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on Energy Economics |
| By: | Khondaker Golam Moazzem; Mashfiq Ahasan Hridoy; Rafat Alam |
| Abstract: | The global energy landscape is undergoing a pivotal transformation, driven by the dual imperatives of sustainable development and climate change mitigation. This transition from traditional fossil fuels to renewable energy sources presents a unique set of challenges and opportunities, particularly in the context of developing nations such as Bangladesh. With its dense population and burgeoning energy needs, Bangladesh stands at a critical juncture in its energy development trajectory. This paper explores the implications of Bangladesh’s energy transition on employment and skill requirements within the power and energy sector. Through a comprehensive analysis, the study aims to project the net employment impact by 2030, taking into account the evolving energy mix and the potential for job creation versus job displacement. |
| Keywords: | Energy Transition, Power and Energy Sector, Employment, sustainable energy, Bangladesh |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:pdb:opaper:152&r= |
| By: | Khondaker Golam Moazzem; Faisal Quaiyyum |
| Abstract: | The global energy landscape is undergoing a pivotal transformation, driven by the dual imperatives of sustainable development and climate change mitigation. This transition from traditional fossil fuels to renewable energy sources presents a unique set of challenges and opportunities, particularly in the context of developing nations such as Bangladesh. With its dense population and burgeoning energy needs, Bangladesh stands at a critical juncture in its energy development trajectory. This paper explores the implications of Bangladesh’s energy transition on employment and skill requirements within the power and energy sector. Through a comprehensive analysis, the study aims to project the net employment impact by 2030, taking into account the evolving energy mix and the potential for job creation versus job displacement. |
| Keywords: | Energy Transition, Power and Energy Sector, Employment, sustainable energy, Bangladesh |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:pdb:opaper:153&r= |
| By: | Sukhgeet Kaur; Michael G. Pollitt |
| Keywords: | Renewable energy, solar pumps, feeder level solarisation, energy water nexus, energy subsidies, irrigation water, electricity, groundwater depletion, Punjab |
| JEL: | Q1 Q20 Q25 Q42 Q58 O13 O38 P48 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2408&r= |
| By: | Sukhgeet Kaur; Michael G. Pollitt |
| Keywords: | Agriculture, energy water nexus, electricity, discrete choice, Punjab, India |
| JEL: | O13 Q1 Q4 Q5 Q12 Q24 Q25 Q28 Q48 Q57 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2406&r= |
| By: | Sukhgeet Kaur; Michael G. Pollitt |
| Keywords: | Agriculture, energy water nexus, entitlement, incentive, groundwater, irrigation, electricity consumption, paddy, subsidy, electricity pricing, discrete choice, Punjab |
| JEL: | O13 Q1 Q4 Q5 Q12 Q24 Q25 Q28 Q48 Q57 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2407&r= |
| By: | Nahim Bin Zahur |
| Abstract: | In many capital-intensive markets, sellers sign long-term contracts with buyers before committing to sunk cost investments. Ex-ante contracts mitigate the risk of under-investment arising from ex-post bargaining. However, contractual rigidities reduce the ability of firms to respond flexibly to demand shocks. This paper provides an empirical analysis of this trade-off, focusing on the liquefied natural gas (LNG) industry, where long-term contracts account for over 70% of trade. I develop a model of contracting, investment and spot trade that incorporates bargaining frictions and contractual rigidities. I structurally estimate this model using a rich dataset of the LNG industry, employing a novel estimation strategy that utilizes the timing of contracting and investment decisions to infer bargaining power. I find that without long-term contracts, sellers would decrease investment by 27%, but allocative efficiency would significantly improve. Negative contracting externalities lead to inefficient over-use of long-term contracts in equilibrium. Policies aimed at eliminating contractual rigidities reduce investment by 16%, but raise welfare by 9%. |
| Keywords: | Long-term Contracts, Spot Markets, Under-investment, Nash Bargaining, Contracting Externalities, Market Power, Liquefied Natural Gas |
| JEL: | D22 D23 L14 L22 L42 Q41 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:qed:wpaper:1518&r= |
| By: | Nahim Bin Zahur |
| Abstract: | The liquefied natural gas (LNG) industry is characterized by systematic inter-regional price differentials, raising the question of whether sellers price discriminate. This paper measures market power in the LNG spot market and studies how market power influences pricing, trade and welfare. I develop a novel method for inferring market conduct that utilizes information on sellers’ pricing and quantity decisions across multiple geographically segmented markets. My test for market conduct is based on the observation that sellers exercising market power engage in third-degree price discrimination, whereas sellers behaving competitively do not. Using data from 2006 to 2017 on spot market trade flows, spot prices, shipping costs and seller capacities, I estimate a structural model of LNG trade and pricing that incorporates spatial differentiation, capacity constraints and trade frictions and flexibly nests different models of seller market power. I find that seller decisions are consistent with a Cournot model and unlikely to be generated by a competitive model. The total deadweight loss from market power is estimated to be USD 12 billion, or about 4.5% of total revenue. I find that market power plays a key role in exacerbating inter-regional price differentials. |
| Keywords: | Market Power, Price Discrimination, Conduct Parameter, Contracts, Liquefied Natural Gas |
| JEL: | D23 L13 D43 Q41 |
| Date: | 2023–02 |
| URL: | https://d.repec.org/n?u=RePEc:qed:wpaper:1517&r= |
