vehicles.
    Date: 2021
  14. By: Martin FAULQUES (University of Caen-Normandy, CREM-CAEN, UMR CNRS 6211, UFR SEGGAT, esplanade de la paix 14000 Caen (France)); Jean BONNET (University of Caen-Normandy, CREM-CAEN, UMR CNRS 6211, UFR SEGGAT, esplanade de la paix 14000 Caen (France)); Sébastien BOURDIN (EM Normandie Business School, Métis Lab, 9 rue Claude Bloch, 14000 Caen (France)); Marine JUGE (ENGIE); Jonas PIGEON (ENGIE); Charlotte RICHARD (ENGIE)
    Abstract: The development of Renewable Energies(RE)must be stepped upin the coming years if we areto successfullyrealizethe ambitiousenergy transition challenge set by manygovernments across the globe. In this context, we used a Discrete Choice Experiment (DCE) combined with a Geographical Information System (GIS) to assess the willingness of individualsin the French context to switchto a more virtuousenergy mixbasedon three energy sources(wind, photovoltaic and biogas). Our findingsshowthatinhabitants living in areas with the presence of REwith negative externalities(Wind Turbines and Anaerobic Digestion units)tend to have a lower Willingness to Pay(WTP)than other areas, indicatinga principle of territorial distributive justice. In this context, people ask for greaterterritorial equity in the distribution of externalitiessincethey consider they “have already done their part”.Accordingly, our study argues for morepublic policy effort to plan the location of future RE facilitiesin a more equitable way.
    Keywords: Environmental justice, renewable energies, willingness to pay, discrete choice experiment, territory
    Date: 2021–01
  15. By: Burghard, Uta; Breitschopf, Barbara; Wohlfarth, Katharina; Müller, Fabian; Keil, Julia
    Abstract: When paving the way for steps towards the energy transition, aspects of acceptance and perception of society are relevant and partially crucial to be considered for a successful development. In order to help designing elements that are supported by society, this paper considers monetary and non-monetary effects, from society's perspective, on the energy transition. Starting from a literature review, relevant impacts on micro (effects affecting individuals directly), meso (effects that occur at the energy system level) and macro (effects that individuals consider important for society) levels were differentiated. With these findings in mind, a broad quantitative survey with a sample of 300 participants, as well as online workshops with 55 participants, were conducted to investigate perception and judgement of participation in the energy transition. Whether individuals actively participated or not was differentiated in the analysis. The survey revealed that the dynamics of the energy transition, the environmental effects and the increasing energy costs in financial terms and additional burdens were issues for all participants, while environmental and financial aspects were addressed more often by non-participating individuals. In parallel, workshops were held to identify perceived effects of the energy transition in an open format. Most participants had a generally positive attitude towards the energy transition or its impacts, while the majority also saw increasing burdens for society. Compared to non-participating individuals, the participating individuals were more critical of the implementation of the energy transition and of economical role players in the process. Renewable energies are seen as an important element, with active participation advocated predominantly by the participating group. Concerning personal impacts, participating individuals mostly voiced political views and were concerned that the transition was not happening fast enough. The non-participating individuals focused more on negative effects or failures of the energy transition e.g., higher energy prices or more regulations. Nevertheless, there was overall agreement on the necessity of the energy transition. This study showed once again that participation can increase acceptance of the energy transition. Additionally, access to information can increase the willingness of individuals to participate. Further study of personal values could assist in identifying preferences that affect individual responses to the energy transition. Such information could be used to guide design decisions around future energy transition activities.
    Date: 2021
  16. By: Rom\'an P\'erez-Santalla; Miguel Carri\'on; Carlos Ruiz
    Abstract: In the present work we tackle the problem of finding the optimal price tariff to be set by a risk-averse electric retailer participating in the pool and whose customers are price-sensitive. We assume that the retailer has access to a sufficiently large smart-meter dataset from which it can statistically characterize the relationship between the tariff price and the demand load of its clients. Three different models are analyzed to predict the aggregated load as a function of the electricity prices and other parameters, as humidity or temperature. In particular, we train linear regression (predictive) models to forecast the resulting demand load as a function of the retail price. Then we will insert this model in a quadratic optimization problem which evaluates the optimal price to be offered. This optimization problem accounts for different sources of uncertainty including consumer's response and renewable source availability, and relies on a stochastic and risk-averse formulation. Moreover, we consider both standard forward based contracts and the recently introduced power purchase agreement contracts as risk-hedging tools for the retailer. The results are promising as profits are found for the retailer with highly competitive prices and some possible improvements are shown if a better dataset could be produced. A realistic case study and multiple sensitivity analyses have been performed to characterize the risk-aversion behavior of the retailer considering price-sensitive consumers. It has been assumed that the energy procurement of the retailer can be satisfied from the pool and different types of contracts. The obtained results reveal that the risk-aversion degree of the retailer strongly influences contracting decisions, whereas the price sensitiveness of consumers has a higher impact on the selling price offered.
