|
on Energy Economics |
| By: | Xulia González; María J. Moral |
| Abstract: | In response to the sharp rise in fuel prices following Russia’s 2022 invasion of Ukraine, many governments introduced temporary fuel subsidies to shield households from higher energy costs. This paper evaluates the distributional and environmental effects of Spain’s fuel subsidy policy. We combine household-level estimates of gasoline price elasticities from the Household Budget Survey with weekly retail fuel price data to estimate the pass-through of the subsidy to consumers. We find an average short-run gasoline price elasticity of 0.55 and incomplete pass-through, with only 89% of the subsidy reflected in retail prices. As a result, part of the fiscal transfer was captured by fuel retailers, while the benefits accrued disproportionately to higher-income households: the lowest income quartile received 12.4% of total benefits compared with 28.4% for the highest quartile. We also identify substantial regional heterogeneity in this distribution. The subsidy also increased fuel consumption and carbon emissions. Overall, the findings suggest that uniform fuel subsidies are poorly targeted and can conflict with both equity and environmental policy objectives. |
| Keywords: | Fuel subsidy, price elasticity, gasoline prices, distributional equity, emissions |
| JEL: | H22 H23 L11 Q41 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:vig:wpaper:2603 |
| By: | John García Rendón (Escuela de Finanzas, Economía y Gobierno, Universidad EAFIT); Felipe Idrobo Mejía (Escuela de Finanzas, Economía y Gobierno, Universidad EAFIT); Mariana Restrepo López (Escuela de Finanzas, Economía y Gobierno, Universidad EAFIT) |
| Abstract: | Facing the challenge of transforming the current energy landscape towards a more sustainable one that helps to reduce greenhouse gases, the energy transition has been considered as the main strategy for reducing CO2 emissions, in which energy communities have begun to play a key role, especially in Europe. Therefore, this paper, through a literature review in the markets that have advanced the most in the implementation of energy communities and interviews with experts in the Colombian electricity market, aims to conduct a qualitative analysis to identify the challenges and opportunities in the implementation of smart contracts to incorporate energy communities in the Colombian energy market. Although opportunities derived from energy communities are evident, such as i) environmental, with the reduction of CO2 emissions, ii) economic, related to obtaining additional income from the sale of surplus energy produced to the system and participating in the demand response mechanism; iii) social, such as mitigating energy poverty and improving the health conditions of households that cook with firewood. However, there are challenges for the implementation of blockchain and smart contracts and one of the main barriers, under the current government, is institutional, increasing legal uncertainty, which has led to a deterioration of incentives and uncertainty for domestic and foreign investors. |
| Keywords: | Blockchain; Smart contracts; Energy communities, ; Distributed energy resource; Non-Conventional Renewable Energy; Prosumers; Sustainability. |
| JEL: | D47 L23 L81 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:col:000122:023621 |
| By: | Lion Hirth |
| Abstract: | In many power systems, wind and solar generation increasingly often exceeds electricity demand. Curtailing renewable generation in those hours matters both for prices and for the physical stability of the grid. Turning off wind turbines and solar panels is technically easier than ramping down a large power station, yet support schemes often give renewables an economic incentive to keep producing at negative prices. This paper studies wind and solar energy in Germany. For each cohort of generators it estimates, hour by hour, the incentive implied by two decades of support policy. It then sets those incentives against observed behavior, using a new estimate of market-based curtailment built from reanalysis weather data. I find that in 2025, at prices below -50 EUR/MWh, almost all wind generators had an incentive to stop producing, but only half of them did. Solar is the opposite case: nearly two thirds of the potential had no incentive to curtail at all, mostly because it receives a feed-in tariff that shields it from wholesale prices. Of the exposed remainder, just over a fifth cut production. Low exposure and response rates inflate subsidy payments and make the power system harder to operate safely. I conclude that a further expansion of wind and solar requires them to respond to price signals. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.10053 |
| By: | Bruno Villalba (PRINTEMPS - Professions, institutions, temporalités - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines - CNRS - Centre National de la Recherche Scientifique, AgroParisTech, Université Paris-Saclay) |
| Keywords: | Energy self-limitation, Energy sufficiency, Energy frugality |
| Date: | 2026–03–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05737700 |
| By: | Jackson, James; Larsen, Mathias |
| Abstract: | There is an ongoing debate amongst scholars as to whether democratic or authoritarian political systems are more effective in achieving climate policy outcomes. In this article, we follow the latter trend through the concept of eco-authoritarianism, proposing that it is the appropriate way to understand China’s approach to the green transition. Drawing on primary and secondary data on China’s electric vehicle (EV) transition, we make two contributions to the environmental politics literature. First, we go beyond the current high-level theorising of eco-authoritarianism by identifying political architecture, ambitions & priorities, and state capacity as key to applying the concept. Second, we provide an empirical account of China’s EV transition through these dimensions as core features of eco-authoritarianism, finding that they create policy durability – effective coordination of policies across the state apparatus, policy consistency over time, and market-shaping levels of policy support. |
| Keywords: | China;climate policy;eco-authoritarianism;eElectric vehicles;green transition;industrial policy |
| JEL: | R14 J01 |
| Date: | 2026–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140991 |
| By: | Lessmann, Kai; Kalkuhl, Matthias |
| Keywords: | Climate policy instruments, Carbon debt, Clean-up certificates, Non-permanent carbon storage, Carbon leakage, Carbon dioxide removal (CDR) |
| JEL: | Q54 Q58 H23 Q52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esrepo:343433 |