| By: | Gideon Ndubuisi; Elvis Korku Avenyo; Rex Asiama |
| Abstract: | South Africa's current electricity crises have worsened, placing the country on an uncertain and turbulent economic trajectory. To identify the manufacturing sub-sectors that are most vulnerable to this crises, we use the input-output matrices for the period between 1993 and 2021 to develop a sub-sector energy vulnerability index. Second, we employ the self-constructed energy vulnerability index in a flexible empirical framework to examine the effect of the electricity crises on manufacturing sector jobs in the country. |
| Keywords: | Electricity, Crisis, Energy, Vulnerability, Manufacturing, Jobs |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-41&r= |
| By: | Thomas Fackler; Oliver Falck; Moritz Goldbeck; Fabian Hans; Annina Hering |
| Abstract: | We investigate differences in labor demand between German automotive firms specializing in green propulsion technology and those with a focus on combustion engines. To this end, we introduce a firm-level labor demand index based on the near-universe of online job postings and firms’ patent portfolios. Workforce adjustments are a crucial dimension of technology-related structural change, and labor demand as a highly reactive decision parameter is an ideal measure to detect employment adjustments. Our index enables us to distinguish labor demand by firms’ greenness in real-time, a notable advantage over survey or administrative data. In a difference-in-differences setup, we exploit the poly-crisis triggered by unexpected escalations of trade conflicts and sustained by consequences of the pandemic and the war in Ukraine. We find green firms’ labor demand is significantly and persistently higher than before the outbreak of the poly-crisis, by 34 to 50 percentage points compared to firms with a focus on combustion technology. This gap widens over time and is not driven by unobserved firm heterogeneity. Green firms systematically adjust labor demand towards production and information technology jobs. |
| Keywords: | low carbon technology, firm employment decisions, sustainability, disruptive innovation |
| JEL: | C55 J23 M51 O14 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11160&r= |
| By: | Shi, Xiangyu; Wang, Chang |
| Abstract: | Input-output linkages among sectors and firms are largely overlooked when assessing regulatory policies. Using a carbon emissions regulation in China as an example, we find that the regulation facilitates the transition to green technologies and reduces entry and carbon emissions in the regulated sectors with large carbon emissions. We also find unintended spillovers via the input-output network, resulting in more entry and innovation in the downstream sectors; and less entry and innovation in the upstream sectors. These facts can be rationalized by a firm-dynamics model with input-output linkages. The results of quantitative exercises are much different when taking input-output linkages into account. |
| Keywords: | carbon emissions regulation; firm dynamics; innovation; input-output networks |
| JEL: | C1 D2 E2 L2 Q5 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121359&r= |
| By: | Vollebergh, Herman (Tilburg University, School of Economics and Management) |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:0a3c8aaf-2b01-4fe9-bfe7-a756be79db7a&r= |
| By: | Chen, Kelin; Zhang, Jun; Zhang, Yuehua |
| Keywords: | Resource/Energy Economics And Policy, Community/Rural/Urban Development, Consumer/ Household Economics |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343855&r= |
| By: | Afees A. Salisu (Centre for Econometrics & Applied Research, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Ahamuefula E. Ogbonna (Centre for Econometrics & Applied Research, Ibadan, Nigeria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Sisa Shiba (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | In this study, we use the GARCH-MIDAS model to evaluate how predictable oil and energy market uncertainties are in relation to gold return volatility. We examine daily gold returns and monthly energy uncertainty measurements such as Oil Market Uncertainty (OMU) and Oil Price Uncertainty (OPU), as well as measurements of energy market uncertainties such as the Global Equally-Weighted Energy Uncertainty Index (GEUI-EQ), GDP-Weighted Global Energy Uncertainty Index (GEUI-GDP), and country-specific energy uncertainty indexes for twenty-eight countries. We calculate the total connectedness index (TCI) for the country-specific indexes as a measure of the composite energy uncertainty index. We find that higher uncertainties in the oil and energy markets lead to increased gold volatilities, suggesting that gold can serve as a reliable hedge against oil and energy market uncertainties. Enhanced trading in the gold market raises its volatility as oil and energy market uncertainties increase. Our analysis, both within the sample and out-of-sample, supports this conclusion, and our findings remain valid even when alternative measures of oil and energy market uncertainties are considered. We provide valuable insights into the practical implications of our findings for both practitioners and policymakers. |
| Keywords: | Energy Market Uncertainties, Gold Return Volatility, GARCH-MIDAS, Forecast Evaluation |
| JEL: | C53 N50 Q43 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202431&r= |
| By: | Li, Xinrui; Yu, Chin-Hsien; Zhao, Jinsong; Shi, Yingyi |
| Keywords: | Production Economics, Resource/Energy Economics And Policy, Environmental Economics And Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343667&r= |