    Date: 2021–10
  17. By: Hao-Lin Shao; Ying-Hui Shao; Yan-Hong Yang
    Abstract: This paper investigates the cointegration between possible determinants of crude oil futures prices during the COVID-19 pandemic period. We perform comparative analysis of WTI and newly-launched Shanghai crude oil futures (SC) via the Autoregressive Distributed Lag (ARDL) model and Quantile Autoregressive Distributed Lag (QARDL) model. The empirical results confirm that economic policy uncertainty, stock markets, interest rates and coronavirus panic are important drivers of WTI futures prices. Our findings also suggest that the US and China's stock markets play vital roles in movements of SC futures prices. Meanwhile, CSI300 stock index has a significant positive short-run impact on SC futures prices while S\&P500 prices possess a positive nexus with SC futures prices both in long-run and short-run. Overall, these empirical evidences provide practical implications for investors and policymakers.
    Date: 2021–10
  18. By: Adam Potter; Rabab Haider; Anuradha M. Annaswamy
    Abstract: As pressures to decarbonize the electricity grid increase, the grid edge is witnessing a rapid adoption of distributed and renewable generation. As a result, traditional methods for reactive power management and compensation may become ineffective. Current state of art for reactive power compensation, which rely primarily on capacity payments, exclude distributed generation (DG). We propose an alternative: a reactive power market at the distribution level. The proposed market uses variable payments to compensate DGs equipped with smart inverters, at an increased spatial and temporal granularity, through a distribution-level Locational Marginal Price (d-LMP). We validate our proposed market with a case study of the New England grid on a modified IEEE-123 bus, while varying DG penetration from 5% to 160%. Results show that our market can accommodate such a large penetration, with stable reactive power revenue streams. The market can leverage the considerable flexibility afforded by inverter-based resources to meet over 40% of reactive power load when operating in a power factor range of 0.6 to 0.95. DGs participating in the market can earn up to 11% of their total revenue from reactive power payments. Finally, the corresponding daily d-LMPs determined from the proposed market were observed to exhibit limited volatility.
    Date: 2021–10
  19. By: Paolo Falbo; Carlos Ruiz
    Abstract: The paper develops a typical management problem of a large power producer (i.e., he can partly influence the market price). In particular, he routinely needs to decide how much of his generation it is preferable to commit to fixed price bilateral contracts (e.g., futures) or to the spot market. However, he also needs to plan how to distribute the production across the different plants under his control. The two decisions, namely the sales-mix and the generation plan, naturally interact, since the opportunity to influence the spot price depends, among other things, by the amount of the energy that the producer directs on the spot market. We develop a risk management problem, since we consider an optimization problem combining a trade-off between expectation and conditional value at risk of the profit function of the producer. The sources of uncertainty are relatively large and encompass demand, renewables generation and the fuel costs of conventional plants. We also model endogenously the price of futures in a way reflecting an information advantage of a large power producer. In particular, it is assumed that the market forecast the price of futures in a naive way, namely not anticipating the impact of the large producer on the spot market. The paper provides a MILP formulation of the problem, and it analyzes the solution through a simulation based on Spanish power market data.
    Date: 2021–10
  20. By: Weber, Jeremy
    Abstract: Pennsylvania law requires that all oil and gas well operators properly decommission their wells at the end of the well’s useful life, an act often referred to as well plugging. Since 1985, it has also required that operators set aside money, a bond, before drilling so as to guarantee funds for the well’s plugging. The law sets bond amounts but gives the Pennsylvania Environmental Quality Board (EQB) the authority to adjust amounts “every two years to reflect the projected costs to the Commonwealth of performing well plugging.” From 1989 to 2020, the Commonwealth has paid to plug more than 3,000 wells, spending $15,100 per well on average and a minimum of $3,400 per well. By comparison, the current bond amount for a conventional well is $2,500 for an operator with few wells and, because of blanket bond provisions, $250 for an operator with 100 wells. Using data on the wells the Commonwealth has paid to plug, this report projects the cost to the Commonwealth of plugging wells in the future and makes three recommendations to the Environmental Quality Board: Adjust the bond amount to $25,000 per conventional well and $70,000 per unconventional well for the 2021-2022 period; Revisit bond amounts every two years to consider new information on plugging costs and to update bond amounts accordingly, and; Discontinue the use of blanket bonds or bond caps.