| By: | Carroll, James (Central Bank of Ireland); Lambert, Derek (Central Bank of Ireland); Lyons, Paul (Central Bank of Ireland); O'Callaghan, Andrew (Central Bank of Ireland); Franklin, Joel (Central Bank of Ireland); McCoy, Daire (Central Bank of Ireland); Coyne, Bryan (Central Bank of Ireland) |
| Abstract: | Retrofitting homes to a Building Energy Rating (BER) of B2 or higher generates net lifetime savings for most households, particularly for those with a starting BER of C3 or lower. Financial benefits would improve significantly if 'Net Zero' climate targets are achieved as, in such a scenario, expectations would be for higher fossil fuel prices and lower electricity prices. Retrofitting through loan financing can create short-term cash flow pressures which may pose a significant barrier for many households. Longer loan terms and mortgage top-ups are the most effective means of smoothing costs over time, though they may result in higher lifetime credit costs. For Ireland to achieve its national climate targets and reduce household exposure to transition risk our findings underscore the importance of tailored financing options and supportive policies to encourage retrofitting at scale. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:12/si/26 |
| By: | Tomasz Weron; Katarzyna Maciejowska |
| Abstract: | This article examines various methods of constructingmultidimensional probabilistic forecasts of electricity prices. Building on the Multiple Split (MS) method, it incorporates forecast averaging across estimation windows of different lengths and compares its performance with that of other, well-established methods. The research demonstrates that the ensemble representation of the price distribution is particularly useful in battery energy storage system (BESS) management. It enables the direct construction of probabilistic forecasts of daily profits. These forecasts can be used to determine optimal charging and discharging hours, as well as to support risk management decisions. The methods are evaluated using data from the German and Spanish day-ahead electricity markets from 2021-2024. The results indicate that theMS method with averaging (MS-ave) generally outperforms the other considered approaches in terms of Prediction Interval Coverage Probability (PICP), the Continuous Ranked Probability Score (CRPS) and the Energy Score (ES). Moreover, it is superior in supporting BESS trading strategies, particularly in case of non-zero operational costs. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.26122 |
| By: | Pradyumna Rao; Daniel T. Kaffine; Bri-Mathias Hodge |
| Abstract: | As US power markets contend with growing demand for firm generation, the nuclear industry has offered Small Modular Reactors (SMRs). However, how these concepts would fare in a rapidly evolving power grid is unclear, given the paucity of operational examples. Current literature, informed by substantial cost escalations for traditional nuclear plants, focuses on the investment costs SMRs need to achieve for private investment feasibility. However, this work finds that the operating and marginal costs of SMRs are more critical to economic feasibility in market environments. This work dispatches SMRs using a flexible operations model, considering revenue from two main electric markets, capacity and wholesale energy markets, with and without policy support. Manufacturer advertised costs for investment and operating costs are used, with fuel costs calculated from manufacturer provided design parameters. Results indicate that SMRs are uneconomical primarily because investment cost reductions are offset by increased marginal costs. As such, an environment of prices and subsidies beyond historic norms are necessary to attract private investment at manufacturer advertised cost benchmarks. Current SMRs are as profitable as advanced estimates of the AP1000 traditional nuclear reactor, and if investment costs escalate at the average rate for nuclear projects, they are similar to Vogtle 3 & 4. In projected future power markets, reductions in marginal cost may be more beneficial than those in investment costs. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.08929 |
| By: | John García Rendón (Escuela de Finanzas, Economía y Gobierno, Universidad EAFIT); Stephania Mosquera-López (Orkestra-Instituto Vasco de Competitividad Universidad de Deusto) |
| Abstract: | The Paris Agreement’s worldwide pledge to keep global warming to 1.5°C has sped up the energy transition, and with this, the deployment of renewable energy sources, increasing the demand for electrical systems’ flexibility. To investigate the role of Distributed Energy Resources (DERs) in providing flexibility services that support the integration of non-conventional renewable energy (NCRE), this study performs a systematic literature review using the PRISMA approach. DERs enable decentralized, smart grid-based energy models that complement conventional centralized systems. According to the review, which examines 697 papers published between 2010 and February 2024, research has grown exponentially since 2015, especially in Europe. The study examines the functions of emerging agents, such as prosumers, aggregators, and Distribution System Operators (DSOs), and highlights important flexibility services, such as frequency regulation, voltage control, and congestion management, using bibliometric and content analysis. The results show that although DERs greatly improve grid resilience and the integration of renewable energy sources, several institutional, economic, technological, and social barriers prevent their complete implementation. New market mechanisms and regulatory frameworks that promote flexibility and active demand-side participation are needed to address these issues. |
| Keywords: | DER; flexibility services; energy transition; energy management; systematic literature review; electrical system |
| JEL: | Q42 Q48 L94 O33 C18 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:col:000122:023622 |
| By: | G. Ishara Musimwa; Yves Togba Boboy; Xiyong Dong |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cvi:wpaper:2025-002-01 |
| By: | Gabriel Monteiro; Edson R. Severnini |