| By: | Kang, Munsu (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | In the Middle East and North Africa (hereafter MENA) region, fossil fuel subsidies have been utilized as a social protection mechanism, serving as a tool under the social contract. Previous studies have primarily focused on the social welfare implications of abolishing fossil fuel subsidies. In this study, we aim to answer the question of whether the public in the MENA region prefers social protection services as an alternative to fossil fuel subsidies using online survey results in four countries including Egypt, Jordan, Saudi Arabia, and Tunisia. The survey results reveal that respondents in the MENA countries prefer energy price reduction (or stabilization) policies over pro-poor cash transfer programs. However, respondents answer that they prefer support for vulnerable groups above government-led energy price reduction policies when there are energy price shocks. Why do people agree to reduce subsidies? Some of the concerns regarding the energy subsidy is that subsidy policies are more pro-rich in nature and benefits are unequally distributed. However, respondents who answered they prefer to maintain or increase fossil fuel subsidies mention that the subsidy policy could benefit all. Based on the results, two key policy implications emerge. First, social protection programs must be carefully designed as an alternative to energy subsidy reform. The second key policy implication is the importance of effective public campaigning and awareness-raising around the need for energy subsidy reform. |
| Keywords: | MENA; energy subsidy; public perception |
| Date: | 2024–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kiepwe:2024_016&r= |
| By: | Majeed, Fahd; Khanna, Madhu; Mwebaze, Paul; McCall, James; Waechter, Katy; Jia, Mengqi; Peng, Bin; Miao, Ruiqing; Kaiyu, Guan; Macknick, Jordan |
| Keywords: | Resource/Energy Economics And Policy, Environmental Economics And Policy, Agricultural And Food Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343890&r= |
| By: | Ko, Minkyong; Ta, Chi L.; Garg, Teevrat; Lewis, Eric |
| Keywords: | Environmental Economics And Policy, International Development |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343776&r= |
| By: | Johnson, David R.; Bahalou Horeh, Marziyeh; Liu, Jing; Zuidema, Shan; Chepeliev, Maksym; Hertel, Thomas W. |
| Keywords: | Agricultural And Food Policy, Environmental Economics And Policy, Land Economics/Use |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343944&r= |
| By: | Sulehri, Fiaz Ahmad; Ali, Amjad |
| Abstract: | Sustainable development is of great significance for present and future generations. This study examines the mediation role of economic growth on sustainable development through country risk. We have employed the structural equation modeling (SEM) technique to examine the direct and indirect effects of exogenous and endogenous variables. We conducted this analysis using a sample of 24 countries that contributed approximately 65% of global greenhouse gas (GHG) emissions from 2000 to 2019. The empirical analysis based on direct effects establishes that country risk reduces economic growth and sustainable development. Interestingly, the empirics of indirect effects reveal that country risk has a positive and significant indirect impact on sustainable development by using economic growth as a mediator. Moreover, the negative direct effect of country risk on sustainable development is greater than the total negative effect due to the positive indirect effect. Finally, policymakers should minimize country risk to promote economic growth, ensuring environmental, social, and economic sustainability for the safety of current and future generations. |
| Keywords: | Country Risk, Economic Growth, Sustainable Development, Structural Equation Model |
| JEL: | F30 O44 Q56 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121290&r= |
| By: | Frances C. Moore; Moritz A. Drupp; James Rising; Simon Dietz; Ivan Rudik; Gernot Wagner |
| Abstract: | Estimating the cost to society from a ton of CO2 - termed the social cost of carbon (SCC) - requires connecting a model of the climate system with a representation of the economic and social effects of changes in climate, and the aggregation of diverse, uncertain impacts across both time and space. Increasingly a growing literature has examined the effect of fundamental structural elements of the models supporting SCC calculations. This work has accumulated in piecemeal fashion, leaving their relative importance unclear. Here we perform a comprehensive synthesis of the evidence on the SCC, combining 1823 estimates of the SCC from 147 studies with a survey of authors of these studies. The distribution of published 2020 SCC values is wide and substantially right-skewed, showing evidence of a heavy right tail (truncated mean of $132). Analysis of variance reveals important roles for the inclusion of persistent damages, representation of the Earth system, and distributional weighting. However, our survey reveals that experts believe the literature is biased downwards due to an under-sampling of structural model variations and biases in damage-function and discount-rate. To address this imbalance, we train a random forest model on variation in the literature and use it to generate a synthetic SCC distribution that more closely matches expert assessments of appropriate model structure and discounting. This synthetic distribution has a mean of $284 per ton CO2, respectively, for a 2020 pulse year (5%–95% range: $32–$874), higher than all official government estimates, including a 2023 update from the U.S. EPA. |
| Keywords: | social cost of carbon |
| JEL: | Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11153&r= |
| By: | Julia Mink (University of Bonn) |
| Abstract: | This study quantifes the financial burden of acute air pollution on the French healthcare system. By combining comprehensive French administrative health data for a nationally representative sample with high-resolution geospatial data on air pollution and meteorological conditions, the healthcare costs of air pollution exposure are estimated more accurately and comprehensively than in the previous literature. I use an instrumental variable approach exploiting weekly variations in local concentrations of nitrogen dioxide, ground-level ozone and particulate matter induced by variations in altitude weather conditions. I find that air pollution causes healthcare costs to the French healthcare system in the order of several billion per year, even though air pollutant concentrations are mostly below the current European air quality standards considered safe for human health. My cost estimates are about 10 times higher than those estimated in previous studies, suggesting that the health costs of air pollution have been severely underestimated. While air pollution has a large effects on overall spending in more polluted and populated urban areas due to the higher number of affected people, the marginal effects appear to be greater in low-pollution and less populated areas. Reducing population exposure even at low air pollution concentrations should therefore be an important public health goal. Even the most stringent 2021 WHO guideline values should not be considered safe for human health. |