    Keywords: Oil and gas; wells; plugging; bonding
    JEL: Q48 Q52 Q58
    Date: 2021–06–01
  21. By: Guglielmo Maria Caporale; Abdurrahman Nazif Catik; Gül Serife Huyugüzel Kisla; Mohamad Husam Helmi; Coskun Akdeniz
    Abstract: This paper analyses the effects of oil prices and exchange rates on sectoral stock returns in the BRICS-T countries over the period from 2 January 2001 to 22 March 2021. After estimating a benchmark linear model, the possible presence of structural breaks is investigated using the Bai and Perron (2003) tests, and a state-space model with time-varying parameters is then estimated. The main findings can be summarised as follows. Both the sub-samples and the time-varying estimates indicate a greater role for exchange rate returns. Oil prices have a positive and significant impact on the energy sector in all countries except India; a negative and significant one on the financial sector of Brazil, Russia, India, and South Africa; no effect on the transportation sector of Brazil, China, and South Africa, a negative one on those of India and Turkey, and a positive one in the case of Russia. The vulnerability of energy-dependent sectors to global fluctuations implies that appropriate energy policies should be adopted to reduce risk.
    Keywords: oil prices, exchange rates, sectoral stock returns, structural breaks, time-varying parameters
    JEL: G12 C50 C58
    Date: 2021
  22. By: bouchoucha, najeh
    Abstract: The purpose of this study is to examine the interaction effects of Foreign Direct investment and institutional quality on environmental degradation in 17 Middle East and North African (MENA). We use ordinary least squares (OLS), Fixed effects (FE) random effects (RE) and system generalized method of moments (GMM) for the period 1996–2018. Six dimensions of governance are used : control of corruption, a sound voice and accountability, rule of Law, regulatory Quality, Govenance effectiviness and Political Stability. First, our findings show that FDI increases CO2 emissions in the MENA countries. Second, the effect of FDI on environmental degradation can be ameliorated through the presence of good institutional quality. In fact, FDI accompagnied by good governance could reduce the adverse effects of co2 emissions in MENA countries. Therefore, MENA countries should implement efficiently good institutions that will help to reduce carbon dioxide emissions.
    Keywords: FDI, CO2 emissions, institutional quality, GMM Panel, MENA countries.
    JEL: K0
    Date: 2021–10–04
  23. By: Vineet Jagadeesan Nair; Venkatesh Venkataramanan; Rabab Haider; Anuradha Annaswamy
    Abstract: With increasing penetration of DERs in the distribution system, it is critical to design market structures that enable smooth integration of DERs. A hierarchical local electricity market (LEM) structure is proposed in this paper with a secondary market (SM) at the lower level representing secondary feeders and a primary market (PM) at the upper level, representing primary feeders, in order to effectively use DERs to increase grid efficiency and resilience. The lower level SM enforces budget, power balance and flexibility constraints and accounts for costs related to consumers, such as their disutility, flexibility limits, and commitment reliability, while the upper level PM enforces power physics constraints such as power balance and capacity limits, and also minimizes line losses. The hierarchical LEM is extensively evaluated using a modified IEEE-123 bus with high DER penetration, with each primary feeder consisting of at least three secondary feeders. Data from a GridLAB-D model is used to emulate realistic power injections and load profiles over the course of 24 hours. The performance of the LEM is illustrated by delineating the family of power-injection profiles across the primary and secondary feeders as well as corresponding local electricity tariffs that vary across the distribution grid. Together, it represents an overall framework for a Distribution System Operator (DSO) who can provide the oversight for the entire LEM.
