nep-ene New Economics Papers
on Energy Economics
Issue of 2023‒05‒29
sixty papers chosen by
Roger Fouquet
National University of Singapore

  1. The International Diffusion of Climate Policy: Theory and Evidence By Dolphin, Geoffroy; Pollitt, Michael G.
  2. The People and the Experts: Alternative Views on Economic Affairs By William Nordhaus; Douglas Rivers
  3. The Effect of Income on Vehicle Demand: Evidence from China’s New Vehicle Market By Shen, Chang; Linn, Joshua
  4. Roadblock or Accelerator? The Effect of Electric Vehicle Subsidy Elimination By Lohawala, Nafisa
  5. Distributed renewable energy in Colombia: Unlocking private investment for non-interconnected zones By Lylah Davies; Deger Saygin
  6. A Discounting Rule for the Social Cost of Carbon By Newell, Richard G.; Pizer, William; Prest, Brian C.
  7. The Effect of Changing Marginal-Cost to Physical-Order Dispatch in the Power Sector By Gutiérrez-Meave, Raúl; Rosellón, Juan; Sarmiento, Luis
  8. Geoeconomics, Structural Change and Energy Use in Iran: A SAM-Based CGE Analysis with Some Geoeconomic and Geopolitical Considerations By Khan, Haider
  9. A hybrid model for day-ahead electricity price forecasting: Combining fundamental and stochastic modelling By Mira Watermeyer; Thomas M\"obius; Oliver Grothe; Felix M\"usgens
  10. Intensity-based Rebating of Emissions Pricing Revenues By Böhringer, Christoph; Fischer, Carolyn; Rivers, Nicholas
  11. EROI Minimum et Croissance Economique By Victor Court; Fizaine Floriane
  13. Intangible assets, the digitalization of production and the development - energy nexus By Knauss, Steven
  14. Breath, Love, Walk? The impact of mindfulness interventions on climate policy support and environmental attitudes By Julie Bayle Cordier; Loïc Berger; Rayan Elatmani; Massimo Tavoni
  15. A Heat-Jarrow-Morton framework for energy markets: a pragmatic approach By Matteo Gardini; Edoardo Santilli
  16. What are Large Global Banks Doing About Climate Change? By Daniel O. Beltran; Pinar Uysal
  17. STraM: a framework for strategic national freight transport modeling By Steffen Jaap Bakker; E. Ruben van Beesten; Ingvild Synn{\o}ve Brynildsen; Anette Sandvig; Marit Siqveland; Asgeir Tomasgard
  18. Have the Effects of Shocks to Oil Price Expectations Changed?: Evidence from Heteroskedastic Proxy Vector Autoregressions By Martin Bruns; Helmut Lütkepohl
  19. The Mortality Effects of Winter Heating Prices By Janjala Chirakijja; Seema Jayachandran; Pinchuan Ong
  20. Vehicle Attribute Tradeoffs and the Distributional Effects of US Fuel Economy and Greenhouse Gas Emissions Standards By Leard, Benjamin; Linn, Joshua; Springel, Katalin
  21. Emissions Standards and Electric Vehicle Targets for Passenger Vehicles By Linn, Joshua
  22. Understanding the Resistance to Carbon Taxes: A Case Study of Sweden By Ewald, Jens; Sterner, Thomas; Sterner, Erik
  23. Health Implications of Building Retrofits: Evidence from a Population-Wide Weatherization Program By Steffen Künn; Juan Palacios
  25. The Value of Advanced Energy Funding: Analysis for Active Legislative Discussion By Cleary, Kathryne; Funke, Christoph; Witkin, Steven; Shawhan, Daniel
  26. The Ban on Long-Term Natural Gas Contracts for the European Union: A Double-Edged Sword? By Zlata Sergeeva
  27. Gestión integral de las baterías fuera de uso de vehículos eléctricos en el marco de una estrategia de economía circular By Zagorodny, Juan Pablo
  28. Contracting Matters: Hedging Producers and Consumers with a Renewable Energy Pool By Karsten Neuhoff; Fernanda Ballesteros; Mats Kröger; Jörn C. Richstein
  29. Clean innovation and heterogeneous financing costs By Emanuele Campiglio; Alessandro Spiganti; Anthony Wiskich
  30. Plugging Abandoned Wells: Effects of the Draft Energy Infrastructure Act By Raimi, Daniel
  31. Carbon Price Forecasting with Quantile Regression and Feature Selection By Tianqi Pang; Kehui Tan; Chenyou Fan
  32. Is Power to Gas always Beneficial ? The Implications of Ownership Structure By Camille Megy; Olivier Massol
  33. Impact of the global fear index (covid-19 panic) on the S&P global indices associated with natural resources, agribusiness, energy, metals and mining: Granger Causality and Shannon and Rényi Transfer Entropy By Celso-Arellano, Pedro; Gualajara, Victor; Coronado, Semei; Martinez, Jose N.; Venegas-Martínez, Francisco
  34. Evaluation of Power Sector Emissions Reduction Pathways By Witkin, Steven; Shawhan, Daniel
  35. Effects of electricity pricing schemes on household energy consumption. A meta-analysis of academic and non-academic literature By Khanna, Tarun M.; Bruns, Stephan; Miersch, Klaas; Minx, Jan C.
  36. Effectiveness and Heterogeneous Effects of Purchase Grants for Electric Vehicles By Peter Haan; Adrián Santonja; Aleksandar Zaklan
  37. Documento de Análisis Regulatorio y Económico Sectorial - ARES Colombia 2022 By Juan Benavides; Marthe E. Delgado-Rojas; Felipe Castro; Alejandra Fonseca; Sebastián Bernal
  38. The Energy-Price Channel of (European) Monetary Policy By Gökhan Ider; Alexander Kriwoluzky; Frederik Kurcz; Ben Schumann
  39. Targeted Regulation for Reducing High-Ozone Events By Linn, Joshua; Holt, Christopher
  40. Road Traffic Flow and Air Pollution Concentrations: Evidence from Japan By NISHITATENO Shuhei; Paul J. BURKE; ARIMURA Toshi H.
  41. Warming the MATRIX: a Climate Assessment under Uncertainty and Heterogeneity By Bazzana, Davide; Rizzati, Massimiliano; Ciola, Emanuele; Turco, Enrico; Vergalli, Sergio
  42. Improving flow-based market coupling by integrating redispatch potential - Evidence from a large-scale model By Bucksteeg, Michael; Voswinkel, Simon; Blumberg, Gerald
  43. Smart Thermostats, Automation, and Time-Varying Prices By Blonz, Joshua; Palmer, Karen; Wichman, Casey; Wietelman, Derek C.
  44. Carbon pricing and inflation volatility By Daniel Santabárbara; Marta Suárez-Varela
  45. Effects of 2017 US Federal Tax Overhaul on the Energy Sector By Cunningham, Brandon; Lu, Chenxi; Toder, Eric; Williams III, Roberton C.
  46. Impacts of Global Climate Policies on Middle Eastern Oil Exporters: A Review of Economic Implications and Mitigation Strategies. By Salaheddine Soummane; Aisha Al-Sarihi
  47. Does green transition promote green innovation and technological acquisitions? By Udichibarna Bose; Wildmer Daniel Gregori; Maria Martinez Cillero
  48. Political Strategies to Overcome Climate Policy Obstructionism By Sugandha Srivastav; Ryan Rafaty
  49. Validation of a Computer Code for the Energy Consumption of a Building, with Application to Optimal Electric Bill Pricing By Merlin Keller; Guillaume Damblin; Alberto Pasanisi; Mathieu Schumann; Pierre Barbillon; Fabrizio Ruggeri
  50. Climate Stress Testing By Viral V. Acharya; Richard Berner; Robert Engle; Hyeyoon Jung; Johannes Stroebel; Xuran Zeng; Yihao Zhao
  51. Toward net 0: Digital CO2 proofs for the sustainable transformation of the European economy By Leinauer, Christina; Körner, Marc-Fabian; Strüker, Jens
  52. Border Carbon Adjustments without Full (or Any) Carbon Pricing By Campbell, Erin; Pizer, William
  53. The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels By Joshua Blonz; Brigitte Roth Tran; Erin Troland
  54. Greening our Laws: Revising Land Acquisition Law for Coal Mining in India By Sugandha Srivastav; Tanmay Singh
  55. U.S. Banks’ Exposures to Climate Transition Risks By Hyeyoon Jung; João A. C. Santos; Lee Seltzer
  56. How Responsive Are New Car Buyers in India and China to Factors Driving Fuel Consumption? By Prateek Bansal; Rubal Dua
  57. The Role of Carbon Pricing in Promoting Material Recycling: A Model of Multi-Market Interactions By Xi Sun
  58. Damage functions in integrated assessment models (IAMs) map changes in climate to economic impacts and form the basis for most of estimates of the social cost of carbon. Implicit in these functions lies an unwarranted assumption that restricts the spatial variation (Svar) and temporal variability (Tvar) of changes in climate to be null. This could bias damage estimates and the climate policy advice from IAMs. While the effects of Tvar have been studied in the literature, those of Svar and their interactions with Tvar have not. Here we present estimates of the economic costs of climate change that account for both Tvar and Svar, as well as for the seasonality of damages across sectors. Contrary to the results of recent studies which show little effect that of Tvar on expected losses, we reveal that ignoring Svar produces large downward biases, as warming is highly heterogeneous over space. Using a conservative calibration for the damage function, we show that previous estimates are biased downwards by about 23-36%, which represents additional losses of about US$1, 400-US$2, 300 billion by 2050 and US$17-US$28 trillion by the end of the century, under a high emissions scenario. The present value of losses during the period 2020-2100 would be larger than reported in previous studies by $47-$66 trillion or about ½ to ¾ of annual global GDP in 2020. Our results imply that using global mean temperature change in IAMs as a summary measure of warming is not adequate for estimating the costs of climate change. Instead, IAMs should include a more complete description of climate conditions. By Francisco Estrada; Richard S.J. Tol; Wouter Botzen
  59. Discounting for Public Benefit-Cost Analysis By Li, Qingran; Pizer, William
  60. Modeling CO2 Pipeline Systems : An Analytical Lens for CCS Regulation By Adrien Nicolle; Diego Cedreros; Olivier MASSOL; Emma Jagu Schippers

  1. By: Dolphin, Geoffroy (Resources for the Future); Pollitt, Michael G.
    Abstract: Globally coordinated climate action has resulted in suboptimal GHG emission reductions and unilateral, second-best, climate policies have so far provided the bulk of these reductions. Using an open economy general equilibrium framework, we propose that the adoption of climate policy is partly determined by a process of policy diffusion whereby actions of foreign jurisdictions affect domestic conditions and policy decisions. We focus on diffusion mechanisms related to (i) access to improved foreign abatement technology and (ii) policy adoption by foreign jurisdictions. We apply our framework to the adoption of feed-in tariffs (FiT), renewable portfolio standards (RPS) and carbon pricing mechanisms. Overall, results highlight differences among policies. The evidence suggests that improved access to climate change mitigation technologies leads to earlier adoption of RPS and carbon taxes but not FiT or an emissions trading system (ETS). It also suggests that countries with common legacy institutions influence each other's adoption decisions in the case of FiT.