| Abstract: | Transportation is a major source of greenhouse gas and air pollution emissions worldwide, with most automobile pollution coming from vehicles older than 10 years. Yet, many policies discourage the removal of older vehicles from the fleet, with potential consequences for pollution and public health. This paper examines an equity-motivated anti-scrappage policy in Brazil using a border-pair design that exploits state variation in the age thresholds for vehicle ownership tax exemptions. Using municipality-level vehicle registration data from 2013-2020, we find that lower exemption age thresholds increase the average fleet age by up to one year, as they encourage owners to retain vehicles until they qualify for tax exemptions. Using fleet- and satellite-based estimates of pollution and administrative health data, we show that these policies increase on-road CO2 emissions per capita by up to 23% and PM2.5 concentrations by 4%, while deteriorating infant health outcomes. Leveraging state reforms that raised exemption ages, we find evidence that incumbents face greater electoral penalties wherever a greater share of the vehicle fleet re-enters the tax base, consistent with a “political environmental trap.” Within an MVPF framework, we find that lowering the exemption age by five years generates a net welfare loss of $0.78 for every $1 of forgone government revenue. |
| Keywords: | vehicle ownership tax, transportation-related local air pollution, infant health, electoral and fiscal outcomes, border-pair approach |
| JEL: | Q53 Q56 Q58 H23 I18 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12959 |
| By: | Valentin Georges; Paul Vertier |
| Abstract: | Cross-referencing the carbon assessments of French companies published on the ADEME website with their financial statements allows us to show that companies reporting higher greenhouse gas emissions subsequently have less favourable financing conditions. However, a company is penalised less if it publishes ambitious emission reduction targets. <p> Le croisement des bilans carbone des entreprises françaises publiés sur le site de l’ADEME et de leurs bilans sociaux permet de montrer que celles qui y publient des émissions de gaz à effet de serre plus élevées ont ensuite des conditions de financement moins favorables. Cette pénalisation est atténuée si elles publient des objectifs ambitieux de réduction de leurs émissions. |
| Date: | 2026–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:457 |
| By: | Irma Alonso-Alvarez (Banco de España); Iván Kataryniuk (Banco de España); David López-Salido (Banco de España); Javier J. Pérez (Banco de España) |
| Abstract: | This paper develops a tractable framework that maps geopolitical risk in the Middle East to oil prices and macroeconomic conditions through three linked blocks. Geopolitical uncertainty is modelled as a probability distribution over a small set of mutually exclusive scenarios, whose weights are updated with prediction-market prices, structured expert assessments and high-frequency indicators via Bayesian methods. Each scenario is then translated into a net oil supply shortfall after inventory and reserve buffers, which in turn feeds a reduced-form but economically interpretable Brent price equation grounded in recent oil market research. The same architecture can be combined with standard statistical forecasts to check the internal consistency of scenario mixtures and, in reverse, to infer the scenario configuration implicit in observed oil prices. The framework is designed as an operational tool for central banks and other policy institutions to structure geopolitical scenario analysis, quantify resulting oil price and inflation risks and update these assessments in real time. |
| Keywords: | geopolitical risk, oil supply disruptions, energy security, scenario analysis, Bayesian updating, oil prices, inflation, macroeconomic projections |
| JEL: | C11 C53 E31 E37 F51 Q31 Q43 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2616e |
| By: | De Ridder, Maarten; Rachel, Lukasz |
| Abstract: | In many economies, the recent productivity slowdown coincided with declines in carbon dioxide emissions. Productivity statistics ignore this progress, even though lower emissions raise future consumption. We propose emissions-adjusted total factor productivity (TFPE), a forward-looking, welfare-relevant productivity measure. TFPE requires few assumptions, relying on the social cost of carbon as a sufficient statistic. At recent consensus estimates of the social cost of carbon, U.S. TFPE could grow twice as fast as TFP during a transition to net zero by 2050. At these costs of carbon, historical productivity adjustments are modest; at higher values, the post-2005 U.S. productivity slowdown disappears. In other countries, TFPE growth significantly exceeds TFP growth during the 1990s. |
| Keywords: | total factor productivity;growth accounting;national accounts;climate damages |
| JEL: | N0 R14 J01 |
| Date: | 2026–09–11 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140962 |
| By: | Alexander Mihailov (Department of Economics, University of Reading) |
| Abstract: | This paper is a sequel to my 'greening prosperity stripes' article, Mihailov (2026). It refines the calculation of these illustrative color stripes to take into account consumption-based, or trade-embodied, carbon dioxide (CO2) emissions, not production-based CO2 emissions as in the earlier study, thus revealing the influence of, in particular, offshoring polluting industries. Yet, the refined indicator comes at the cost of losing nearly half of the countries in the world and most country groupings in the World Bank classification, due to unavailability of such data. Nevertheless, it offers a more precise - and, perhaps, fairer - image, relative to the original production-based greening prosperity stripes, of how green(ing) is the prosperity for most countries in the world. The novelty of this sequel paper consists in illustrating clearly the difference between the two indicators of greening prosperity, in pairs of comparative graphs. Because images and colors have power to impress human minds deeper than words, the greening prosperity stripes, in addition to raising awareness and mobilizing immediate climate policy action worldwide, can essentially be used to track the progress of each country in comparison with other countries toward the goal of net zero. Ideally, an annually updated public-domain website could serve this crucial monitoring function at a global scale in a straightforward way with immediate online illustration and verification. |
| Keywords: | consumption-based (or trade-embodied) greening prosperity stripes and maps; production-based greening prosperity stripes and maps; comparative colormap data visualization; communicating science to raise public awareness; tracking progress to net zero |
| JEL: | C82 F64 O44 Q51 |
| Date: | 2026–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2026-09 |
| By: | Arkadiusz Lipiecki; Rafa{\l} Weron |