    Date: 2021–10
  24. By: Jan J. J. Groen; Adam I. Noble
    Abstract: Oil prices have increased by nearly 60 percent since the summer of 2020, coinciding with an upward trend in global inflation. If higher oil prices are the result of constrained supply, then this could pose some stagflation risks to the growth outlook—a concern reflected in a June Financial Times article, “Why OPEC Matters.” In this post, we utilize the demand and supply decomposition from the New York Fed’s Oil Price Dynamics Report to argue that most of the oil price increase over the past year or so has reflected improving global demand expectations. We then illustrate what these changing global demand expectations might mean for near-term global inflation developments.
    Keywords: oil prices; global inflation
    JEL: E2 F00 G1
    Date: 2021–10–04
  25. By: Brühl, Volker
    Abstract: The "European Green Deal" stipulates that the EU will become climate-neutral by 2050. This transformation requires enormous investments in all major sectors including energy, mobility, industrial manufacturing, real estate and farming. Although the EU Commission has announced that a total of EUR 1 trillion will be invested into the green transformation of the European economy over the next ten years, the majority of the investments must be financed by the private sector. Alongside many factors affecting a successful implementation of the Green Deal, a regulatory framework for the financial industry has to be established to facilitate the financing of sustainable investments. To that end, the European Sustainable Finance Strategy lays the foundation for a complex set of different measures that have been launched in recent years. This article provides a comprehensive overview of key regulatory initiatives such as the taxonomy regulation, the disclosure frameworks for both corporates and financial institutions and other aspects of financial market regulation that have already significantly improved the regulatory framework for sustainable finance. Nevertheless, some additional instruments could be considered, such as a reform of top management remuneration or the provision of tax incentives for green investments in the real economy, and these are briefly discussed.
    JEL: G10 G20
    Date: 2021
  26. By: Adélie Ranville (GEM - Grenoble Ecole de Management, USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Anne-Lorene Vernay (GEM - Grenoble Ecole de Management)
    Date: 2021–05–03
  27. By: Steven Campbell; Yichao Chen; Arvind Shrivats; Sebastian Jaimungal
    Abstract: Here, we develop a deep learning algorithm for solving Principal-Agent (PA) mean field games with market-clearing conditions -- a class of problems that have thus far not been studied and one that poses difficulties for standard numerical methods. We use an actor-critic approach to optimization, where the agents form a Nash equilibria according to the principal's penalty function, and the principal evaluates the resulting equilibria. The inner problem's Nash equilibria is obtained using a variant of the deep backward stochastic differential equation (BSDE) method modified for McKean-Vlasov forward-backward SDEs that includes dependence on the distribution over both the forward and backward processes. The outer problem's loss is further approximated by a neural net by sampling over the space of penalty functions. We apply our approach to a stylized PA problem arising in Renewable Energy Certificate (REC) markets, where agents may rent clean energy production capacity, trade RECs, and expand their long-term capacity to navigate the market at maximum profit. Our numerical results illustrate the efficacy of the algorithm and lead to interesting insights into the nature of optimal PA interactions in the mean-field limit of these markets.
    Date: 2021–10
  28. By: Meergans, Franziska; Aue, Christina; Knieper, Christian; Kochendörfer, Sascha; Lenschow, Andrea; Pahl-Wostl, Claudia
    Abstract: This paper constitutes one of six analyses of cross-sectoral challenges in water governance. These have been conducted as part of the STEER research project and results are published in separate analyses and position papers. While the agricultural sector and food industry of the region of Weser-Ems in Lower Saxony have brought about economic prosperity, they have also posed challenges to the environment, and water quality in particular. Intensive animal farming is considered the main source of nitrate pollution in groundwater, a trend that has been further reinforced by the promotion of non-fossil fuel energy sources and increased biogas production in the region. Against this backdrop, coordination of the water, (bio)energy and agricultural sectors is key to establishing Integrated Water Resources Management (IWRM) in the region and thereby reducing nitrate levels in the groundwater. This paper is based on the analysis of coordination and cooperation among local and regional stakeholders which takes account of i) legal and regulatory structures, ii) water management processes and iii) the socio-ecological conditions. It shows that groundwater protection in the region of Weser-Ems has for two decades been characterised by the same trade-off between the barely coordinated policies of the water, (bio)energy and agricultural sectors. The problem thus remains as pressing as ever. The lack of sufficient coordination between Germany's Renewable Energy Act (EGG) and its Fertiliser Ordinance (DüV) is inconsistent with growing international recognition of the need for coherent and integrated policy solutions to the management of natural resources such as groundwater. For many years, the German agricultural policy, of central importance for water resources management, was geared solely to profitability in agriculture, neglecting the considerable social and environmental costs of this approach. It is not yet possible to gauge the extent to which the amendment of the Fertiliser Ordinance in 2020 and the designation of nitrate vulnerable zones have led to effective integration. In order to reduce nitrate pollution in the region of Weser-Ems and similar regions of Germany in the long term, we make the following recommendations in this paper: * improve legislative coordination in the water, energy and agricultural sectors, * expand and promote successful (local) projects (e.g. whole-farm approach), * transform intensive farming into business models combining profitability with ecological compatibility (e.g. organic farming), * support this by integrating practical knowledge into the development of new policy instruments, and * elevate water protection issues in agricultural training.