| Keywords: | Air pollution, healthcare cost, instrumental variable approach |
| JEL: | I12 J14 Q51 Q53 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:320&r= |
| By: | Yu, Chengzheng; Zhang, Zhi Min; Wei, Liangchun |
| Keywords: | Environmental Economics And Policy, Health Economics And Policy, Resource/Energy Economics And Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343628&r= |
| By: | Afees A. Salisu (Centre for Econometrics & Applied Research, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Ahamuefula E. Ogbonna (Centre for Econometrics & Applied Research, Ibadan, Nigeria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | In this study, we use the GARCH–MIDAS (Generalized Autoregressive Conditional Heteroskedasticity variant of Mixed Data Sampling) model to explore the relationship between geopolitical risks and oil return volatility. We analyze the daily crude oil returns (West Texas Intermediate (WTI and Brent) and five different monthly measures of geopolitical risks – geopolitical oil price risk (GOPRX), its augmented variant (GOPRX_Augmented), and the conventional geopolitical risks (GPR), geopolitical risks-threats (GPRT), and geopolitical risks-attacks (GPRA). Our results show that higher levels of geopolitical risk are linked to lower oil return volatility, which is due to reduced trading during periods of high geopolitical risks. This finding is consistent across the different GPR indices, with evidence of even out-of-sample predictability. We also discuss the practical implications of our findings for practitioners and policymakers. |
| Keywords: | Geopolitical risks, Oil price volatility, GARCH-MIDAS, Forecast evaluation |
| JEL: | C53 Q41 Q47 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202429&r= |
| By: | Christina Gravert |
| Abstract: | This paper presents new evidence on the question: Why don’t consumers switch electricity contracts? By conducting a large-scale survey experiment with 3% of the Danish working-age population, I have gathered data on respondents’ factual knowledge of the retail electricity market, their beliefs, preferences, and intentions to switch providers. Crucially, I can link their intentions with actual switching behaviors using nationwide smart meter data. My findings reveal a enormous gap between switching intentions and actions. This gap is exacerbated by my experimental interventions which 1) provide information about savings and switching costs and 2) decrease switching costs by offering free access to a switching service. A majority of consumers leaves money on the table by not switching, despite their stated intentions to switch. The low switching rates of on average 1.2% per month cannot be explained by biased beliefs or high switching costs. Demographics do not explain switching behavior, but personality traits such as risk aversion, trust, and a tendency to avoid procrastination matter. These results raise the fundamental question: Why should consumers actively choose electricity contracts? Instead, policymakers should consider implementing smart defaults, for which I find strong support from consumers. |
| Keywords: | consumer inertia, electricity markets, switching, field experiment |
| JEL: | C83 D03 D12 D83 L13 L43 L94 L98 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11139&r= |
| By: | Bolakhe, Kumar; Yu, Tun-Hsiang E.; Sykes, Virginia R.; Smith, Aaron; Boyer, Christopher N. |
| Keywords: | Production Economics, Environmental Economics And Policy, Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343595&r= |
| By: | Bettina Meinhart |
| Abstract: | Abstract:International climate targets have far-reaching implications for all areas of the economy and life, including trade policy. To reach the target of the Paris Agreement, it may be necessary to link trade and environmental policy, whereby one way of linking the two policy areas is to include environmental provisions (EPs) in trade agreements. Several motives for including environmental concerns in trade agreements exist, ranging from promoting environmental cooperation and ensuring a level playing field to pursuing protectionist interests. In principle, the inclusion of environmental aspects is not a new development. Since the 1990s, EPs have been frequently integrated into trade agreements, for example on issues such as hazardous waste, deforestation or biodiversity protection. In recent years, as climate initiatives have gained prominence at the EU level, the number of EPs in trade agreements has steadily increased. Thereby, the inclusion of these concerns is very heterogeneous in terms of the subject matter and enforceability. A closer look at the enforceability indicator is crucial, because if EPs are not legally enforceable, addressing environmental concerns may not have an impact on trade and the environment. The European Commission is aware of this issue and therefore published the review of its policy chapter on trade and sustainable development in June 2022. This identifies how the contribution of EU trade agreements to promoting environmental protection can be improved, mentioning, among other actions, the strengthening of enforcement through trade sanctions as a last resort. Whether the current changes are effective in terms of environmental and trade impacts will be seen in further research. |
| Date: | 2022–10 |
| URL: | https://d.repec.org/n?u=RePEc:wsr:pbrief:y:2022:m:10:i:055&r= |
| By: | Michele Fioretti; Junnan He; Jorge Tamayo |