    Date: 2021–08–09
  2. By: William Nordhaus (Cowles Foundation, Yale University); Douglas Rivers (Stanford University)
    Abstract: Are speculators driving up oil prices? Should we raise energy prices to slow global warming? The present study takes a small number of such questions and compares the views of economic experts with those of the public. This comparison uses a panel of 2000+ respondents from YouGov with the views of the panel of experts from the IGM at the Chicago Booth School. We found that most of the US population is at best modestly informed about major economic questions and policies. The low level of knowledge is generally associated with he intrusion of ideological, political, and religious views that challenge or deny the current economic consensus. The intruding factors are highly heterogeneous and are much more diverse than the narrowness of public political discourse would suggest. Many of these findings have been established for scientific subjects, but they appear to be equally important for economic views.
    Date: 2023–05
  3. By: Shen, Chang; Linn, Joshua (Resources for the Future)
    Abstract: Growth of private vehicle ownership in low-income and emerging countries is a dominant factor in forecasts of global oil demand and greenhouse gas emissions. Countries such as China are expected to experience rapid income growth over the next few decades, but little causal evidence exists on its effect on car ownership in these countries. Using city-level data on new car sales and income from 2005 to 2017, and using export-led growth to isolate plausibly exogenous income variation, we estimate an elasticity of new car sales to income of about 2.5. This estimate indicates that recent projections of vehicle sales in China have understated actual sales by 36 percent and carbon dioxide emissions by 18 million metric tons in 2017. The results suggest that, to meet its climate objectives, China’s climate policies will need to be substantially more aggressive than previous forecasts indicate.
    Date: 2021–06–24
  4. By: Lohawala, Nafisa (Resources for the Future)
    Abstract: Federal and state governments in many countries subsidize the early adopters of electric vehicles (EVs). These programs often use quotas or deadlines to phase out the subsidies, which can create dynamic incentives for car manufacturers. Since most of the literature studies the effect of introducing subsidies on market outcomes in static settings, little research has addressed the dynamic effects of subsidy-capping designs. This paper explores those effects in the US vehicle market. I develop a structural model of consumers’ vehicle choices and manufacturers’ pricing decisions in the US automobile industry. I then estimate the model using comprehensive data on new vehicle registrations, prices, characteristics, and subsidies in 30 states between 2011 and 2017. Based on the primitives generated from the model, I conduct counterfactual simulations to compare three designs: a marketwide deadline, a per-manufacturer deadline, and a per-manufacturer quota. The simulations show that for a given government expenditure, the quota leads to up to 18 percent lower EV sales than the deadlines. Moreover, each design influences the sales of conventional vehicles, consumer surplus, manufacturer profits, and liquid fuel consumption differently.
    Date: 2023–05–05
  5. By: Lylah Davies; Deger Saygin
    Abstract: Colombia has prioritised the use of renewable energy to expand and improve electricity services for its population in zones non-interconnected to the national grid. Recent policies and regulations have supported this ambition with successive measures to strengthen investment conditions for distributed renewable energy, like standalone solar photovoltaic (PV) solutions and hybrid solar PV mini-grids. Still, the distributed renewable energy market in non-interconnected zones is relatively immature, reflected by the high costs for connecting new users. New business and financing models will be critical to bringing down the cost of renewable energy technologies, accessing private equity and debt in larger volumes, and ultimately progressing towards replacing existing inefficient and polluting diesel generation systems. Building on international experiences, this paper discusses approaches to strengthening investment conditions, looking at support mechanisms and de-risking instruments used elsewhere, which can help bridge the financing gap in Colombia.
    Keywords: Blended Finance, Distributed Energy Sources, Energy Access, Finance and Investment, Renewable Energy, Rural Electrification
    JEL: G20 H32 H54 Q40 Q42 Q48 Q52 Q56 H71
    Date: 2023–05–17
  6. By: Newell, Richard G. (Resources for the Future); Pizer, William (Resources for the Future); Prest, Brian C. (Resources for the Future)
    Abstract: We develop a discounting rule for estimating the social cost of carbon (SCC) given uncertain economic growth. Diminishing marginal utility of income implies a relationship between the discount rate term structure and economic growth uncertainty. In the classic Ramsey framework, this relationship is governed by parameters reflecting pure time preference and the elasticity of the marginal utility of consumption; yet disagreement remains about the values of these parameters. We calibrate these parameters to match empirical evidence on both the future interest rate term structure and economic growth uncertainty, while also maintaining consistency with discount rates used for shorter-term benefit-cost analysis. Such an integrated approach is crucial amidst growth uncertainty, where growth is also a key determinant of climate damages. This results in an empirically driven, stochastic discounting rule to be used in estimating the SCC that also accounts for the correlation between climate damage estimates and discount rates.
    Date: 2021–06–18
  7. By: Gutiérrez-Meave, Raúl; Rosellón, Juan; Sarmiento, Luis
    Abstract: The analysis of local environmental policies is essential when evaluating the consistency of national public policies vis-Ã -vis the compliance of global agreements to reduce climate change. This study explores one of these policies; the 2021 Mexican reform to change electric power dispatch from a marginal-cost-based to a command and control physical system prioritizing power generation from the state power company. The new law forces the dispatch of the state company power facilities before private power producers. We use the GENeSYS-MOD techno-economic model to determine the reform’s effect on the power system’s generation mix, cost structure, and anthropogenic emissions. For this, we optimize the model under three distinct scenarios; a business-as-usual scenario with no changes to the merit order, a model with the new physical order dispatch, and an additional case where in addition to the shift to the physical dispatch, we reduce the price of fuel oil below natural gas prices to simulate the current behavior of the power company. It is relevant to note that we optimize the energy system without any assumption regarding renewable targets or climate goals because of political uncertainty and the need of pinpoint the effect of the merit order change while avoiding possible variations in the state-space arising from other constraints. Our results show that by 2050, the new dispatch rule increases the market power of the state company to 99% of total generation and decreases the share of renewable technologies in the generation mix from 72%to 51%. Additionally, cumulative power sector emissions increase by 563 Mega-tons of CO2, which with the current cost of carbon in the European Emissions Trading System translates to around 36 billion Euros.
    Date: 2021–07–16
  8. By: Khan, Haider
    Abstract: In this paper we present a structural CGE model for analyzing the energy situation in Iran and to draw some tentative economic policy and geopolitical conclusions. An important feature of the Iranian economy is its constant intensification of energy use per unit of labor. At the same time, Iran shows only slow improvement in energy intensity i.e. the use of energy per unit of output. Our structural computable general equilibrium (CGE) model for Iran is based on 3- aggregate productive activities input-output structure- agriculture, energy and industry ---within a social accounting matrix for Iran. Four simulation exercises are conducted using this model--- industrial investment demand increase, industrial wage increase, exchange rate depreciation, and government spending increase in industry. Our results show that structural change associated with raising industrial labor productivity and employment share are likely to result in simultaneous intensification of per worker energy-use and slight reduction of energy productivity in Iran. Industrial wage increase can create cost-push inflation and output contraction through a decrease in input use and increase in imports. Exchange rate devaluation is expansionary. Furthermore, when industrial output is insulated from foreign-domestic relative price effects, devaluation too becomes contractionary and wage increase results in a slight contraction in real GDP due to the "forced saving" effect. The model illustrates some of policy challenges Iran faces in its attempt to achieve "green growth" objective with high level of employment. To implement socially beneficial, capabilities- enhancing wage-led growth, Iran has to first successfully rebalance from its export-oriented growth path, which might require the government providing better social safety net for its citizens and increase their purchasing power across the board and generate further productive capacity in the Agricultural sector rather than generate inflation by increasing just the industrial sector wage. This would require a careful crafting of guaranteed income esp. for the Agricultural sector and government programs and incentives for increasing supply and productivity by enhancing both physical infrastructure, technical change and human capabilities. Geopolitically, Iran’s current competition with Saudi Arabia and Turkey diverts valuable economic resources from development to political purposes. Satisfying legitimate security concerns rationally while reorienting the geopolitical concerns to a peaceful commercial relation to North and East of Iran including Japan will lead to much more stable and prosperous economic conditions than Iran experiences at present. However, provocations such as the June 2017 Qatar crisis provoked by Saudi Arabia and its “Islamic NATO” alliance makes geopolitical complexities more acute for Iran. Still Iran needs to avoid sanguinary conflicts and try to isolate Saudi Arabia politically. Geopolitical, 2023 moves for reconciliation via China and Russia seem to indicate a northward and eastward direction of energy and other related policies of both Iran and Saudi Arabia.
    Keywords: Energy , Geoeconomics, geopolitics, Iran, Saudi Arabia, Russia, China, CGE modeling
    JEL: F4 F51 Q4
    Date: 2023–04–15
  9. By: Mira Watermeyer; Thomas M\"obius; Oliver Grothe; Felix M\"usgens
    Abstract: The accurate prediction of short-term electricity prices is vital for effective trading strategies, power plant scheduling, profit maximisation and efficient system operation. However, uncertainties in supply and demand make such predictions challenging. We propose a hybrid model that combines a techno-economic energy system model with stochastic models to address this challenge. The techno-economic model in our hybrid approach provides a deep understanding of the market. It captures the underlying factors and their impacts on electricity prices, which is impossible with statistical models alone. The statistical models incorporate non-techno-economic aspects, such as the expectations and speculative behaviour of market participants, through the interpretation of prices. The hybrid model generates both conventional point predictions and probabilistic forecasts, providing a comprehensive understanding of the market landscape. Probabilistic forecasts are particularly valuable because they account for market uncertainty, facilitating informed decision-making and risk management. Our model delivers state-of-the-art results, helping market participants to make informed decisions and operate their systems more efficiently.