| Abstract: | Foundation models promise accurate forecasts with little or no task-specific training, but whether they can replace models designed specifically for electricity price forecasting remains unclear. We compare nine variants from five foundation model families, evaluated in zero-shot mode, with two state-of-the-art electricity price forecasting benchmarks in Germany, Poland, and Spain over 2021-2025. Their performance is assessed in terms of point and probabilistic forecasting accuracy, as well as economic value in battery energy storage arbitrage. Only the TabPFN models consistently and significantly outperform the benchmarks across all three markets and all statistical measures. However, this statistical dominance does not translate directly into economic dominance: TabPFN performs best under unlimited bids and riskier quantile-based strategies, whereas the Distributional Deep Neural Network benchmark is more profitable when risk tolerance is lower. Thus, foundation models cannot universally replace market-specific models, and their value depends on both model architecture and the decision problem. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.00089 |
| By: | Samuel M. Hartzmark; Kelly Shue |
| Abstract: | We develop a new measure of impact elasticity: the change in a firm's environmental impact due to a change in its cost of capital. We find that reducing green firms' financing costs leads to minimal impact changes, while increasing brown firms' financing costs causes significant negative impact changes. Thus, sustainable investing strategies that shift capital from brown to green firms contain a counterproductive channel that makes brown firms more brown without making green firms more green. A mistaken focus on percentage reductions in emissions rewards already-green firms for trivial reductions in emissions and gives brown firms weak incentives to improve. |
| JEL: | G1 G3 G4 Q5 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35519 |
| By: | Alexander Crosier; Kyle Onghai; Ronnie Sircar |
| Abstract: | The twenty-first century's transformative technology, artificial intelligence, is increasingly constrained by the twentieth century's transformative technology, the electricity grid. Rapid growth in electricity demand from data centers is leading to higher electricity prices, without a compensating supply-side response. We develop a framework linking data-center load growth, available generation capacity, and market-clearing prices to understand this phenomenon. We first analyze a deterministic model to show how differing estimates of demand and supply growth rates affect prices. We then model the expansion of new data centers and their associated electricity demand, together with build-outs of new electricity supply, as stochastic processes, resulting in probabilistic distributions of supply, demand, and prices rather than a single forecast. Finally, we formulate generation expansion as a stochastic control problem in which a revenue-maximizing investor dynamically chooses the intensity of supply-side investments. The analysis highlights a central challenge of the data-center build-out: even when rapid demand growth increases the need for new generation, the uncertainties related to load forecasts, development execution risks, and value cannibalization from overbuilding capacity may weaken incentives to invest at the pace required to keep electricity prices stable. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.08166 |
| By: | Baker, Peter C. |
| Abstract: | Recent fossil-fuel plant retirement disputes show how difficult it can be to maintain grid reliability while the energy grid is undergoing so many changes. This paper focuses on two plant retirement disputes, the Eddystone/PJM and J.H. Campbell/MISO cases, and analyzes the policies associated with maintaining grid reliability during the energy transition. Throughout the analysis, it becomes evident that there is more to the conflict than a simple tradeoff between reliability and decarbonization. There is a coordination problem between many governing organizations. Plant owners, state regulators, regional grid operators, FERC, NERC, and DOE all have different responsibilities, and their decisions do not always line up. A plant owner may decide that a facility is no longer economical while another institution later argues that it is still needed for reliability. Section 202(c) of the Federal Power Act gives DOE the authority to prevent plant closures that are deemed necessary for reliability, regardless of the economics involving the plant. However, this paper argues that authority should remain a temporary response to a specific reliability problem. If DOE keeps a plant operating, it should be able to show why that plant is needed, who will pay for it, and what has to happen before it can finally retire. The Eddystone and Campbell cases suggest that repeated emergency orders are not just a reliability issue. They are also evidence that retirement decisions and replacement resources are not being coordinated well enough. |
| Date: | 2026–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:bkvqw_v1 |
| By: | Alex Haag; Colin J. Hottman; Amanda Tinkham |
| Abstract: | Amid the largest global oil supply shock in history, oil futures prices moved up much less than many expected. The steep backwardation in oil futures from the Strait of Hormuz's closure sparked a spirited debate over whether futures prices were too sanguine about the risks of prolonged disruption. For institutions, including central banks, that use futures as a guide for market expectations of future commodity prices, understanding the performance of futures in forecasting is essential (Bernanke 2008, Baumeister 2023). |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103746 |
| By: | Danae Hernández-Cortés; Alejandro Lopez-Feldman; Rafael Pineda Albarrán; Mariana Ramos Flores; Roberto Vélez Grajales |
| Abstract: | La transición energética de México se desarrolla en un contexto de profundas desigualdades estructurales y una movilidad social persistentemente baja. Si bien la mayoría de los hogares cuenta con electricidad, persisten grandes disparidades en términos de asequibilidad, confiabilidad y en la capacidad del acceso a la energía para ampliar capacidades y oportunidades. Este artículo desarrolla un marco que vincula la justicia energética con la movilidad social combinando evidencia empírica sobre pobreza energética con la perspectiva de la economía social y solidaria (ESS). Con datos de encuestas de hogares, documentamos inequidades en el acceso a los servicios energéticos y mostramos cómo los hogares de bajos ingresos enfrentan cargas desproporcionadas que limitan su movilidad educativa y ocupacional. Posteriormente, exploramos cómo los modelos basados en la ESS, en particular las cooperativas energéticas, pueden mejorar la asequibilidad, la confiabilidad y la participación comunitaria en la gobernanza energética. Un estudio de caso de una cooperativa pesquera en Yucatán ilustra cómo los proyectos de energía renovable pueden tanto aliviar la privación como fomentar la movilidad ascendente. Sostenemos que incorporar la justicia distributiva y procedimental en la transición energética de México es fundamental para lograr un desarrollo inclusivo y sostenible. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:auk:ecosoc:2026_02 |