| Abstract: | We study firms' strategic interactions when each firm may own multiple production technologies, each with its own marginal cost and capacity. Increasing industry concentration by reallocating non-efficient capacity to the largest and most efficient firm can decrease market prices as it incentivizes the firm to outcompete its rivals. However, with large reallocations, the standard monotonic relationship between concentration and prices re-emerges as competition weakens due to the rival's lower capacity. Thus, we demonstrate a U-shaped relationship between market prices and industry concentration when firms are diversified. This result does not rely on economies of scale or scope. We find consistent evidence from the Colombian wholesale energy market, where strategic firms are diversified with fossil-fuel and renewable technologies, exploiting exogenous variation in renewable capacities. Our findings not only apply to the green transition but also to other industries and suggest new insights for antitrust policies. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.03504&r= |
| By: | Darius Sultani; Sebastian Osorio; Claudia Günther; Michael Pahle; Katrin Sievert; Tobias S. Schmidt; Bjarne Steffen; Ottmar Edenhofer |
| Abstract: | Novel Carbon Dioxide Removal (CDR) technologies have seen a first wave of deployment, driven by investments through voluntary carbon markets and by specific support policies. To sustain the momentum, a credible long-term policy path is urgently needed to lead removal technologies through the valley of death, and to ramp-up sufficient capacities to limit global warming to well below 2°C. The integration of removals into carbon compliance markets has been widely discussed as a potential option. Even though current allowance prices in markets like the European emissions trading system (EU ETS) are still considerably lower than removal cost, integration and the prospects of rising allowance prices could increase long-term certainty for investors. What is more, integration would also help to find to the efficient mix of emissions abatement and removal. To date, however, it remains unclear how exactly such an integration can take place. We address this gap in three parts. We (1) characterise a first-best vision for removals in the form of an economically desirable, long-term regulatory framework to work towards to. We (2) then analyse the implications of a first-best - i.e. direct and unconstrained - integration of permanent removals into the EU’s carbon compliance market using the numerical model LIMES-EU. In our base scenario, we find more than 60 Mt of CDR entering the market annually by 2050, cutting allowance prices considerably. This underpins the general cost-effectiveness of integration. However, high uncertainty on CDR cost and fragmented regulation give rise to the risks of abate-ment deterrence and excessive biomass use, which need to be accounted for through a second-best sequencing approach. We consequently (3) derive a three-stage path for removal integration into the EU ETS, based on risk reduction contingencies that serve as preconditions for entering subsequent stages. |
| Keywords: | carbon dioxide removal, emissions trading, policy sequencing, technology learning |
| JEL: | H23 Q52 Q55 Q58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11173&r= |
| By: | Zattler, Jürgen K. |
| Abstract: | The environment in which development policy operates has changed quickly. Some of these changes are longer-term trends to which development policy should adapt: the global economy is in upheaval, while global crises are becoming the norm and are increasing the debt level even further. Moreover, they are exacerbating inequality in our partner countries, which in turn is undermining democratic structures. Public budgets are increasingly coming under pressure and populist forces are calling into question the very principle of development policy. At the same time, the world is becoming more multipolar and developing countries are gaining in self-confidence.Development policy needs to find structural answers to these challenges: – It should explicitly see itself as part of overall policy and should systematically contribute to overcoming global challenges; – It must find new ways to ensure that environmental transformation goes hand in hand with social progress; – It needs to become even more effective and more political, particularly by systematically integrating bilateral contributions into the policies of the partner countries and into multilateral and European approaches; moreover, policy reforms must be addressed comprehensively, most importantly those related to the green transformation; – It must profoundly change the way it mobilises private investments, focusing not on subsidising individual investments but on transforming markets; – Finally, development partners need to team up to find solutions to the acute debt and financial crisis. This paper will not only outline current trends and formulate principles for a modern development policy. It will also show examples of how these principles could be put into practice through concrete initiatives: – Socio-ecological fiscal reforms: environmentally harmful subsidies can be repurposed for social security – A new Sustainable Development Goal (SDG) to reduce intra-country inequality – Climate programmes that focus on policy reforms. |
| Keywords: | international financial system, development financing |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:idospb:299129&r= |
| By: | Angel, Tobias; Berthe, Alexandre; Costantini, Valeria; D’Angeli, Mariagrazia |