    Date: 2023–04
  10. By: Böhringer, Christoph; Fischer, Carolyn (Resources for the Future); Rivers, Nicholas
    Abstract: Carbon pricing policies worldwide are increasingly coupled with direct or indirect subsidies where emissions pricing revenues are rebated to the regulated entities, particularly for emission-intensive and trade-exposed firms. We analyze the incentives created by two novel forms of rebating that reward additional emission intensity reductions: one given in proportion to output (intensity-based output rebating, IBOR) and another that rebates a share of emissions payments made (intensity-based emissions rebating, IBER). We contrast them with more common approaches like output-based rebating (OBR), abatement-based rebating (ABR), or lump-sum rebating (LSR). Comparing revenue-neutral schemes, given the same emissions price, IBOR incentivizes the most intensity reductions, while ABR incentivizes the most output reductions, and OBR puts the least pressure on output (and emissions); IBER lies in between by implicitly subsidizing emissions while incentivizing intensity reductions. We supplement partial equilibrium theoretical analysis with numerical simulations to assess the performance of different mechanisms in a multisector general equilibrium model that accounts for economy-wide market interactions and accommodates the trade-off analysis between overall economic efficiency and sectoral performance indicators such as output or emission intensity.
    Date: 2022–01–05
  11. By: Victor Court (IFP School, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Fizaine Floriane (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc)
    Abstract: Les notions d'énergie nette et d'EROI ont progressivement gagné en popularité depuis leur création dans les années 1970. Particulièrement utiles pour caractériser, respectivement, l'état d'abondance et la difficulté à extraire l'énergie de l'environnement, leur mesure s'avère néanmoins difficile. Depuis quelques années, dans un contexte de raréfaction des hydrocarbures et de basculement vers les énergies décarbonées, plusieurs études ont essayé d'estimer l'impact d'une baisse de l'EROI sur le fonctionnement d'une société industrielle. Une autre façon d'approcher ce sujet revient à se demander s'il est possible d'estimer la valeur minimum d'EROI requise pour soutenir la croissance économique. En raison de certaines faiblesses méthodologiques, les résultats de ce champ de recherche restent hétérogènes et difficiles à interpréter, d'autant qu'ils s'inscrivent dans un contexte de requalification de l'objectif à atteindre (croissance économique ou qualité de vie), auquel la science ne pourra pas répondre seule.
    Keywords: EROI Minimum, Transition Bas-Carbone, Croissance Economique, Prospérité
    Date: 2023–05–01
  12. By: Michele Imbruno (Sapienza University of Rome and GEP, Nottingham); Alessia Lo Turco (Department of Economics and Social Sciences, Universita' Politecnica delle Marche (UNIVPM)); Daniela Maggioni (Department of Economics, Catholic University of the Sacred)
    Abstract: We inspect whether multinational supply chains bring energy efficiency gains to domestic firms active in a host country. Our theoretical model suggests that the presence of foreign firms in upstream manufacturing and energy industries expands the availability of high-quality inputs for downstream domestic firms, implying a reduction in their energy intensity. We test these theoretical predictions using data from Turkish manufacturing firms over the period 2010-2015. Our empirical analysis shows that domestic-owned firms in sectors that are more likely to buy manufacturing and energy inputs from foreign-owned suppliers tend to reduce their energy intensity, confirming environmental gains from FDI. When exploring the underlying mechanisms, we provide evidence that the presence of foreign firms in upstream sectors leads to an increase in the quality of available inputs which turns into improvements in downstream domestic firms' energy efficiency.
    Keywords: Energy Efficiency, FDI, MNEs, Turkey
    JEL: F23 D22 L20
    Date: 2023–04
  13. By: Knauss, Steven
    Abstract: Initially based in the ICT sector, technologies based on intangible assets have since generalized throughout the economy and are playing a central role in the digitalization of manufacturing. As global value chains (GVCs) potentially bring such changes to developing countries, hopes are raised for “sustainable industrialization, ” where the greater scalability, spillovers and synergies engendered by intangible assets could favor more rapid economic upgrading while at the same time unleashing significant gains in energy efficiency. To better assess the plausibility of such projections, this paper conducts a cross-country panel study of GVCs in 30 sectors and 67 countries between 1995 and 2018. The link is explored between the intangible asset intensity of GVCs and each of the two pillars of sustainable industrialization: energy efficiency and developing country upgrading. The results find little evidence for the optimistic view, suggesting that intangible spillovers in GVCs may be limited by winner take most dynamics and tendencies toward intellectual property monopolies. The path toward sustainable structural transformation in developing economies is therefore likely to require more active forms of industrial policy and a financial architecture that favors them.
    Keywords: global value chains; development; intangible assets; energy efficiency
    Date: 2023–02–22
  14. By: Julie Bayle Cordier (IÉSEG School Of Management [Puteaux]); Loïc Berger (CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna]); Rayan Elatmani (IÉSEG School Of Management [Puteaux]); Massimo Tavoni (POLIMI - Politecnico di Milano [Milan], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna])
    Abstract: Mindfulness practices have the potential to induce the cognitive and behavioral changes needed to foster proenvironmental behavior and increase support toward sustainable and climate-oriented policies. However, the empirical evidence of the effectiveness of meditation on sustainable behavior is limited and mostly confined to correlational studies, often based on the same type of mindfulness interventions. In this paper, we report the results of an online experiment (n=1000) comparing the impact of three different short-term mindfulness interventions on various (self-reported and incentivized) measures of mindfulness state and sustainable behavior. While only one of our interventions is found to impact environmental attitude and climate policy support directly, we show that the three meditation practices indirectly foster sustainable behavior through preidentified mediators. These results are relevant for organizations and policymakers who seek to foster climate policy support and environmental attitudes in their stakeholders.
    Keywords: Mindfulness, climate policy support, Pro-environmental behavior, interventions, meditation
    Date: 2023–04–17
  15. By: Matteo Gardini; Edoardo Santilli
    Abstract: In this article we discuss the application of the Heat-Jarrow-Morton framework Heath et al. [26] to energy markets. The goal of the article is to give a detailed overview of the topic, focusing on practical aspects rather than on theory, which has been widely studied in literature. This work aims to be a guide for practitioners and for all those who deal with the practical issues of this approach to energy market. In particular, we focus on the markets' structure, model calibration by dimension reduction with Principal Component Analysis (PCA), Monte Carlo simulations and derivatives pricing. As application, we focus on European power and gas markets: we calibrate the model on historical futures quotations, we perform futures and spot simulations and we analyze the results.
    Date: 2023–05
  16. By: Daniel O. Beltran; Pinar Uysal
    Abstract: We review the "climate action plans" of Global Systemically Important Banks (GSIBs) and the progress they are making toward achieving them. G-SIBs have identified the drivers of climate risk and their transmission channels to credit and other risks. Additionally, some have started to measure and model these risks. While most GSIBs have committed to fully offsetting their emissions by mid-century, they are only beginning to measure financed emissions resulting from their loans and investments, which comprise the vast majority of their emissions. G-SIBs have also committed to increase green finance and have started to do so. All told, despite some progress by large global banks to address climate change considerations, much work lies ahead to properly measure and disclose climate-related risks, and to better align financing activities with their net-zero targets.
    Keywords: banks; climate finance; environmental reporting; climate change
    JEL: Q54 Q56 G21
    Date: 2023–01
  17. By: Steffen Jaap Bakker; E. Ruben van Beesten; Ingvild Synn{\o}ve Brynildsen; Anette Sandvig; Marit Siqveland; Asgeir Tomasgard
    Abstract: To achieve carbon emission targets worldwide, decarbonization of the freight transport sector will be an important factor. To this end, national governments must make plans that facilitate this transition. National freight transport models are a useful tool to assess what the effects of various policies and investments may be. The state of the art consists of very detailed, static models. While useful for short-term policy assessment, these models are less suitable for the long-term planning necessary to facilitate the transition to low-carbon transportation in the upcoming decades. In this paper, we fill this gap by developing a framework for strategic national freight transport modeling, which we call STraM, and which can be characterized as a multi-period stochastic network design model, based on a multimodal freight transport formulation. In STraM, we explicitly include several aspects that are lacking in state-of-the art national freight transport models: the dynamic nature of long-term planning, as well as new, low-carbon fuel technologies and long-term uncertainties in the development of these technologies. We illustrate our model using a case study of Norway and discuss the resulting insights. In particular, we demonstrate the relevance of modeling multiple time periods, the importance of including long-term uncertainty in technology development, and the efficacy of carbon pricing.
    Date: 2023–04
  18. By: Martin Bruns; Helmut Lütkepohl
    Abstract: Studies of the crude oil market based on structural vector autoregressive (VAR) models typically assume a time-invariant model and transmission of shocks or they consider a time-varying model and shock transmission. We assume a heteroskedastic reduced-form VAR model with time-invariant slope coefficients and test for time-varying impulse responses in a model for the global crude oil market that includes key macroeconomic variables. We find evidence for changes in the transmission of shocks to oil price expectations during the last decades which can be attributed to heteroskedasticity.
    Keywords: Structural vector autoregression, heteroskedastic VAR, proxy VAR, crude oil market
    JEL: C32
    Date: 2023
  19. By: Janjala Chirakijja (Monash University); Seema Jayachandran (Princeton University and NBER); Pinchuan Ong (National University of Singapore Business School)
    Abstract: This paper examines how the price of home heating affects mortality in the US. Exposure to cold is one reason that mortality peaks in winter, and a higher heating price increases exposure to cold by reducing heating use. Our empirical approach combines spatial variation in the energy source used for home heating and temporal variation in the national prices of natural gas and electricity. We find that a lower heating price reduces winter mortality, driven mostly by cardiovascular and respiratory causes. Our estimates imply that the 42% drop in the natural gas price in the late 2000s, mostly driven by the shale gas boom, averted 12, 500 deaths per year in the US. The effect appears to be especially large in high-poverty communities.