| By: | Stefano Carattini (Georgia State University); Pamela Giustinelli (University of Padova); Marcella Veronesi (University of Turin) |
| Abstract: | Knowledge gaps and biased beliefs concerning both climate change and climate policy represent major obstacles to the decarbonization process. Climate education may offer a scalable solution to address such obstacles. In the context of a national reform of the school curriculum in Italy, we implemented a nationwide field experiment, training thousands of secondary school teachers across thousands of schools using a staggered design. Our intervention, a comprehensive course on climate change and climate policy, goes beyond the light-touch interventions typical in the literature. Using extensive survey data, we examine how training affects teachers' knowledge, beliefs, attitudes, behaviors, and policy preferences and, in turn, those of students. Our study highlights important initial knowledge gaps and biased beliefs about climate change among teachers and students, and provides evidence that climate education can address them at scale. Following our intervention, teachers and students also reconsider their support for climate policies. |
| Keywords: | climate change, climate policies, field experiment, biased beliefs, public support, climate education, secondary education |
| JEL: | C93 D72 D83 Q54 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:hka:wpaper:2026-008 |
| By: | OECD |
| Abstract: | The global steel industry is at a crossroads, facing the two interconnected challenges of addressing excess capacity and preparing for a low-emissions future. These two challenges are mutually reinforcing. Excess capacity affects the pace at which low-emission capacity adjustments take place, reduces companies’ ability to invest in low-emission capacity and R&D and alters market price signals. Conversely, policies promoting the adoption of low-emission technologies can help steer capacity towards more sustainable production when properly designed but also may trigger new waves of excess capacity if built in a way that displaces market-based low emission production without reducing overall capacity. Drawing on recent developments in the global steel sector, this paper examines the mechanisms through which excess capacity hampers the transition to low emission technologies. It finds that persistent overcapacity depresses steel prices, squeezes profit margins, increases earnings volatility and borrowing costs, and limits the availability of internal financing for technology deployment. Excess capacity also raises the relative price premium of low-emission steel products, weakening demand signals and delaying investment decisions. At the same time, subsidisation and capacity expansion in non-market economies risk perpetuating existing distortions and creating a new generation of excess capacity in low-emission forms. |
| Keywords: | excess capacity, industrial decarbonisation, industrial restructuring, low carbon, steel industry, transition |
| JEL: | H25 O25 Q55 |
| Date: | 2026–09–22 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaac:194-en |
| By: | Louise Bernard; Robert D. Metcalfe; Andrew Schein |
| Abstract: | Demand flexibility at scale is likely to be an important part of the future energy system. This study evaluated the world’s first nationwide domestic and commercial demand flexibility program. We analyzed the policy using a natural field experiment, with a sample of 2.7 million, assigning 119, 999 customers to a control group and the rest to receive randomized encouragement to sign up to the demand flexibility program. The program paid consumers to reduce their demand below a predicted baseline at peak demand across 16 events (i.e., when the system was stressed) during the Winter of 2023–24. Customers who opted into events reduced demand during events by 23.1% among compliers, at an average cost for the system operator of £2, 325 per MWh. The adoption of solar panels and batteries, heat pumps, and EVs all increased demand response. |
| JEL: | Q40 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35485 |
| By: | Horbach, Jens; Rammer, Christian |
| Abstract: | Eco-innovations are highly important for mitigating climate change and transitioning towards a circular economy. There is extensive literature on the determinants of eco-innovation. The analysis of the role of government subsidies, however, is still under-developed. Subsidies are controversially discussed because they may distort competition and lead to less efficient solutions. At the same time, eco-innovations may produce positive externalities both at the innovation stage (knowledge spillovers) and the diffusion stage (reducing environmental damage). Subsidies may hence be important to avoid private under-investment in such innovations. The paper investigates which types of subsidies (e.g. general vs. research oriented, regional vs. national vs. supranational) are used by firms that engage in different fields of eco-innovation. The analysis is based on panel-econometric estimations using data from the German part of the Community Innovation Survey (CIS), covering the years 2020 to 2024. The results show that regional subsidies and general industry support are important for the diffusion of eco-innovations, such as the substitution of fossil fuels by renewables, because they help to overcome financial constraints. Specific R&D subsidies are important for innovations leading to less CO2 emissions in production processes. |
| Keywords: | Green subsidies, eco-innovation, random effects panel probit models |
| JEL: | C23 C25 Q55 Q58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:343046 |
| By: | Thiemo Fetzer (University of Warwick and University of Bonn); Christina Palmou (King's College London); Jakob Schneebacher (Institute for Fiscal Studies); Ivan Yotzov (Bank of England) |
| Abstract: | In a turbulent world, effective policy requires granular estimates of firm responses to shocks as they unfold. We develop a replicable framework that combines high-frequency administrative and survey microdata with a pre-registered shift-share design to estimate multi-margin firm responses in real time. We show that the resulting coefficient vectors can be interpreted as first-order perturbations of firms’ optimal-response functions. We apply the framework to the 2021–23 UK energy price shock and find that energy-intensive firms pass on cost increases, build cash reserves and shift towards homeworking. We find little evidence of aggregate employment losses or firm exits. Responses are highly heterogeneous: small firms drive price pass-through; large firms, capital investment. We show that our real-time estimates are consistent with the UK’s structural business survey, released two years later, and across survey instruments. We apply the framework out of sample and in real time to the energy price shock triggered by the 2026 US–Israeli strikes on Iran and discuss implications for the design of energy support schemes and environmental policy. |