| Abstract: | This study investigates the relationship between distinct types of inequality and CO2 emissions using panel data on 156 countries from 1995 to 2020. Using fixed effects panel and quantile regression techniques, we report estimates that indicate that pre-distribution (inequality reduction by structural changes and social protection) is better aligned with the goal of carbon emission reduction than redistribution (inequality reduction by transfers). However, those countries who contribute the least to global warming face the highest environmental degrading effect of pre-distribution. In contrast, pre-distribution decreases or does not affect the carbon emissions of the biggest global polluters. Redistribution, on the other hand, exhibits the reverse pattern. Moreover, we differentiate in this analysis between production-based and consumption-based emissions, finding on average higher challenges regarding joint inequality and emission reduction in countries that produce carbon intensive commodities. These findings call for international cooperation, structural changes and social protection policies to achieve the Sustainable Development Goals of joint inequality and carbon emission reduction. |
| Keywords: | Climate Change, Environmental Economics and Policy |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:343512&r= |
| By: | Breddermann, Christopher; Henger, Ralph |
| Abstract: | Für eine erfolgreiche Energiewende ist der zügige Ausbau von Photovoltaik (PV) eine Grundvoraussetzung. Auch wenn der Ausbau der Solarenergie derzeit besser als unter früheren Regierungen läuft, bleibt die Zielerreichung bis 2030 eine erhebliche Herausforderung. Große Potenziale bleiben ungenutzt. Insbesondere auf Dächern von Mehrfamilienhäusern werden zu wenige neue PV-Anlagen installiert. Ein zentrales Hemmnis stellen die Regelungen zum Mieterstrom dar. Ohne umfassende Reformen, die über das Solarpaket 1 hinausgehen, wird sich an dem Nischendasein des Mieterstroms nichts ändern. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkkur:300071&r= |
| By: | Roman Stöllinger |
| Abstract: | Abstract:The case for green industrial policy is strong and it is the obvious instrument to induce the structural transformation towards an emission-free economy. At the core of such a transformation lies the decarbonisation of the energy system. The industrial policy effort required to achieve the ambitious net zero objective in the European Green Deal (EGD) can be divided into three policy tasks: expanding renewable energy sources, raising energy efficiency across sectors and developing new technologies for industrial production processes where clean technologies are not available yet. While the first two tasks can rely on cost-competitive technologies and the required investment costs could in the long run pay for themselves, the third task constitutes formidable technological challenges that need to be tackled with a mission-oriented industrial policy. The industrial policy package employed ought to be a mix of public investments, green subsidies coupled with appropriate environmental regulations and an industrial mission for developing net zero industrial technologies. Importantly, with investment costs estimated at 1.75% of GDP per year, achieving the objectives of the EGD seems feasible also from a financial perspective. Despite this optimistic tone, the EGD is far from being a safe bet, and its success can easily be threatened by a plethora of factors, including opposition by vested interests or geopolitical confrontations. |
| Date: | 2023–06 |
| URL: | https://d.repec.org/n?u=RePEc:wsr:pbrief:y:2023:m:06:i:59&r= |
| By: | Zhou, Sophie Lian; van der Ploeg, Frederick |
| Abstract: | We study climate change in a model with a carbon-intensive and a green sector, each subject to stochastic productivity shocks, and show how the underlying economic structure affects the risk-adjusted discount rate and the climate risk premium in the social cost of carbon (SCC). Consumption growth, aggregate consumption volatility, and the climate beta depend on the elasticity of substitution between the two sectors and the relative size of the sectors, and vary during the green transition. The time path of the climate risk premium is hump-shaped, with the climate beta playing a dominant role in its magnitude. For strong substitutability between the two sectors and low correlation between the sectoral shocks, decarbonization can temporarily reduce aggregate consumption risk, as the climate beta becomes negative in the mid phase of the transition. The risk-adjusted discount rate first falls then rises during the green transition, leading to a SCC to GDP ratio that rises then falls as the green sector grows. We illustrate our analytical results numerically. |
| Keywords: | social cost of carbon, climate beta, carbon risk premium, two-sector model, asset pricing |
| JEL: | E60 G12 H23 O41 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:299239&r= |
| By: | Devin Mounts; Robin M. Cross |
| Abstract: | This paper considers the reliability problem in energy-only markets. Following widespread blackouts in 2011, Texas introduced a reliability price incentive to attract two GW of net additional natural gas-generating capacity. The incentive is unusual because energy buyers pay the incentive directly to producers in a real-time spot market. The program has created $13 billion in direct payments to generators annually since 2015 and is now being implemented or considered in several major energy markets in the US and abroad. We assess the incentive's impact on the Texas market from three perspectives: First, we derive the incentive's equilibrium effect on the electricity price in a monopolistic market from first principles using a standard partial equilibrium economic model. We then empirically test whether the incentive encouraged net entry into the market or the generating applicant pool, controlling for market and climatic conditions using monthly capacity data. Finally, we look for direct evidence of an incentive response among active traders using real-time market trading data. The three approaches suggest buyers and producers cancel out the incentive, and the price-only program does not encourage new generation capacity to enter the market. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.15687&r= |
| By: | Francesca Caselli; Andresa Lagerborg; Mr. Paulo A Medas |