    Keywords: Mortality, Home Heating, Heating Prices
    JEL: I30 I31 I39 Q41
    Date: 2023–01
  20. By: Leard, Benjamin (Resources for the Future); Linn, Joshua (Resources for the Future); Springel, Katalin
    Abstract: This paper presents welfare and distributional effects of US passenger vehicle fuel economy and greenhouse gas standards between 2012 and 2022. We build an equilibrium model that allows for endogenous markups, market shares, and nonprice attributes. The model includes fixed and variable costs of raising fuel economy, manufacturer substitution between fuel economy and performance, and heterogeneous consumer preferences and manufacturer costs. We estimate all demand and supply parameters from observed consumer and manufacturer choices. We find that the standards have increased social welfare and that consumer undervaluation of fuel cost savings accounts for most of the social benefits. Manufacturers achieve most fuel economy improvements by trading off horsepower rather than adjusting prices or adding fuel-saving technology. Due to this compliance strategy, the standards have been progressive because high-income households value horsepower much more than low-income households do. Consumer undervaluation of fuel cost savings also contributes to progressivity.
    Date: 2023–03–15
  21. By: Linn, Joshua (Resources for the Future)
    Abstract: This paper analyzes welfare and distributional effects of nested US policies affecting plug-in vehicles: state-level zero-emission vehicle (ZEV) standards and national fuel economy and greenhouse gas (GHG) standards for passenger vehicles. I use a computational model of the passenger vehicle market that endogenizes manufacturer choices of prices, technology, fuel economy, and horsepower and incorporates the timing of regulatory decisions and pre-existing distortions caused by market power and consumer undervaluation of fuel economy. Ignoring the influence of the 2022 ZEV standards on fuel economy and GHG standards, ZEV standards would appear to impose high costs without reducing emissions. However, accounting for such influence reveals that ZEV standards reduced GHG emissions at modest costs.
    Date: 2023–03–21
  22. By: Ewald, Jens; Sterner, Thomas (Resources for the Future); Sterner, Erik
    Abstract: Although carbon taxes are generally well accepted in the countries where they have been implemented to lower carbon emissions, there is still public resistance to raising them. We study attitudes toward carbon taxation and other environmental policy instruments in Sweden. We survey a national sample of the population as well as members of a large organization that protests against fuel taxes. Our results show that educational level, rural versus urban domicile, political orientation, and especially trust in government affect opinions on carbon taxes; household income does not appear to matter. Lack of trust in government and lack of belief in the Pigouvian mechanism are especially important motivations for protesters’ opposition. When asked about the use of carbon tax revenue, some respondents support revenue refunding (uniform or progressive), but more people support using it for climate mitigation investments.
    Date: 2021–07–12
  23. By: Steffen Künn; Juan Palacios
    Abstract: What is the impact of housing upgrades on occupant health? Although economists and policymakers are certain about the health implications of housing upgrades, empirical evidence is largely missing or else only based on small-scale experiments in developing countries. This study provides the first population-representative quasi-experimental estimates based on a large-scale refurbishment program that renovated half of the East German housing portfolio in the aftermath of German reunification. During the 1990s, the German government devoted significant financial resources to upgrading the insulation and heating systems of over 3.6 million dwellings in East Germany. We link the renovations to individual demand for the healthcare of occupants using the German Socio-Economic Panel (SOEP) as well as administrative records of universal hospital admissions in Germany. Exploiting the staggered roll-out of the renovation program, our results show that an improvement in housing quality enhances the health of vulnerable age groups. Evidence from hospital records suggests that reductions in hospitalization were due to a lower risk of cardiovascular problems for older individuals (45 years or older) which were mainly driven by days with extremely hot and cold ambient temperatures. Our findings have strong policy implications and can enrich the cost-benefit analysis of public investments in weatherization programs.
    Keywords: Housing quality, renovation program, health
    JEL: H54 I38 R21 R23 R38
    Date: 2023
  24. By: Timo Goeschl; ; Alice Soldà (-)
    Abstract: Pledges feature in international climate cooperation since the 2015 Paris Agreement. We explore how differences in pledgers’ trustworthiness affect outcomes in a social dilemma that parallels climate change. In an online experiment, two participants interact with a randomly matched third player in a repeat maintenance game with a pledge stage. Treatments vary whether participants are matched with a player that is more or less trustworthy as revealed by behavior in a promise-keeping game; and whether they observe that trustworthiness. We find that participants knowingly matched with more trustworthy players cooperate more than participants matched with less trustworthy players (knowingly or unknowingly), but also more than participants unknowingly matched with more trustworthy players. In contrast, participants knowingly matched with less trustworthy players do not co-operate less than participants who are unknowingly so. Our findings suggest that the use of pledges, as per the Paris Agreement, can leverage the power of trustworthiness to enhance cooperation.
    Keywords: Social dilemmas; cooperation; pre-play communication; credibility;pledges; group formation
    JEL: C72 C92 D83 D91
    Date: 2023–05
  25. By: Cleary, Kathryne (Resources for the Future); Funke, Christoph (Resources for the Future); Witkin, Steven (Resources for the Future); Shawhan, Daniel (Resources for the Future)
    Abstract: The benefits of additional research, development, and demonstration (RD&D) for advanced energy technologies are likely to greatly exceed the costs. The additional funding authorized by the Energy Act of 2020 for the five technologies we consider would generate projected societal benefits averaging $30 billion in present value per technology during 2040–2060. All dollar values in this brief are in 2020 dollars.Twenty-six experts in advanced nuclear, advanced geothermal, energy storage, natural gas with carbon capture and sequestration (NG-CCS), and direct air capture (DAC) projected the effects of the additional RD&D funding on the future costs of the technologies. The experts expect the additional funding to reduce the costs of the technologies by 9–30 percent in 2035, compared with the case of no additional funding.Applying the expert projections, we find that average power sector benefits of the added RD&D spending are likely to exceed costs by about 7 times without additional federal policies like a national clean energy standard. Benefits outside the power sector are likely to also be significant and would increase these ratios.The estimated benefits of added RD&D funding are split mainly among lower electricity bills, health benefits, and climate benefits. Average annual electricity bill savings per household for each technology are about $14.
    Date: 2021–08–13
  26. By: Zlata Sergeeva (King Abdullah Petroleum Studies and Research Center)
    Abstract: Long-term natural gas contracts are necessary market instruments that provide supply security for customers and demand security for producers. Nevertheless, the European Commission recently announced a plan to ban long-term contracts for unabated fossil gas after 2049. This study shows that this plan may destabilize the market due to the lack of supply security for customers and demand security for producers.
    Keywords: Carbon, Carbon capture and storage, CCS, Carbon neutrality
    Date: 2023–04–04
  27. By: Zagorodny, Juan Pablo
    Abstract: En este documento se recogen los resultados de la evaluación de los posibles efectos del cambio en la política comercial del Ecuador respecto de los países miembros de la Alianza del Pacífico, principalmente México. Dado que el período del estudio coincide con el de la pandemia de enfermedad por coronavirus (COVID-19), también se evaluaron los efectos derivados de la misma. Entre las principales conclusiones se destaca que, tras la posible incorporación plena del Ecuador a la Alianza del Pacífico, el PIB del país mostraría un leve incremento (0, 09%). Entre los sectores más beneficiados estarían los de agricultura, ganadería y pesca; alimentos, bebidas y tabacos, y químico, con tasas de variación en sus exportaciones del 14%, el 61% y el 17%, respectivamente. Una posible adhesión del Ecuador a la Alianza del Pacífico también tendría consecuencias en el segmento de importaciones de manufacturas, ya que el país podría proveerse de insumos intermedios y bienes de capital necesarios para el proceso productivo. Dado un acuerdo amplio con los países miembros de la Alianza del Pacífico, el Ecuador podría ampliar su integración con Chile y México, profundizando, además, sus nexos comerciales y productivos con Colombia y el Perú.
    Date: 2023–04–26
  28. By: Karsten Neuhoff; Fernanda Ballesteros; Mats Kröger; Jörn C. Richstein
    Abstract: Renewable energy installations are rapidly gaining market share due to falling technology costs and supportive policies. Meanwhile, the energy price crisis resulting from the Russian-Ukrainian war has shifted the energy policy debate toward the question of how consumers can benefit more from the low and stable generation costs of renewable electricity. Here we suggest a Renewable Pool (“RE-Pool”) under which the government passes the conditions of Contracts-for-Difference on to consumers who thereby benefit from reliably low-cost electricity supply. We assess the effect on financing costs, scale, and system friendliness of wind investments, as well risk hedging for consumers’ volume risks and hedging incentives.
    Keywords: Contracts-for-Difference, renewable policy, electricity markets, financing, PPA
    JEL: D44 D47 G32 L94
    Date: 2023
  29. By: Emanuele Campiglio (Department of Economics, University of Bologna; RFF-CMCC European Institute on Economics and the Environment (EIEE), Milan; LSE Grantham Research Institute on Climate Change and the Environment, London); Alessandro Spiganti (RFF-CMCC European Institute on Economics and the Environment (EIEE), Milan; Department of Economics, Ca’ Foscari University of Venice); Anthony Wiskich (Centre for Applied Macroeconomic Analysis, Australian National University, Canberra)
    Abstract: Access to finance is a major barrier to clean innovation. We incorporate heterogeneous and endogenous financing costs in a directed technical change model and identify optimal climate mitigation policies. The presence of a financing experience effect pushes the policymaker to strengthen policies in the short-term, both to shift innovation and production towards clean sectors and to reduce the financing cost differential across technologies, which further facilitates the transition. The optimal climate policy mix between carbon taxes and clean research subsidies depends on the drivers of the experience effect. In our benchmark scenario, where clean financing costs decline as cumulative clean output increases, we find an optimal carbon price premium of 47% in 2025, relative to a case with no financing costs.
    Keywords: carbon tax, directed technological change, endogenous growth, financing experience effect, innovation policy, low-carbon transition, optimal climate policy, sustainable finance
    JEL: H23 O31 O44 Q55 Q58
    Date: 2023
  30. By: Raimi, Daniel (Resources for the Future)
    Abstract: The US EPA estimates that abandoned oil and gas wells in the United States emit roughly 280, 000 metric tons of methane each year, though this estimate is uncertain. Per ton, methane’s global warming potential (GWP) is 34 times that of carbon dioxide (CO2) over a 100-year period and 86 times the impact over a 20-year period. Using the 100-year GWP, annual methane emissions from abandoned wells are roughly equivalent to the CO2 emissions emitted by all of the power plants in Massachusetts each year. Plugging abandoned wells presents an opportunity to provide jobs in the oil and gas industry while also reducing methane emissions.A 2020 analysis by Resources for the Future and Columbia University Center for Global Energy Policy estimated that a significant federal program to plug abandoned oil and gas wells could employ tens of thousands of workers, with as many as 120, 000 job years created to plug 500, 000 wells. The costs associated with reducing greenhouse gas emissions through a major well plugging program would also fall well within the range of other climate policy options—roughly $67 to $170 per ton of CO2-equivalent greenhouse gas reductions.Several policy proposals have sought to provide funding to plug these wells and reduce methane emissions while creating new jobs in the oil and gas industry. One such bill is the Energy Infrastructure Act, a new proposal from West Virginia Senator Joe Manchin that earmarks tens of billions of dollars in federal funds towards environment and energy-related initiatives, including $4.7 billion for plugging abandoned oil and gas wells. This issue brief, part of a three-part series on the Energy Infrastructure Act, details the methane emissions reductions associated with this potential spending.