| Keywords: | Real-time evaluation;firm dynamics;economic shocks;energy prices. |
| JEL: | C23 D22 D24 H23 L11 |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023580 |
| By: | Ofori, Isaac K. |
| Abstract: | Despite growing international commitments to green finance, it remains an open empirical question whether such transfers translate into inclusive green growth (IGG) in developing countries. This study addresses this gap by examining how countries' levels of development and executive corruption condition the effects of green finance on IGG. To this end, we draw on a comprehensive sample of 99 developing countries spanning 2000-2024 and employ instrumental-variable and quantile regression techniques for the analysis. Three clear findings emerge. First, we find robust evidence that green finance promotes IGG, but only in low-income countries. Second, we show that executive corruption significantly reduces the IGG-enhancing effects of green finance in low-income countries, whereas no comparable effect is observed in higher-income developing countries. Third, the evidence reveals notable heterogeneity in the conditional distribution of IGG, with countries at the lower end of IGG performance experiencing relatively larger gains from green finance. Overall, the findings indicate that the effectiveness of green finance in promoting inclusive green growth depends critically on countries' levels of development and the prevalence of executive corruption |
| Keywords: | Corruption, Developing countries, Green finance, Inclusive green growth |
| JEL: | D73 F35 O11 O13 Q56 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343605 |
| By: | Brazzola, Nicoletta |
| Abstract: | Der Iran-Krieg hatte zur Folge, dass sich die Kerosinpreise etwa verdoppelten und Fluggesellschaften tausende Flüge streichen mussten. Aus der Branche sind Stimmen mit dem Ansinnen zu vernehmen, klimapolitische Auflagen zu lockern. Doch sie verkennen, was die Krise tatsächlich zeigt: Nicht zu viel Klimapolitik treibt die Kosten, sondern die Abhängigkeit von fossilen Energien selbst. 2026/27 entscheidet die EU, ob sie die seit 2013 geltende Ausnahmeregelung ("Stop the clock") für internationale Flüge beendet und das Emissionshandelssystem auf alle Abflüge aus dem Europäischen Wirtschaftsraum ausweitet oder ob diese weiterhin unter internationalen Kompensationsmechanismen bleiben. Die Entscheidung hat Konsequenzen weit über die Luftfahrt hinaus: für das 2040-Klimaziel, für die Nachfrage nach dauerhafter CO2-Entnahme und für die Glaubwürdigkeit europäischer Klimaarchitektur. |
| Keywords: | Carbon Off-setting and Reduction Scheme for International Aviation (CORSIA), EU-Luftfahrt, Iran-Krieg, Klimapolitik, nachhaltige Luftfahrttreibstoffe, Sustainable Aviation Fuels, SAF, EU-Emissionshandelssystem, ETS, Carbon Offsetting and Reduction Scheme for International Aviation, CORSIA, Artikel-6.4-Gutschriften, ReFuelEU-Verordnung, UN-Zivilluftfahrtorganisation, ICAO, CO2-Entnahme, CDR, direkte Luftabscheidung mit Speicherung, DACCS |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpakt:343115 |
| By: | Littlechild, S. C.; Bush, H.; Sutherland, A. D. A.; Knott, G.; Walker, A. |
| Abstract: | Negotiated settlement has long been common in North American utility regulation but has played only a limited role in the United Kingdom. This paper looks at what can be learned from UK experience in airports, the Scottish water sector and energy networks, drawing in particular on presentations at a Cambridge seminar in March 2026. Airports show that direct bargaining can improve issue definition and customer focus even without full agreement. The Scottish water sector remains the clearest UK example of a near-negotiated settlement affecting the substance of the outcome. Energy networks have moved much further towards organised customer engagement than towards bargaining. The paper suggests that negotiated settlement deserves more serious attention in UK energy regulation where the issues are material, the parties are credible and the regulator can give the process real standing. |
| Keywords: | Negotiated Settlements, Customer Engagement, Energy Regulation, Water Regulation, Airports |
| JEL: | L51 L94 L95 L97 |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2669 |
| By: | Ricardo Alonzo Fern\'andez Salguero |
| Abstract: | This study evaluates alternative designs for reforming Bolivia's liquefied petroleum gas subsidy using a machine-learning agent-based microsimulation framework. The analysis harmonizes household survey data, expenditure data, demographic and health information, and monthly hydrocarbon production and commercialization series to simulate fiscal savings, poverty effects, energy substitution, administrative costs, and social risks under multiple reform scenarios. The model compares uncompensated subsidy removal, fixed energy transfers, full compensation for vulnerable LPG users, voucher-based compensation, maternal-child transfers, clean-energy transition kits, and hybrid policy packages. Machine-learning models are used to learn household vulnerability, fuel-use patterns, food insecurity risk, and behavioral propensities that feed into a monthly agent-based simulation. The results show that eliminating the subsidy without compensation generates the largest fiscal savings but increases poverty, extreme poverty, and pressure toward solid-fuel substitution. Full monetary compensation for Q1-Q2 LPG users substantially reduces social harm while preserving significant fiscal savings and dominates an equivalent voucher design under normal market conditions because of lower administrative friction. The most socially robust design combines targeted monetary energy compensation, maternal-child reinforcement, and clean-energy kits for households using solid fuels. The findings support a gradual replacement of the universal LPG subsidy with targeted, administratively lean, and behaviorally informed compensation mechanisms. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.00414 |
| By: | Ortega-McCormack, Hannah (Central Bank of Ireland); Carroll, James (Central Bank of Ireland); Gillespie, Tom (Central Bank of Ireland); Lyons, Ronan C. (Central Bank of Ireland) |