| Abstract: | This paper studies the impact of green fiscal rules – designed to protect climate-related spending –on debt dynamics. Simulations of green rules that exempt green spending from the rule limits for an emergingmarket economy illustrate that they can lead to unsustainable debt dynamics when the net zero emissions goal is pursued mostly using spending-based instruments (e.g., investment and subsidies). Or the rule would need to implicitly assume a large fiscal adjustment in the non-green budget, which would undermine its credibility. It will be needed to build broad public consensus for a more comprehensive fiscal strategy that tackles the difficult policy tradeoffs that will be required and takes into account long-term effects. A more appropriate mix of climate policies, including actively employing carbon pricing, should be pursued within the overall setting of fiscal and debt objectives. Developing ‘green’ medium-term fiscal frameworks would help to integrate climate change considerations into fiscal policy design in a more comprehensive manner. |
| Keywords: | Fiscal rule; golden rule; medium-term fiscal framework; MTFF |
| Date: | 2024–06–21 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/125&r= |
| By: | Schmitz, Tom; Colantone, Italo; Ottaviano, Gianmarco |
| Abstract: | This paper shows how to combine microeconometric evidence on the effects of environmental policy with a macroeconomic model, accounting for general equilibrium spillovers that have mostly been ignored in the literature. To this end, we study the effects of a recent US air pollution policy. We use regression evidence on the policy’s impact across industries and local labor markets to calibrate a quantitative spatial model allowing for general equilibrium spillovers. Our model implies that the policy lowered emissions by 11.1%, but destroyed approximately 250’000 jobs. Ignoring spillovers overestimates job losses in polluting industries, but underestimates job losses in clean industries. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2024–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:343507&r= |
| By: | Rob Bauer; Katrin Gödker; Paul Smeets; Florian Zimmermann |
| Abstract: | We investigate financial experts’ beliefs about climate risk pricing and analyze how those beliefs influence stock return expectations. In a comprehensive survey, we elicit experts beliefs using both structured and open-ended questions. We establish that experts share the view that climate risks are insufficiently reflected in stock prices, yet they hold heterogeneous beliefs about the source and persistence of the mispricing. Through the analysis of experts’ text responses, we delineate distinct mental models used by financial professionals to interpret and predict the asset pricing implications of climate risks. Differences in experts’ mental models explain variation in return expectations in the short-term (1-year) and long-term (10-year). Furthermore, we document that experts’ political leanings and geography determine the type of mental model they hold. In a last step, we show that one widely held mental model, which is based on second-order beliefs, causally affects experts’ return expectations using an information provision experiment. |
| Keywords: | climate finance, climate risks, mental models, 2nd order beliefs, expectations |
| JEL: | D01 G10 G40 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_569&r= |
| By: | Fotios Kalantzis; Salma Khalid; Alexandra Solovyeva; Marcin Wolski |
| Abstract: | Using a novel cross-country dataset, which merges firm-level financials with information on firms’ participation in the European Unions’ Emissions Trading System (ETS), we investigate how firm performance is affected by tightening of environmental policies that put a price on pollution. We find that more stringent policies do not have a strong negative impact on the profitability of ETS-regulated or non-ETS firms. While firms report an increase in their input costs during periods of high carbon prices, their reported turnover is also higher. Among ETS-regulated firms which must purchase emission certificates under the EU ETS, tightening of climate policies in periods of high carbon prices results in increased investment, particularly in intangible assets. We establish robustness of our results using a quantile regression analysis, ensuring our key findings are not driven by distributional irregularities. Our findings provide support for the benefits of EU ETS on accelerating firms’ climate transition, while keeping firm-level financial costs at bay. |
| Keywords: | climate finance; climate change; decarbonization; firm-level analysis; Emissions Trading System (ETS) |
| Date: | 2024–06–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/135&r= |
| By: | Sarra Ben Yahia (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Jose Angel Garcia Sanchez (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Rania Hentati Kaffel (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This study provides sentiment analysis model to enhance market return forecasts by considering investor sentiment from social media platforms like Twitter (X). We leverage advanced NLP techniques and large language models to analyze sentiment from financial tweets. We use a large web-scrapped data of selected energy stock daily returns spanning from 2018 to 2023. Sentiment scores derived from FinBERT are integrated into a novel predictive model (SIMDM) to evaluate autocorrelation structures within both the sentiment scores and stock returns data. Our findings reveal i) significant correlations between sentiment scores and stock prices. ii) Results are highly sensitive to data quality. iii) Our study reinforces the concept of market efficiency and offers empirical evidence regarding the delayed influence of emotional states on stock returns. |
| Keywords: | financial NLP finBERT information extraction webscraping sentiment analysis, financial NLP, finBERT, information extraction, webscraping, sentiment analysis, LLM, Deep learing |
| Date: | 2024–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-04629569&r= |
| By: | Fan, Xinxin; Lee, Yuanyao Stanley; Khanna, Madhu; Kent, Jeffery; Shi, Rui; Guest, Jeremy; Lee, DoKyoung |