    Date: 2021–07–14
  31. By: Tianqi Pang; Kehui Tan; Chenyou Fan
    Abstract: Carbon futures has recently emerged as a novel financial asset in the trading markets such as the European Union and China. Monitoring the trend of the carbon price has become critical for both national policy-making as well as industrial manufacturing planning. However, various geopolitical, social, and economic factors can impose substantial influence on the carbon price. Due to its volatility and non-linearity, predicting accurate carbon prices is generally a difficult task. In this study, we propose to improve carbon price forecasting with several novel practices. First, we collect various influencing factors, including commodity prices, export volumes such as oil and natural gas, and prosperity indices. Then we select the most significant factors and disclose their optimal grouping for explainability. Finally, we use the Sparse Quantile Group Lasso and Adaptive Sparse Quantile Group Lasso for robust price predictions. We demonstrate through extensive experimental studies that our proposed methods outperform existing ones. Also, our quantile predictions provide a complete profile of future prices at different levels, which better describes the distributions of the carbon market.
    Date: 2023–05
  32. By: Camille Megy (CentraleSupélec, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec, City University London)
    Abstract: Power-to-gas (PtG), a technology that converts electricity into hydrogen, is expected to become a core component of future low-carbon energy systems. While its economics and performance as a sector coupling technique have been well studied in the context of perfectly competitive energy markets, the distortions caused by the presence of large strategic players with a multi-market presence have received little attention. In this paper, we examine them by specifying a partial equilibrium model that provides a stylized representation of the interactions among the natural gas, electricity, and hydrogen markets. Using that model, we compare several possible ownership organizations for PtG to investigate how imperfect competition affects its operations. Evidence gained from these market simulations show that the effects of PtG vary with the multi-market profile of its operator. Producers of fossil-based hydrogen tend to make little use of PtG, whereas renewable power producers use it more to increase the electricity prices. Although PtG operations are profitable and can be welfare-enhancing, the social gain is either very tiny or negative when PtG is strategically operated in conjunction with variable renewable generation. In that case, PtG also raises environmental concerns as it stimulates the use of polluting thermoelectric generation.
    Keywords: Power-to-Gas, Sector Coupling, Hydrogen, Renewable Energy Sources, Multi-Market Oligopoly, Mixed Complementarity Problem
    Date: 2023–02–01
  33. By: Celso-Arellano, Pedro; Gualajara, Victor; Coronado, Semei; Martinez, Jose N.; Venegas-Martínez, Francisco
    Abstract: The Global Fear Index (GFI) is a measure of fear/panic based on the number of people infected and deaths due to COVID-19. This paper aims to examine the interconnection or interdependencies between the GFI and a set of global indexes related to the financial and economic activities associated with natural resources, raw materials, agribusiness, energy, metals, and mining, such as: the S&P Global Resource Index, the S&P Global Agribusiness Equity Index, the S&P Global Metals and Mining Index, and the S&P Global 1200 Energy Index. To this end, we first apply several common tests: Wald exponential, Wald mean, Nyblom, and Quandt Likelihood Ratio. Subsequently, we apply Granger causality using a DCC-GARCH model. Data for the global indices are daily from 3 February 2020 to 29 October 2021. The empirical results obtained show that the volatility of the GFI Granger causes the volatility of the other global indices, except for the Global Resource Index. Moreover, by considering heteroskedasticity and idiosyncratic shocks, we show that the GFI can be used to predict the co-movement of the time series of all the global indices. Additionally, we quantify the causal interdependencies between the GFI and each of the S&P global indices using Shannon and Rényi transfer entropy flow, which is comparable to Granger causality, to confirm directionality more robustly The main conclusion of this research is that financial and economic activity related to natural resources, raw materials, agribusiness, energy, metals, and mining were affected by the fear/panic caused by COVID-19 cases and deaths.
    Keywords: Global indices, Co-movement, Granger causality, DCC-GARCH
    JEL: G19
    Date: 2023–01–29
  34. By: Witkin, Steven (Resources for the Future); Shawhan, Daniel (Resources for the Future)
    Abstract: The power sector is the second-largest contributor of greenhouse (GHG) emissions in the United States, accounting for one-quarter of total emissions. Decarbonization of the power sector can play a leading role in cost-effective economy-wide emissions reductions given that deep emissions reductions are projected to cost more in other sectors. Resources for the Future, with support from the REBA Institute, analyzed decarbonization policy pathways for the power sector through RFF’s advanced power sector model, E4ST, to project the tradeoffs and impacts of key options, including:A national clean energy standard (CES)—both a Fast CES (100% target by 2035) and a Slow CES (100%target by 2050)Utility-led decarbonization—all investor-owned vertically integrated utilities fully decarbonizeA national transmission macrogridExpansion of competitive generation via expansion of organized wholesale electricity markets (OWMs)Expansion of supply choice to almost all commercial and industrial customers
    Date: 2021–07–29
  35. By: Khanna, Tarun M.; Bruns, Stephan; Miersch, Klaas; Minx, Jan C.
    Abstract: Time-varying prices are thought to be critical for increasing economic efficiency of the power system. However, a rigorous assessment of the evidence from field trials that use time-of-use pricing, critical peak pricing, etc. in households is missing. This machine learning-assisted systematic review compiles the largest dataset till date of results from pricing pilots reported in both academic publications and electricity utility reports. This unique dataset enables us to deduce the presence of publication bias in peer-reviewed publications. Employing a multilevel meta-analysis, we estimate an average reduction of 8.7%-10.6% in peak consumption, 1.2%-1.5% in total consumption and no change in off-peak consumption across trials. Our heterogeneity analysis, using Bayesian Model Averaging, finds that a 10% increase in the peak-to-baseline price ratio is associated with a 0.47% reduction in peak consumption with marginal reduction in effects suggesting “scope effect” in household behavior. Overall consumption is not responsive to price ratio. Dynamic pricing thus seems to be effective in managing electricity demand but with limits.
    Keywords: Dynamic pricing, Energy demand, Households, Buildings emissions, Monetary incentives, Rebates, Time-of-use pricing, Demand response
    JEL: Q41
    Date: 2023
  36. By: Peter Haan; Adrián Santonja; Aleksandar Zaklan
    Abstract: We evaluate German purchase subsidies for battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) using data on new vehicle registrations in Germany during 2015-2022. We account for confounding time trends and interacting EU-level CO2 standards using neighboring countries as a control group. The program was cost-ineffective, as only 40% of BEV and 25% of PHEV registrations were subsidy-induced, and had strong distributional effects, with greater uptake in wealthier and greener counties. The implied abatement cost of 870 euro per ton of CO2 for BEVs and 2, 470 euro for PHEVs suggests that subsidies to PHEVs were especially cost-ineffective.
    Keywords: Decarbonizing road transport, electric mobility, purchase subsidies, policy effectiveness, distributional effects of climate policy
    JEL: Q54 Q58 H23 R48
    Date: 2023
  37. By: Juan Benavides; Marthe E. Delgado-Rojas; Felipe Castro; Alejandra Fonseca; Sebastián Bernal
    Abstract: La infraestructura es una plataforma transversal a toda la economía, cuyos beneficios a los usuarios directos son una fracción pequena de los beneficios totales a la sociedad. El ARES Colombia 2022 se enfoca en analizar el rol de la infraestructura como habilitador del crecimiento económico y el desarrollo sostenible con un foco regional (Región Caribe, Pacífico y los Santanderes) y un foco sectorial (transición energética, transporte, agua y alcantarillado, residuos, TICS, agro/agroindustria y agroforestal). Como resultado del diagnóstico que se desarrolla en el resto del documento y de la identificación de oportunidades innovadoras, se seleccionaron las intervenciones transversales o nacionales tanto regulatorias como de política pública que pueden tener impactos altos y dentro del plazo del Plan Nacional de Desarrollo 2022-2026.****** Abstract: Infrastructure is a transversal platform for the entire economy, whose benefits to direct users are a small fraction of the total benefits to society. The ARES Colombia 2022 focuses on analyzing the role of infrastructure as an enabler of economic growth and sustainable development with a regional focus (Caribbean, Pacific and Santander Regions) and a sectoral focus (energy transition, transport, water and sewerage, waste , ICTs, agro/agroindustry, and agroforestry). As a result of the diagnosis that is developed in the rest of the document and the identification of innovative opportunities, cross-cutting or national interventions, both regulatory and public policy, that can have high impacts and within the term of the National Development Plan 2022-2026.
    Keywords: Desarrollo Económico, Análisis Sectorial, Recomendaciones de Política, Infraestructura, Transición Energética, Crecimiento Económico, Desarrollo Sostenible, Colombia, Economic Development, Sectorial Analysis, Policy Recommendations, Infrastructure, Energy Transition, Economic Growth, Sustainable Development, Cololmbia
    JEL: O13 O14 O18
    Date: 2022–08–16
  38. By: Gökhan Ider; Alexander Kriwoluzky; Frederik Kurcz; Ben Schumann
    Abstract: This study examines whether central banks can combat inflation that is caused by rising energy prices. By using a high-frequency event study and a Structural Vector Autoregression, we find evidence that the European Central Bank (ECB) and the Federal Reserve (Fed) are capable of doing so by affecting domestic and global energy prices. This “energy-price channel” of monetary policy plays an important role in the transmission mechanism of monetary policy. As many major sources of energy, such as oil, are priced in dollars, fluctuations in the domestic exchange rate vis-a-vis the dollar crucially shapes the transmission of monetary policy to energy prices. On the one hand an appreciation of the euro against the dollar lowers local energy prices (in euro) through cheaper imports. On the other hand lower import prices raise energy demand and thereby increase global energy prices (in dollars). Our counterfactual analysis demonstrates that both effects are present, but the latter effect is stronger than the former.