    Date: 2020
  29. By: Fatica, Serena (European Commission); Panzica, Roberto (European Commission)
    Abstract: Using data on institutional investors' bond holdings, we investigate the resilience of green bonds to the COVID-19 shock in a difference-in-differences framework. We find that during the COVID outbreak green bonds experience lower sales, on average, while in normal times no significant differences emerge compared with ordinary bonds. The result is robust across different investor classes and is not driven by those that have a longer-term investment horizon. Furthermore, we find that sustainability-oriented funds sell less of green bonds than their peers without a sustainability mandate. We also document that the ownership of green fixed income securities is more concentrated than that of comparable conventional bonds, and that concentration has increased in the first quarter of 2020.
    Keywords: Sustainable finance, climate change, green bonds, institutional investors
    JEL: G12 G20 Q52 Q53 Q54
    Date: 2021–08
  30. By: Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The objective of this study is to evaluate: (i) the effects of infrastructures on CO2 emission and (ii) how trade openness and governance contribute to mitigating these effects. The results from the system GMM methodology for 36 African countries between the 2003-2019 period show that infrastructural development exacerbates CO2 emission in Africa. This result is robust across different types of infrastructural development indexes. When the indirect effect regressions are carried out by interacting governance and trade openness with the different infrastructural development variables, the following results are obtained. Firstly, infrastructural development interacts with governance producing a positive net effect, up to a governance threshold estimate of 0.532 when the positive net effect is nullified. Secondly, infrastructures interact with trade openness producing a negative net effect up to a trade openness threshold of 78.066914 (% of GDP) when the negative net effect is nullified. Positive and negative synergy effects are also apparent. Practical policy implications are discussed based on the results obtained.
    Keywords: Infrastructures, CO2, trade openness, governance, Africa, System GMM
    JEL: N67 N77 C23 Q56
    Date: 2021–01
  31. By: Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon); Vanessa S. Tchamyou (Yaoundé, Cameroon)
    Abstract: This paper measures the macroeconomic impact of recent political crisis, protest and uprisings in Africa with the generalized synthetic control method and evaluates the role played by natural resource dependence on the modulation of the impact. We find that political crisis, protests and uprisings have a significant and negative impact on economic growth while the impact is positive on investment and price level. For economic growth, the deviation of the actual series from the counterfactual is negative, instantaneous, persistent and highly significant; indicating non-negligible costs of the shock. Indeed, dependence on natural resources amplifies the negative effect of political crisis, protests and uprisings on GDP. Finally, the more the treated country depends on natural resources, the more it becomes resilient from the investment losses caused by political crisis.
    Keywords: political conflicts; economic growth; Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2021–01
  32. By: Guglielmo Maria Caporale; Abdurrahman Nazif Catik; Mohamad Husam Helmi; Coskun Akdeniz; Ali Ilhan
    Abstract: This paper examines the effects of the COVID-19 pandemic on stock returns, CDS and economic activity in the US and the five European countries (the UK, Germany, France, Italy, and Spain) which have been most affected. The sample period covers the dates from the first confirmed COVID-19 cases in these countries to February 19, 2021. Specifically, we estimate first benchmark linear VAR models and then, given the evidence of parameter instability, TVP-VAR models with stochastic volatility which are ideally suited to capturing the changing dynamics in both financial markets and the real economy. The empirical findings can be summarised as follows. The linear VAR responses of electricity consumption (a proxy for real economic activity) to a one-standard-deviation shock to the number of COVID-19 cases are statistically insignificant, except for France, whilst the CDS ones are positive and significant only in a few periods, and there are very mixed results for those of stock returns. As for the TVP-VAR results, these indicate that COVID-19 cases had a negative and significant effect on economic activity in all countries in the early stages of the pandemic (especially in Italy), and a positive one on CDS at the same time (with cross-country differences). Finally, the negative impact on stock markets was felt only initially and it had tapered off by mid-April 2020.