| Keywords: | Resource/Energy Economics And Policy, Environmental Economics And Policy, Agricultural And Food Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343741&r= |
| By: | Hrozencik, Robert A.; Rouhi Rad, Mani; Uz, Dilek; Li, Liqing |
| Keywords: | Community/Rural/Urban Development, Resource/Energy Economics And Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343894&r= |
| By: | Ofori, Pamela E.; Ofori, Isaac K. |
| Abstract: | The surge in frontier technology adoption (FTR) in education, health, and labour markets cannot be overemphasised. Notwithstanding, rigorous empirical findings concerning their socioeconomic impacts in the Global South are hard to find. Accordingly, this study explores the impact of FTR on gender inequality in low-income, and middle- and high-income African countries. Second, this study investigates the moderating role of electricity access in the FTR-gender inequality nexus. Third, the study examines the threshold effect of electricity access in the FTR-gender inequality relationship. Compelling evidence, based on country-level data for 29 African countries from 2010-2020, reveals that FTR promotes gender equality in both low-income, and middle- and high-income African countries. However, this impact is striking in the middle- and high-income African countries. Further, the contingency analysis establishes that electricity access amplifies the effect of FTR on gender equality but only in middle- and high-income African countries. Additionally, the threshold analysis demonstrates that broadening electricity access coverage conditions FTR to further enhance gender equality. However, this positive impact eludes low-income African countries. We conclude that investments in broadening electricity access and the capacity of African countries in adopting, mastering, and adapting frontier technologies are critical for inclusive human development. |
| Keywords: | Africa; Agenda 2063; Frontier technology adoption; Gender Inequality; Inclusive human development |
| JEL: | J16 O3 O55 Q01 Q43 |
| Date: | 2024–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121245&r= |
| By: | Güntner, Jochen; Reif, Magnus; Wolters, Maik H. |
| Abstract: | We propose a structural vector-autoregressive model for the German natural gas market to investigate the impact of the 2022 Russian supply stop on the German economy. We combine conventional and narrative sign restrictions to leverage information about supply cuts for identification and find that gas supply and demand shocks have large and persistent price effects, while output effects are rather moderate. The 2022 natural gas price spike was driven by adverse flow supply shocks and positive storage demand shocks, as Germany filled its inventories before the winter. Counterfactual simulations of an embargo on natural gas imports from Russia indicate similar positive price and negative output effects compared to what we observe in the data. |
| Keywords: | Energy crisis, German natural gas market, narrative sign restrictions, natural gas price, structural scenario analysis, vector-autoregression |
| JEL: | E32 F51 Q41 Q43 Q48 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:299244&r= |
| By: | Ofori, Isaac K.; Gbolonyo, Emmanuel Y.; Ojong, Nathanael Ojong |
| Abstract: | Tracking the progress of countries in inclusive green growth (IGG) is crucial for shaping effective sustainable development policies. However, comprehensive IGG data is often inaccessible. Accordingly, rigorous empirical contributions in this direction in the context of Africa remain sparse. To address this, we computed IGG scores for 22 African countries from 2000-2020. Our data reveal that only nine of these countries are achieving green and inclusive growth. This dataset equips researchers and institutions to assess IGG progress and identify pathways for African governments to promote sustainable development |
| Keywords: | Africa; Inclusive green growth; IGG Index; Sustainable Development |
| JEL: | E01 O55 Q01 |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121317&r= |
| By: | Efrem Castelnuovo; Lorenzo Mori; Gert Peersman |
| Abstract: | We employ a structural VAR model with global and US variables to study the relevance and transmission of oil, food commodities, and industrial input price shocks. We show that commodities are not all alike. Industrial input price changes are almost entirely endogenous responses to other shocks. Exogenous oil and food price shocks are relevant drivers of global real and financial cycles, with food price shocks exerting the greatest influence. We then conduct counterfactual estimations to assess the role of systematic monetary policy in shaping these effects. The results reveal that pro-cyclical policy reactions exacerbate the real and financial effects of food price shocks, whereas counter-cyclical responses mitigate those of oil shocks. Finally, we identify distinct mechanisms through which oil and food shocks affect macroeconomic variables, which could also justify opposing policy responses. Specifically, along with a sharper decrease in nondurable consumption, food price shocks raise nominal wages and core CPI, intensifying inflationary pressures. Conversely, oil price shocks act more like adverse aggregate demand shocks absent monetary policy reactions, primarily through a decrease in durable consumption and spending on goods and services complementary to energy consumption, which are amplified by financial frictions. |
| Keywords: | commodity price shocks, transmission mechanisms, monetary policy |
| JEL: | E32 E52 F44 G15 Q02 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11140&r= |
| By: | Maria Cotofan; Karlygash Kuralbayeva; Konstantinos Matakos |
| Abstract: | The effects of climate change have become far more noticeable in recent years, with abnormally high temperatures recorded across the world. Maria Cotofan, Karlygash Kuralbayeva and Konstantinos Matakos examine how spikes in temperature influence political behaviour and how age groups respond differently. |
| Keywords: | preference formation, environmental policies, policy support, voting |
| Date: | 2024–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:684&r= |