    Keywords: Inflation, energy prices, monetary policy transmission mechanism
    JEL: C22 E31 E52 Q43
    Date: 2023
  39. By: Linn, Joshua (Resources for the Future); Holt, Christopher
    Abstract: Nitrogen oxides (NOx) are a precursor to ground-level ozone, a pernicious pollutant that is harmful to human health and ecosystems. Despite decades of regulations and a precipitous decline in NOx emissions, episodic high-ozone events prevent many areas from attaining air quality standards. Theoretically, spatially or temporally differentiated emissions prices could be more cost effective at reducing such events than a uniform price. To test this prediction, with data from EPA and NOAA spanning 2001–2019, we use novel empirical strategies to estimate (1) the link between hourly emissions and high-ozone events and (2) hourly marginal abatement costs. These estimates form the basis for simulations that compare uniform and differentiated emissions pricing. Consistent with economic theory, differentiated pricing is substantially more cost effective at reducing high-ozone events, but this advantage depends on the accuracy of the estimated NOx–ozone relationship.
    Date: 2023–02–14
  40. By: NISHITATENO Shuhei; Paul J. BURKE; ARIMURA Toshi H.
    Abstract: Vehicular emissions, being a major global health concern, have gathered worldwide attention and necessitated extensive research to gain deeper insights. The aim of this study was to estimate the effects of road traffic flow on the local ambient concentrations of nitrogen oxides (NOx), carbon monoxide (CO), non-methane hydrocarbons (NMHC), and fine particulate matter (PM2.5) in Japan. We constructed an hourly panel dataset of nationwide samples of air pollution monitoring stations from 2010–2015. By estimating a dynamic panel model with station-hour panel data, short-run pollution-road traffic elasticities of 0.04–0.05 for NOx, CO, and NMHC, and long-run elasticities of 0.09–0.17 were observed; however, no significant evidence was found for PM2.5. We used these estimates to understand the potential effects of reducing road traffic flow to meet the World Health Organization’s new air quality guidelines.
    Date: 2023–04
  41. By: Bazzana, Davide; Rizzati, Massimiliano; Ciola, Emanuele; Turco, Enrico; Vergalli, Sergio
    Abstract: This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the stringency of emission reduction targets, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve.
    Keywords: Environmental Economics and Policy, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy
    Date: 2023–05–11
  42. By: Bucksteeg, Michael; Voswinkel, Simon; Blumberg, Gerald
    Abstract: Power markets have been gradually integrated to achieve the target of a single European market. A major step was the introduction of the flow-based market coupling (FBMC) in Central Western and Eastern Europe (Core region). FBMC reflects the physical constraints of the underlying transmission grid in detail. However, the European Commission and regulators imposed minimum margins to increase cross-border trade and to foster price convergence between the different bidding zones, neglecting physical constraints and increasing redispatch volumes. Integrating redispatch poten-tials into FBMC allows for moving closer to physical reality while maintaining a high level of cross-border trade. In this study, we develop a multi-stage model covering capacity calculation, market coupling, and redispatch stages. This study is the first to evaluate different options for integrating FBMC and redispatch potentials based on a large-scale numerical analysis of Central Europe. The results reveal that minimum margins effectively increase cross-border trade. However, this comes at a high cost due to additional redispatch needs, which reduce overall welfare. Integrating redis-patch potentials in the market-clearing stage leads to a more efficient increase in cross-border ca-pacities and elevates welfare. In the case of combining both approaches, the analysis indicates improved welfare of roughly 80 M€ per year.
    Keywords: Flow-based market coupling, European electricity market, cross-border trade, congestion management, redispatch, market modeling
    JEL: Q4
    Date: 2023
  43. By: Blonz, Joshua; Palmer, Karen (Resources for the Future); Wichman, Casey (Resources for the Future); Wietelman, Derek C.
    Abstract: We evaluate an experiment in which randomly encouraged households activate a smart-thermostat feature that automates responsiveness to time-of-use electricity pricing. The thermostat feature reduces electricity use by raising indoor temperatures, thus increasing thermal discomfort in some households during peak periods. Changes in discomfort are small, concentrated among households who spend the most time at home, and do not prompt them to adjust the feature’s intensity or deactivate it. Using energy cost savings and experienced indoor temperatures, we calculate households’ revealed preference trade-off between comfort and cooling expenditure and find that households are willing to trade off small monetary savings for small increases in discomfort. Automation thus provides a low-cost opportunity to make small changes in energy demand at the household level, with potentially large electricity supply-cost reductions at scale.
    Date: 2021–07–21
  44. By: Daniel Santabárbara (Banco de España); Marta Suárez-Varela (Banco de España)
    Abstract: Carbon pricing initiatives, designed to increase the relative prices of greenhouse gas-intensive goods and services, could not only push up CPI inflation but also affect its volatility. Existing empirical literature has only found that carbon pricing schemes are generally associated to a transitory effect on the level of inflation. This paper assesses empirically the effects of carbon pricing on inflation volatility for both carbon tax and cap-and-trade schemes (also known as emission trading systems). Our work finds strong evidence that cap-and-trade schemes are associated with larger volatility in CPI headline inflation, while no significant effect is found in the case of carbon taxes. This effect seems to feed only through the energy component, and does not seem to affect the volatility of core inflation. In addition, we find that under cap-and-trade schemes, both the increase in the underlying price of emissions and the expansion in the activities covered by these initiatives are associated with greater inflation volatility. These findings have important policy implications, given that inflation volatility could complicate the conduct of monetary policy. Since the ambition to mitigate climate change in the years to come is expected to be implemented through broader coverage of carbon pricing, central banks should monitor those developments closely.
    Keywords: carbon pricing, emission trading systems, carbon tax, inflation, inflation volatility
    JEL: E31 E32 E52 E58 Q48 Q58
    Date: 2022–09
  45. By: Cunningham, Brandon; Lu, Chenxi; Toder, Eric; Williams III, Roberton C. (Resources for the Future)
    Abstract: This paper examines how the Tax Cuts and Jobs Act (TCJA) will affect the US energy sector. It combines qualitative analysis of a range of TCJA provisions with estimates from the Tax Policy Center’s Investment and Capital Model of how a narrower set of provisions will change marginal effective tax rates (METRs) for five major energy industries.Key Findings:The TCJA initially lowered effective tax rates for the energy sector substantially.However, long-run tax cuts are much smaller because of expiring provisions.By 2027, many energy sector firms (especially pass-through entities, such as master limited partnerships) will face higher effective tax rates than under pre-TCJA tax law.Cuts to corporate income tax rates substantially reduce METRs for corporations, with the largest decreases going to sectors with higher pre-TCJA effective tax rates, which means energy sector corporations on average benefit less (as a percentage of income) than corporations in other sectors of the economy.Within the energy sector, corporate income tax rate cuts provide a relatively large METR cut for petroleum and coal products and a much smaller cut for oil and gas extraction.Corporate tax rate cuts do not affect taxes for pass-through entities.Bonus depreciation for new investment cuts METRs more in the energy sector than in the rest of the economy.Oil and gas extraction gains relatively little from bonus depreciation, because it already benefits from existing provisions that accelerate investment deductions.Bonus depreciation phases down and then sunsets at the end of 2026.Limits on net interest deductions raise METRs for firms or sectors with relatively high debt loads. On average, this affects the energy sector more than other sectors of the economy. Renewable energy may be particularly affected by this provision, because it has a higher debt-to-equity ratio than other energy sectors (though we did not model that effect).Changes to the individual income tax also affect METRs. Cuts to individual income tax rates lower METRs for both corporations and pass-throughs. And the new 20 percent pass-through deduction substantially cuts taxes for qualified pass-throughs.Taken together, these two changes yield a relatively small METR reduction for corporations, which is largely similar across energy industries. They cut METRs more for pass-throughs, though that effect varies substantially across the energy sector, with relatively large cuts for petroleum and coal product pass-throughs but only a small increase for oil and gas extraction pass-throughs.Most individual income tax changes sunset at the end of 2025, including the individual rate cuts and pass-through deduction. But changes to inflation indexing (which slightly increase taxes) are permanent. Thus by 2026, changes to the individual income tax slightly raise METRs for all firms.The net effect of all the TCJA provisions modeled is lower METRs for the energy sector in the initial years after the TCJA took effect.But because the interest-deduction-limit change (which raises tax revenue) is permanent and more restrictive after 2021, whereas several of the taxcutting changes (bonus depreciation, individual rate cuts, and the passthrough deduction) are temporary, METRs rise over time.By 2027, many energy subsectors (including pass-throughs in all energy subsectors modeled and oil and gas extraction corporations) face higher METRs than they would have under pre-TCJA law.The base erosion and anti-abuse tax could reduce the value of the production and investment tax credits, but this effect seems unlikely to be substantial.Repeal of the domestic production deduction raises taxes for energy sector firms that previously qualified for this deduction, such as those in domestic oil and gas extraction and refining, as well as electric generation. But even for those firms, the loss of this deduction only partially offsets the benefit of the TCJA’s business tax cuts.New limits on net operating loss deductions substantially increase taxes for firms with highly variable income streams. This is potentially important for energy subsectors facing volatile prices, such as oil and gas.Repeal of the corporate alternative minimum tax provides a substantial benefit to industries that would otherwise have been subject to this tax. Mining and utilities have historically been disproportionately affected by this tax and thus are likely to benefit disproportionately from its repeal.The Joint Committee on Taxation (JCT 2017b) estimates that the TCJA cut revenues by $1.5 trillion over 2018–27 ($1.1 trillion when macroeconomic effects are included). All else equal, this will substantially increase federal borrowing.Higher federal borrowing will eventually lead to higher interest rates. This will raise the cost of borrowing for firms, and the energy sector is relatively capital- and debt-intensive.Increased borrowing will also likely lead to an appreciation of the dollar versus other currencies. This may have substantial effects on trade-exposed energy industries.Increased borrowing will create a greater need for future federal spending cuts or revenue increases, which could affect the energy sector.Figures 1a and 1b summarize the effects of the provisions we model.