| Abstract: | The Energy Efficiency Premium (hereafter called the premium) - that is, the increase in property price associated with a single grade increase in the BER rating - was on average 1.6% between 2015 and 2024. The premium decreased from 1.9% in 2015 to 1.3% in 2024. In 2024, 59% of properties for sale in Daft had a BER ranging from B3 to D1. If a property were to improve its BER from a D1-rating to a B3-rating, the four BER-grade difference would amount to a premium of 5.2%. The change in the premium over time differs by market segment. The premium is highest for lower-priced properties. However, the premiums converged over the ten years, decreasing for lower-priced properties and rising for higher-priced properties, potentially driven by higher-income households having greater capacity to prioritise energy efficiency. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:11/si/26 |
| By: | Luca Bargna (Department of Economics, Insubria University, Varese, Italy); Davide La Torre (SKEMA Business School, Université Côte d'Azur, France); Benjamin Montmartin (SKEMA Business School, France; Université Côte d'Azur, CNRS, GREDEG, France); Lionel Nesta (Université Côte d'Azur, CNRS, GREDEG, France; OFCE, Sciences Po, France; SKEMA Business School, France) |
| Abstract: | We develop a spatial optimal-control model in which air pollution and climate-mitigation innovation evolve jointly through a coupled reaction–diffusion system. We characterize stability and optimal policy, derive closed-form controls under spatial homogeneity, and obtain bounds for nonlinear dynamics. Using data from 1, 181 European NUTS 3 regions over 2005–2020, we estimate the reaction–diffusion dynamics and simulate the optimal policy mix under alternative welfare valuations of pollution-generating activities. Pollution exhibits strong spatial diffusion, whereas innovation diffusion is limited. Innovation is associated with lower subsequent pollution growth, while higher pollution is followed by stronger innovation growth. The optimal policy mix combines environmental regulation and innovation support, but their timing and persistence differ. Abatement may be immediate or delayed depending on the net welfare contribution of pollution-generating activities, while sustained innovation support depends on the value assigned to the terminal innovation stock. |
| Keywords: | Optimal control; Reaction–diffusion systems; Pollution; Innovation; Spatial econometrics |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2026-21 |
| By: | Baumgürtner, C. L.; Prieto, J. C.; Hepburn, C.; Ritz, R. A. |
| Abstract: | What rate of return is needed to compensate investors in an infrastructure project? This question is central to the delivery of future investment into sectors like energy, water and transport. CAPM is often difficult to implement for unlisted green-field investments, and its assumptions sit uneasily with the infrastructure context. In this paper, we present a new simple model - the Infrastructure Risk Pricing Model (IRPM)—which better reflects real-world practice and also prices idiosyncratic risk. We show how IRPM can perform better than CAPM in estimating investor hurdle rates, especially for concentrated funds. To illustrate, we argue that IRPM rationalizes investor behaviour in Sizewell C, a recent large, government-backed UK nuclear energy project. |
| Keywords: | Cost of Equity, Hurdle Rate, Infrastructure Investment, Idiosyncratic Risk, Regulation |
| JEL: | G11 G12 G31 H54 L94 Q48 |
| Date: | 2026–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2671 |
| By: | Thomas R. Covert (Airbnb); Richard Sweeney (Boston College; Boston College) |
| Abstract: | We measure technical progress and cost declines in the wind turbine industry, accounting for large quality improvements that have occurred over time. As in many industrial settings, we do not observe costs. Instead, we infer them by modeling the turbine procurement process, and estimate the model on the near-universe of global commercial wind farms built from 2000 to 2019. We find that while commonly reported measures of price per unit of capacity fell by 30 percent during this time, latent quality-adjusted costs fell by over 75 percent. Underpinning these cost declines, we estimate substantial learning-by-doing. A doubling of manufacturing experience reduces manufacturing costs by 26 to 29 percent. Though inter-firm spillovers per unit are relatively small, in aggregate, they rationalize a significant portion of the cost reductions over time. |
| Keywords: | Innovation, Renewable Energy, Learning |
| JEL: | O33 Q42 L11 |
| Date: | 2026–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1115 |
| By: | Golder, Atoshi |
| Abstract: | Data center operators report water use as a facility-level question, disclosing on-site metrics while omitting the water consumed in generating the electricity they purchase — their Scope 2 water footprint. This paper quantifies that omission at the eGRID-subregion level and traces its consequences for a standardized data center load. Comparing EPA eGRID 2018 against eGRID 2023 on an identical pipeline, I find that generation-weighted national water intensity fell 17.1% over the five years in which data center electricity demand accelerated, but that the decline was uneven: several subregions gaining generation share fell more slowly than the national average, and SERC Virginia/Carolina — host to the largest data center market in the world by inventory — fell only 7.7%, less than half the national pace. Combining eGRID generation data with consumption-basis water coefficients, I estimate a total of 1, 350.6 billion gallons of operational water consumption embedded in contiguous-US electricity generation across all end uses in 2023, and show that an identical data center's embedded footprint varies approximately 3.2-fold by grid region under common technology-factor assumptions. I then construct a Water Dependency Index and adjust it by a territorial water-scarcity score built from the World Resources Institute's Aqueduct basin indicators, on the principle that identical consumption imposes different costs depending on where it occurs; the adjusted index ranks SERC Virginia/Carolina first in the nation. No widely adopted disclosure framework requires standardized, location-based reporting of electricity-embedded water. The paper proposes extending location-based Scope 2 carbon accounting, which is structurally analogous, to water. |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:kc5ad_v1 |
| By: | Onur Polat (Institute of Informatics, Hacettepe University, Beytepe Campus, 06800 Çankaya, Ankara, Turkiye); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Oguzhan Cepni (Center for Economics and Policy Studies, Istinye University, Istanbul, Turkiye; Copenhagen Business School, Porcelaenshaven 16A, Frederiksberg DK-2000, Denmark; Ostim Technical University, Ostim, 100. Yil Blv. 55/F, 06374 Yenimahalle, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability, 29 Buccleuch Place, Edinburgh EH8 9JS, United Kingdom); Elie Bouri (School of Business, Lebanese American University, Lebanon) |