    Keywords: Covid-19, stock markets, CDS, economic activity, TVP-VAR
    JEL: G10 G14 G15
    Date: 2021
  33. By: Dirk Bethmann (Korea University; Department of Economics; Anam-dong, Sungbuk-gu; Seoul 02841)
    Abstract: Newton’s Theorem is used derive a formular for the fractional moment of the binomial distribution. The formular is general enough to handle a continuous number of draws and thereby facilitates the analysis of representative agent models where discrete quantities are typically reflected by continuous variables. An application of the formular illustrates that it is easily implemented and can be quickly calculated using standard mathematical software.
    Keywords: Uncertain Paternity, Binomial Distribution, Expected Power Utility, Fractional Moment, Newton’s Theorem.
    JEL: D10 J11 J13
  34. By: Matthes, Jürgen; Schaefer, Thilo
    Abstract: Trotz großer Hoffnungen war die Exportperformance von deutschen Gütern zur Erzeugung erneuerbarer Energien enttäuschend. Dagegen baut China beständig seine Exportmarktanteile aus. Dies überrascht nicht, wenn ein genauerer Blick auf die Determinanten der deutschen Wettbewerbsfähigkeit bei diesen Gütern gelenkt wird. Für die Zukunft muss die Politik daraus die richtigen Lehren ziehen und prüfen, wo langfristig komparative Vorteile und Exportchancen liegen und wo eher nicht.
    Date: 2021
  35. By: Grimm, Veronika; Janser, Markus (Institute for Employment Research (IAB), Nuremberg, Germany); Stops, Michael (Institute for Employment Research (IAB), Nuremberg, Germany)
    Abstract: "The introduction of hydrogen technologies is regarded as an important step towards a climate-neutral economy. Their utilization is expected to increase significantly in the coming years. Based on analyses of job ads published by the JOBBÖRSE of the German Federal Employment Agency, this report shows that the demand for skills directly referring to hydrogen technologies is already visible on the labor market. Furthermore, the report shows how these skills are related with the requirement levels of the job ads where these skills occurred, how they are regional distributed and how they are related to the local labor market situation." (Author's abstract, IAB-Doku) ((en))
    Keywords: Bundesrepublik Deutschland ; Wasserstofftechnik ; Berufsgruppe ; Kompetenzprofil ; Energiewirtschaft ; Jobbörse ; Klimaschutz ; Qualifikationsanforderungen ; Stellenanzeige ; Arbeitskräftenachfrage ; technische Entwicklung ; 2019-2019
    Date: 2021–06–22
  36. By: Shibly Shahrier (Research Institute for Humanity and Nature); Koji Kotani (School of Economics and Management, Kochi University of Technology); Yoshinori Nakagawa (School of Economics and Management, Kochi University of Technology)
    Abstract: Climate change has become a major threat to existence of humankind on earth. Studies demonstrate that climate change gets exacerbated and people become nonprosocial with urbanization (Ehrlich et al., 2012, Wigginton et al., 2016, Shahrier et al., 2016, 2017, Jingchao et al., 2021). It is hypothesized that people’s cooperation on climate change declines as they become nonprosocial with urbanization. To examine the hypothesis, we implement a survey experiment consisting of climate donation (CD) and social value orientation (SVO) games in three areas of a developing country, Bangladesh: (i) rural, (ii) semiurban and (iii) urban ones. In CD game, a respondent splits a fixed endowment between herself and a donation to climate change countermeasures. The analysis reveals that the number of nonprosocials is higher in the semiurban and urban areas than in the rural area, and nonprosocials donate less than do prosocials. It also shows that education, belief in human-induced climate change and natural disasters’ experiences increase the donations. However, the magnitudes of the increases are less than the magnitudes of the decline in donations associated with urbanization and SVO from prosocials to nonprosocials. Overall, this research suggests that cooperation on climate change shall be compromised along with further urbanization, and a new paradigm, such as vision and/or core values for society development and education, will be necessary to counter such a trend.
    Keywords: Cooperation on climate change, urbanization, prosociality, culture and evolution
    Date: 2021–09

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