    Date: 2021–08–11
  46. By: Salaheddine Soummane; Aisha Al-Sarihi (King Abdullah Petroleum Studies and Research Center)
    Abstract: Climate policies are tightening in an effort to curb carbon dioxide emissions. As a result, global oil demand may peak and gradually decline, causing oil prices to fall. A structural fall in oil prices may have serious implications for Middle Eastern oil exporters. Many studies attempt to estimate the economic implications of climate change response measures for oil exporting countries. However, they have not reached a consensus regarding the magnitude of these implications.
    Keywords: Air conditioning, Applied general model, Article 6, Blockchain
    Date: 2023–03–21
  47. By: Udichibarna Bose; Wildmer Daniel Gregori; Maria Martinez Cillero
    Abstract: This analysis explores the implications of technological shifts towards greener and sustainable innovations on acquisition propensity between firms with different technological capacities. Using a dataset of completed control acquisition deals over the period of 2009-2020 from 23 OECD countries, we find that innovative firms are more likely to acquire innovative target companies. We also find that green acquirors (i.e. firms with green patents) are more inclined to enter into acquisition deals with green firms, possibly due to their technological proximity and informational advantages which further enhances their post-acquisition green innovation performances. Our results also show an increase in green acquisitions after the Paris Agreement by non-green acquiror firms, and these are more pronounced for acquirors in climate policyrelevant sectors and countries with low environmental standards than their counterparts. However, green acquisitions after the Paris Agreement do not show any significant impact on their post-acquisition innovation performances, raising concerns related to greenwashing behaviour by investing firms.
    JEL: G34 O30 Q54
    Date: 2023
  48. By: Sugandha Srivastav; Ryan Rafaty
    Abstract: Great socio-economic transitions see the demise of certain industries and the rise of others. The losers of the transition tend to deploy a variety of tactics to obstruct change. We develop a political-economy model of interest group competition and garner evidence of tactics deployed in the global climate movement. From this we deduce a set of strategies for how the climate movement competes against entrenched hydrocarbon interests. Five strategies for overcoming obstructionism emerge: (1) Appeasement, which involves compensating the losers; (2) Co-optation, which seeks to instigate change by working with incumbents; (3) Institutionalism, which involves changes to public institutions to support decarbonization; (4) Antagonism, which creates reputational or litigation costs to inaction; and (5) Countervailance, which makes low-carbon alternatives more competitive. We argue that each strategy addresses the problem of obstructionism through a different lens, reflecting a diversity of actors and theories of change within the climate movement. The choice of which strategy to pursue depends on the institutional context.
    Date: 2023–04
  49. By: Merlin Keller (EDF - Electricité de France); Guillaume Damblin (Université Paris-Saclay); Alberto Pasanisi (Edison); Mathieu Schumann (EDF - Electricité de France); Pierre Barbillon (MIA Paris-Saclay - Mathématiques et Informatique Appliquées - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Fabrizio Ruggeri (IMATI - Istituto di Matematica Applicata e Tecnologie Informatiche - CNR - Consiglio Nazionale delle Ricerche)
    Abstract: In this paper, we present a case study aimed at determining a billing plan that ensures customer loyalty and provides a profit for the energy company, whose point of view is taken in the paper. The energy provider promotes new contracts for residential buildings, in which customers pay a fixed rate chosen in advance, based on an overall energy consumption forecast. For such a purpose, we consider a practical Bayesian framework for the calibration and validation of a computer code used to forecast the energy consumption of a building. On the basis of power field measurements, collected from an experimental building cell in a given period of time, the code is calibrated, effectively reducing the epistemic uncertainty affecting the most relevant parameters of the code (albedo, thermal bridge factor, and convective coefficient). The validation is carried out by testing the goodness of fit of the code with respect to the field measurements, and then propagating the posterior parametric uncertainty through the code, obtaining probabilistic forecasts of the average electrical power delivered inside the cell in a given period of time. Finally, Bayesian decision-making methods are used to choose the optimal fixed rate (for the energy provider) of the contract, in order to balance short-term benefits with customer retention. We identify three significant contributions of the paper. First of all, the case study data were never analyzed from a Bayesian viewpoint, which is relevant here not only for estimating the parameters but also for properly assessing the uncertainty about the forecasts. Furthermore, the study of optimal policies for energy providers in this framework is new, to the best of our knowledge. Finally, we propose Bayesian posterior predictive p-value for validation.
    Keywords: uncertainty quantification, Bayesian analysis, energy contracts, uncertainty quantification Bayesian analysis energy contracts
    Date: 2022–12
  50. By: Viral V. Acharya; Richard Berner; Robert Engle; Hyeyoon Jung; Johannes Stroebel; Xuran Zeng; Yihao Zhao
    Abstract: We explore the design of climate stress tests to assess and manage macroprudential risks from climate change in the financial sector. We review the climate stress scenarios currently employed by regulators, highlighting the need to (i) consider many transition risks as dynamic policy choices; (ii) better understand and incorporate feedback loops between climate change and the economy; and (iii) further explore “compound risk” scenarios in which climate risks co-occur with other risks. We discuss how the process of mapping climate stress scenarios into financial firm outcomes can incorporate existing evidence on the effects of various climate-related risks on credit and market outcomes. We argue that more research is required to (i) identify channels through which plausible scenarios can lead to meaningful short-run impact on credit risks, given typical bank loan maturities; (ii) incorporate bank-lending responses to climate risks; (iii) assess the adequacy of climate risk pricing in financial markets; and (iv) better understand and incorporate the process of expectations formation around the realizations of climate risks. Finally, we discuss the relative advantages and disadvantages of using market-based climate stress tests that can be conducted using publicly available data to complement existing stress testing frameworks.
    Keywords: climate risk; financial stability; systemic risk
    JEL: Q54 G1 G2
    Date: 2023–04–01
  51. By: Leinauer, Christina; Körner, Marc-Fabian; Strüker, Jens
    Abstract: As the decarbonization of industry has become an increasing priority, so has the need for emissions data and the requirement for cross-sector emissions reporting. What challenges and opportunities does industry face? How can digital solutions help leverage the potential of climate-friendly products in emerging climate-neutral lead markets? Based on interviews with experts from various industries, our study with Fraunhofer-FIT "Towards net 0: Digital CO2 proofs for the sustainable transformation of the European economy" presents hurdles and digital solutions as well as conclusions for policy makers. The study comes to the conclusion that granular, secure CO2 proofs on the one hand offer a possibility to manage the increasing effort for the collection, processing and provision of CO2 information more efficiently and at the same time can accelerate and simplify the transition to climate-neutral production processes and products.
    Date: 2023
  52. By: Campbell, Erin (Resources for the Future); Pizer, William (Resources for the Future)
    Abstract: Border carbon adjustments (BCAs) are national or possibly multicountry trade measures—typically taxes on imports (and sometimes rebates on exports)—intended to support ambitious national climate mitigation policies. They are meant to address part of the problem that ambitious mitigation policies in one jurisdiction can lead to increased emissions in jurisdictions with less ambitious policies (“leakage†). In particular, they address the portion of leakage associated with energy-intensive production moving from areas with more ambitious policies to those with weaker policies (“competitiveness†). BCAs are being discussed as part of broader carbon pricing policies, like the European Union’s Emissions Trading Scheme (EU ETS), which recently put forward a concrete BCA proposal; they have also been described and modeled alongside a domestic carbon tax. Much has been written about the design of a BCA in this world with what we might call “full†carbon pricing.Yet, nations’ climate mitigation policies may or may not include carbon pricing, and when they do, the carbon pricing is often not comprehensive. In the United States, for example, carbon pricing has been implemented at the state level (California, Washington State, and the northeastern states’ Regional Greenhouse Gas Initiative) but is currently a lower priority in national policy than incentives and regulatory standards. China has implemented an ETS that allocates free allowances based on performance benchmarks like a firm’s production level of electricity or (in the future) other industrial products. That is, the policy might regulate tons of CO2 per megawatt of electricity, per ton of steel produced, or per ton of cement. This is frequently referred to as a tradable performance standard (TPS; see Pizer and Zhang 2018). Even the EU ETS gives significant free allocation to energy-intensive, trade-exposed industries, thereby blunting some of the ETS effects. This raises the question of how a BCA might work with a “partial-price†or “nonprice†policy.In this paper, we talk about “partial†price policy as implementing an explicit carbon price that is paid on some, but not all of a firm’s actual emissions. Perhaps there is a free allocation tied, one way or another, to production of a given product. This might be explicit, through a tradable performance standard or output-based allocation, or implicit, through a free allocation that helps address competitiveness effects.We talk about a “nonprice†policy as regulating emissions through some type of non-tradable technical or performance-based standard; there is no observed price. Although it is possible to estimate an implicit price or marginal cost associated with the most recent (most expensive) ton of carbon dioxide reduced, it is not observed explicitly.In this short paper we outline basic principles of how such partial-price or nonprice policies might equivalently be applied to imports as a BCA. Full carbon-pricing policies (auctioned ETS credits or a carbon tax) typically put an equivalent price on the carbon content of imports, usually with an adjustment for any carbon pricing in the country of origin. In contrast, partial-price or nonprice policies exempt a portion of the carbon content of imported goods before applying any price. Moreover, the price paid on emissions above the exemption should be based on some notion of marginal cost if a market price or tax is not observed. That is, it should be based on the cost of the last ton abated domestically, not the average cost.Our lens on this issue is an economic notion of roughly equivalent treatment. That is, are exporters to a regulated market facing the same incentives and charges, on average, as a domestic producer? “On average†is a critical term. Unless there is a transparent, fully national climate policy that is easily replicated on imports, the existence of state- (or even local-) level regulation means different producers will likely face different incentives and costs. Even with national regulation under the Clean Air Act, states may have some discretion in their implementation. Or a national regulation may give some deference to the starting point of individual firms in the application of benchmarks. The choice of how to match a range of observed a range of domestic incentives and charges to BCA parameters has consequences that might motivate matching the high or low end of observed values instead of the average.We note at the outset that we are also ignoring issues of WTO compatibility. This has been discussed elsewhere at length for full-price policies (Hillman 2013; Howse 2021). Partial-price and especially nonprice policies raise even more issues as the treatment of imports, while attempting to mimic domestic policy incentives and costs, is not the same. There may be no explicit domestic charges even as BCAs are implemented as a charge. We leave this for future work.BCAs raise myriad other design questions, including treatment of exports, measurement of emissions, scope (e.g., are indirect emissions targeted?), types of imports covered, and use of revenue. There is also the question of BCAs’ fairness with respect to developing and emerging economies. We believe these questions apply regardless of whether there are full-, partial-, or non-price domestic policies and we do not attempt to tackle them here (see, e.g., Marcu, Mehling, and Cosbey 2020). Rather, our plan is, first, to review the costs imposed by full-, partial-, and nonprice policies and the application of BCAs in the context of full-price domestic policies. This frames our economic notion of trying to apply equivalent treatment to imports. We then discuss how BCAs could seek equivalent treatment with a partial-price or nonprice policy similar to the notion applied with full-price policies. Finally, we consider how domestic policies intersect with one other, and how BCAs might account for a trade partner’s similar or different policies.To continue reading, click "download" above.