| Abstract: | This paper analyzes the time-varying persistence of tourism uncertainty and its macroeconomic drivers. The local Whittle estimator is employed on the monthly Tourism Uncertainty Index (TUI) for 43 economies and two global aggregates from November 2002 to February 2025. The results show that tourism uncertainty in most countries exhibits long-memory and mean-reverting features. Rolling estimates reveal a significant upward trend in persistence, with a positive and significant linear trend for 36 of the 43 countries, while only three show a downward trend. To connect the rising persistence to some underlying factors, we use local projections of the growth rate of the time-varying persistence parameter based on structural oil-market shocks, controlling for global economic conditions and supply-chain pressure. Our results indicate that positive shocks to global economic activity, oil-consumption demand, and oil-inventory demand increase persistence, whereas positive oil-supply shocks, corresponding to expanded production and lower crude prices, decrease persistence. Overall, the findings suggest that tourism uncertainty has become structurally more persistent and largely influenced by demand and supply dynamics in the oil market. |
| Keywords: | tourism uncertainty, long memory, fractional integration, local projections, oil-market shocks, time-varying persistence |
| JEL: | C22 L83 Q43 Z30 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202623 |
| By: | Witzke, Peter; Deppermann, Andre; Hristov, Jordan |
| Abstract: | Context Emission trading systems (ETS) have long been considered an efficient strategy to reduce greenhouse gas emissions and have been discussed and analysed also as an option for the agricultural sector. However, such system comes with different costs regarding the monitoring, reporting and verification (MRV) of agricultural emissions cost depending if larger group of farmers or small numbers of processors are considered. In addition, the proposed system may perform different if the permit rights are granted to the farmers or the processing industry. Objective This study analyses different versions of the ETS for application to agricultural emissions. The focus is put on the comparison of different options for the point of obligation which relates to MRV options and the distribution of emission allowances. Main goals are to quantify the potential income effects of different ETS variants with respect to the point of obligation and emission allowances and the environmental effects with respect to the monitoring system. Methods Using the Common Agricultural Policy Regional Impact Analysis (CAPRI) model, a detailed agricultural sector model, the study simulates impacts of different versions of ETS in Europe. The model facilitates an evaluation of the potential changes in income, production, market prices, trade dynamics, and environmental indicators, providing a comprehensive view of the policy's potential effects. Results and conclusions We illustrate that the degree of monitoring technical mitigation measures in agriculture is critical for the abatement effects as well as for the regional seller or buyer position of regions. The income effects are shown to depend critically on the point of obligation, if the permit entitlements are granted for free to agent subject to the ETS. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:eaae25:410291 |
| By: | Bialek, J. W. |
| Abstract: | This paper provides a high-level analysis of the Iberian blackout and is aimed at a non-technical audience. It starts with quick tutorials on the relationship between reactive power and voltage and on power system oscillations as they are key to understanding the blackout. Then it proceeds with overviewing how the blackout evolved. The direct cause of the blackout was an unexpected interaction between oscillations and voltage stability compounded by inadequate voltage control arrangements in Spain. However the underlying cause is that Spain has concentrated in recent years on increasing the share of renewables but seems to have paid less attention to adapting power system operation and control to the changing needs. The rapidly increasing share of renewables in many power systems causes a profound change in the way power systems behave which we do not yet fully understand. Hence a significant interdisciplinary research effort of the academia and industry is required to overcome the challenges and prevent future blackouts |
| Keywords: | Power System Blackouts, Security of Supply, Iberian Blackout 2025 |
| JEL: | L94 L98 Q40 Q48 Q42 |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2670 |
| By: | Pierri Erika (European Commission - JRC); Orefice Martina (European Commission - JRC); Garcia-gutierrez Pelayo; Bobba Silvia; Gaudillat Pierre (European Commission - JRC); Mathieux Fabrice (European Commission - JRC); Huygens Dries (European Commission - JRC) |
| Abstract: | Article 8 of the Batteries Regulation ((EU) 2023/1542) sets out an obligation for manufacturers of industrial batteries with a capacity greater than 2 kWh to issue documentation on the percentage share of cobalt, lithium or nickel present in the active material that has been recovered from battery manufacturing waste or post-consumer waste, as well as the percentage share of lead in the battery that originates from waste. The methodology for calculating and verifying the recycled content share of cobalt, lithium, nickel and lead in batteries placed on the EU market is to be established in a Delegated Act. The Joint Research Centre (JRC) has been tasked by the Directorate‑General for the Environment (DG ENV) and the Directorate‑General for the Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) to produce techno-scientific recommendations that will underpin the forthcoming Delegated Act. Drawing on a systematic literature review, stakeholder workshops and bilateral industry meetings, the study provides a comprehensive overview of the battery value chain, focusing on the four targeted metals. It maps existing standards, certifications schemes and supply-chain practices and underscores the complexity of the battery value chain and the associated traceability challenges. The report examines the trade-offs of different chain of custody models – analysing possible effects on business continuity, resource efficiency, climate change mitigation, consumer’s confidence, ease of verification and administrative burden – and presents detailed calculation and verification blueprints for two traceability options. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc146717 |