    Date: 2021–07–29
  53. By: Joshua Blonz; Brigitte Roth Tran; Erin Troland
    Abstract: The energy transition away from fossil fuels presents significant transition risks for communities historically built around the fossil fuel industry. This paper uses the decline in the Appalachian coal industry between 2011 and 2018 to understand how individuals are harmed by a reduction in local fossil fuel extraction activity. We use individual-level credit data and exogenous variation in coal demand from the electricity sector to identify how the coal mining industry’s decline affected the finances of Appalachian households. We find that the decline in demand for coal caused broad-based negative impacts, decreasing credit scores and increasing credit utilization, delinquencies, amounts in third party collections, bankruptcy rates, and the number of individuals with subprime status. These effects were broad based and cannot be explained solely by individuals who lost coal mining jobs. Individuals with the lowest pre-period credit scores were more likely to end up in financial distress and experienced a greater deterioration in credit scores. Quantile regressions show that the drop in credit scores from the coal decline was most pronounced between the 30th and 50th percentiles of the credit score distribution. Our results provide evidence that people living in fossil fuel extraction regions are likely to experience declines in financial well-being from the energy transition even if they do not directly work in the affected industry.
    Keywords: coal mining; household finance; energy transition; transition risks; climate policy
    Date: 2023–03–07
  54. By: Sugandha Srivastav; Tanmay Singh
    Abstract: Laws that govern land acquisition can lock in old paradigms. We study one such case, the Coal Bearing Areas Act of 1957 (CBAA) which provides minimal social and environmental safegaurds, and deviates in important ways from the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (LARR). The lack of due diligence protocol in the CBAA confers an undue comparative advantage to coal development, which is inconsistent with India's stance to phase down coal use, reduce air pollution, and advance modern sources of energy. We argue that the premise under which the CBAA was historically justified is no longer valid due to a significant change in the local context. Namely, the environmental and social costs of coal energy are far more salient and the market has cleaner energy alternatives that are cost competitive. We recommend updating land acquisition laws to bring coal under the general purview of LARR or, at minimum, amending the CBAA to ensure adequate environmental and social safeguards are in place, both in letter and practice.
    Date: 2023–04
  55. By: Hyeyoon Jung; João A. C. Santos; Lee Seltzer
    Abstract: We build on the estimated sectoral effects of climate transition policies from the general equilibrium models of Jorgenson et al. (2018), Goulder and Hafstead (2018), and NGFS (2022a) to investigate U.S. banks’ exposures to transition risks. Our results show that while banks’ exposures are meaningful, they are manageable. Exposures vary by model and policy scenario with the largest estimates coming from the NGFS (2022a) disorderly transition scenario, where the average bank exposure reaches 9 percent as of 2022. Banks’ exposures increase with the stringency of a carbon tax policy but tend to benefit from a corporate or capital tax cut redistribution policy relative to a lump sum dividend. Also, banks’ exposures increase, although not dramatically in stress scenarios. For example, according to Jorgenson et al. (2018), banks’ exposures range from 0.5—3.5 percent as of 2022. Assuming that loans to industries in the top two deciles most affected by the transition policy lose their entire value, banks’ exposures would increase to 12—14 percent. Finally, there is a downward trend in banks’ exposures to the riskiest industries, which appears to be at least in part due to banks gradually reducing funding to these industries.
    Keywords: climate risk; transition risk; climate; Network for Greening the Financial System (NGFS) scenarios
    JEL: G21 H23 Q54
    Date: 2023–04–01
  56. By: Prateek Bansal; Rubal Dua (King Abdullah Petroleum Studies and Research Center)
    Abstract: China and India, the world’s two most populous developing economies, are also among the largest automotive markets and carbon emitters. To reduce carbon emissions from the passenger car sector, both countries have considered various policy levers that affect fuel price, car prices and fuel economy. This study estimates the responsiveness of new car buyers in China and India to such policy levers and drivers, including income.
    Keywords: Fleet fuel economy, Fleet GHG Emissions, Ride Hailing, Sustainable Mobility
    Date: 2022–11–22
  57. By: Xi Sun
    Abstract: Recycling of raw material can make a significant contribution to achieving climate neutrality by 2050. Carbon pricing can encourage material recycling by making it more competitive with waste incineration and primary material production. However, accounting for the interactions among different markets in a theoretical model, this paper finds that carbon pricing on material manufacturing alone does not necessarily promote material recovery, if the derived demand for material is elastic, the supply of primary materials inelastic, and the emission intensity for recycling relatively high. In contrast, extending the scope of this policy to the waste sector guarantees a positive effect of carbon pricing on material recovery, together with a strengthened effect on emission mitigation. Using a numerical simulation on plastic waste, this paper shows that implementing carbon pricing on both sources is able to save 37% of CO2e emissions, compared to a policy with a limited scope on production saving 10% less. It is important to consider the full range of impacts and interactions when designing climate policy to ensure that it effectively delivers the objectives for both climate mitigation and circular economy.
    Keywords: Carbon pricing, recycling, material production process emission, incineration, material efficiency
    JEL: D62 H23 Q53
    Date: 2023
  58. Damage functions in integrated assessment models (IAMs) map changes in climate to economic impacts and form the basis for most of estimates of the social cost of carbon. Implicit in these functions lies an unwarranted assumption that restricts the spatial variation (Svar) and temporal variability (Tvar) of changes in climate to be null. This could bias damage estimates and the climate policy advice from IAMs. While the effects of Tvar have been studied in the literature, those of Svar and their interactions with Tvar have not. Here we present estimates of the economic costs of climate change that account for both Tvar and Svar, as well as for the seasonality of damages across sectors. Contrary to the results of recent studies which show little effect that of Tvar on expected losses, we reveal that ignoring Svar produces large downward biases, as warming is highly heterogeneous over space. Using a conservative calibration for the damage function, we show that previous estimates are biased downwards by about 23-36%, which represents additional losses of about US$1, 400-US$2, 300 billion by 2050 and US$17-US$28 trillion by the end of the century, under a high emissions scenario. The present value of losses during the period 2020-2100 would be larger than reported in previous studies by $47-$66 trillion or about ½ to ¾ of annual global GDP in 2020. Our results imply that using global mean temperature change in IAMs as a summary measure of warming is not adequate for estimating the costs of climate change. Instead, IAMs should include a more complete description of climate conditions.
    By: Francisco Estrada; Richard S.J. Tol (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom); Wouter Botzen
    Keywords: climate change; climate impacts; spatial variation; temporal variability; social cost of carbon
    JEL: Q54
  59. By: Li, Qingran; Pizer, William (Resources for the Future)
    Abstract: To determine the overall value of a policy to society, the US government calculates costs and benefits both now and over time. To compare costs and benefits that occur at different times, future impacts must be reduced in value, or discounted, since future costs and benefits are less significant than those same costs and benefits today. Higher discount rates mean that future effects are considered increasingly less significant; a low discount rate means that they are close to equally significant.For nearly 20 years, the Office of Management and Budget (OMB) has advised federal agencies to use two discount rates in policy analyses: 7 percent and 3 percent. The 7 percent rate captures the return paid by private capital, reflecting effects on investment and business, and the 3 percent rate the return received by consumers, with the difference due largely to taxes. When applied to government policies that have costs today but benefits extending far into the future, the two rates can have strikingly different outcomes. Recent estimates of social cost of carbon (SCC) The social cost of carbon refers to the monetized benefits (avoided climate damages) from reducing one ton of carbon dioxide. are six to nine times higher using 3 percent rather than 7 percent, and this discrepancy can have significant, cascading effects on the benefit-cost analysis of policies. The Obama administration adopted a range of SCC estimates centered on a 3 percent discount rate. Several years later, the EPA under the Trump administration adopted SCC estimates based on both 7 and 3 discount rates with equal emphasis.In contrast, economic theory suggests converting the dollar effects on investment and business to their consumption equivalents. That way, costs and benefits (measured entirely as effects on consumers) can be discounted at the consumption rate across the board. This idea has not caught on, however, because the “shadow price†to convert capital goods into consumption equivalents and the distribution of costs and benefits (across investment versus consumption) are not always certain.In this issue brief, we show that a shadow price is no more difficult to identify than discount rates of 7 or 3 percent. Nor is it difficult to establish bounds based on whether costs and benefits accrue to capital or consumption, valuing them differently and appropriately. This approach provides more consistency than the current use of alternative 3 and 7 percent discount rates, particularly for valuing benefits far into the future.
    Date: 2021–06–14
  60. By: Adrien Nicolle (CentraleSupélec); Diego Cedreros (CentraleSupélec); Olivier MASSOL (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec, City University London); Emma Jagu Schippers (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec)
    Abstract: Carbon Capture and Storage (CCS) is regularly depicted as a crucial technology to reduce the social cost of achieving carbon neutrality. However, its deployment critically depends on the installation of CO2 infrastructures. As the regulatory procedures governing their provision are yet to be clarified, the purpose of this paper is to assess the social and environmental impacts of such regulations. We show how the engineering equations of a CO2 pipeline implicitly define a Cobb-Douglas production function. We then infer that the resulting cost function exhibits economies of scale and verifies the technological condition for a natural monopoly. As the possible exertion of market power is a concern, we evaluate the social distortion of the unregulated monopoly and the average-cost pricing solution, which we compare to the outcomes of the welfare-maximizing solution. While the deadweight loss obtained under average-cost pricing remains lower than 5% compared to the first-best solution, our findings indicate that allocative efficiency is an issue, with more than a quarter of the CO2 emissions not being transported. By providing the first analytically determined cost function of a CO2 pipeline, this analysis will usefully inform the emerging regulatory policy debates on CCS.
    Keywords: Carbon Capture and Storage (CCS), CO2 Pipelines, Cobb-Douglas, Regulation
    Date: 2023–04–01

This nep-ene issue is ©2023 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.