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on Environmental Economics |
| By: | Balabanov, Todor (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Schwarzbauer, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria) |
| Abstract: | The main objective of this paper is to identify fuel substitution potential by estimating potential price induced energy substitution and by considering available technological options. We consider the impacts of CO2 taxation on reduction of emissions until 2020, assuming CO2 neutrality of burning fuel wood. We finally address the macroeconomic, environmental and sectoral impacts of enhanced usages of fuel wood for energy. The main assumptions are a 1.5 times increase of fuel wood use by 2020 and achieving a share of renewables of 29.83 %. The main outcome for this scenario is that the Austrian economy could benefit from the double dividend of sustained economic growth and fulfilment of EU targets on renewables and CO2 reduction. The prospects for the energy intensive industries deteriorate – most of them would have to reconsider their technological options and face adverse conditions for their production sites. |
| Keywords: | Sustainable development, Aggregate supply and demand analysis, Demand and supply of renewable resources and conservation |
| JEL: | Q01 Q11 Q21 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:227&r=env |
| By: | Huifang Tian; John Whalley |
| Abstract: | In the paper we discuss China's participation in both the 2009 Copenhagen negotiations on a post-Kyoto global climate change regime currently under way and out beyond Copenhagen in further negotiations likely to follow. China is now both the largest and most rapidly growing carbon emitter, and has much higher emission intensity relative to GDP than OECD countries. In the Copenhagen negotiation, there will be strong pressure on China to take on emissions reduction commitments and China's concern will be to do so in ways that allow continuation of a high growth rate and fast development. Central to this will be maintaining access to OECD markets for manufactured exports in face of potential environmental protectionism. Thus the broad approach seems likely to be to take on environmental commitments in part in return for stronger guarantees of access to export markets abroad. This involves directly linked trade and environmental commitments although how linkage can be made explicit is a major issue. More narrowly, the issues that seem likely to dominate the climate change negotiating agenda from China's viewpoint are the interpretation of the common but differentiated responsibilities (CBDR) principle adopted in Kyoto, the choice of negotiating instruments and form of emission commitments, and the size (and form) of accompanying financial funds for adaptation and innovation. We suggest that a possible interpretation of CBDR reflecting China's desire to leave room to grow when undertaking emission reduction commitments might be for China to take on emission intensity commitments while OECD countries take on emission level commitments. Larger funds and flexibility in their use will also raise China's willingness to make commitments. |
| JEL: | Q54 Q56 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14460&r=env |
| By: | Yongfu Huang (4CMR, Department of Land Economy, University of Cambridge); Terry Barker (4CMR, Department of Land Economy, University of Cambridge) |
| Abstract: | The Clean Development Mechanism (CDM) of the Kyoto Protocol is designed to allow the industrialised countries to earn credits by investing in greenhouse gas (GHG) emission reduction projects in developing countries, which contribute to sustainable development in the host countries. This research empirically investigates the long-run impacts of CDM projects on CO2 emissions for 18 CDM host countries over 1990-2007. By allowing for considerable heterogeneity across countries, this research provides strong evidence in support of a significant effect of CDM projects on CO2 emission reductions in the host countries. It offers ample recommendation for improving CDM development and serves to encourage the developing countries to strengthen their national capacity to effectively access the CDM for their sustainable development objectives. |
| Keywords: | Clean Development Mechanism; CO2 Emissions; Heterogeneous Dymanic Panels |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200839&r=env |
| By: | Persson, Lars (Department of Economics, Umeå University) |
| Abstract: | This paper analyzes environmental policy in a decentralized economic federation comprising two countries, where a federal government decides upon environmental targets (maximum allowable emissions) for each country, which are implemented by the national governments. Both national governments have commitment power vis-à-vis the federal government, whereas one of the national governments (the horizontal Stackelberg leader) also has commitment power vis-à-vis the other country (the horizontal follower). The results show how the horizontal and vertical commitment power affect the horizontal leader’s use of income and production taxes, which are the tax instruments available at the national level. |
| Keywords: | Environmental policy; Optimal taxation; Economic federation; Horizontal commitment power |
| JEL: | D62 H21 H23 H70 |
| Date: | 2008–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0753&r=env |
| By: | BOUCEKKINE, RAOUF (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); Krawczyk, Jacek B.; VALLÉE, Thomas |
| Abstract: | Consider a country with two regions that have developed differently so that their current levels of energy efficiency differ. Each region's production involves the emission of pollutants, on which a regulator might impose restrictions. The restrictions can be related to pollution standards that the regulator perceives as binding the whole country (e.g., enforced by international agreements like the Kyoto Protocol). We observe that the pollution standards define a common constraint upon the joint strategy space of the regions. We propose a game theoretic model with a coupled constraints equilibrium as a solution to the regulator's problem of avoiding excessive pollution. The regulator can direct the regions to implement the solution by using a political pressure, or compel them to employ it by using the coupled constraints' Lagrange multipliers as taxation coefficients. We specify a stylised model that possesses those characteristics, of the Belgian regions of Flanders and Wallonia. We analytically and numerically analyse the equilibrium regional production levels as a function of the pollution standards and of the sharing rules for the satisfaction of the constraint. For the computational results, we use NIRA, which is a piece of software designed to min-maximise the associated Nikaido-Isoda function. |
| Keywords: | coupled constraints, generalised Nash equilibrium, Nikaido-Isoda function, regional economics, environmental regulations. |
| JEL: | C6 C7 D7 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvco:2008055&r=env |
| By: | Cameron Hepburn (School of Enterprise and the Environment, Oxford University); John K.-H. Quah (Department of Economics, Oxford University); Robert A. Ritz (Department of Economics, Oxford University) |
| Abstract: | This paper examines the operation of an emissions trading scheme (ETS) in a Cournot oligopoly. We study the impact of the ETS on industry output, price, costs, emissions, and profits. In particular, we develop formulae for the number of emissions permits that have to be freely allocated to firms in order to neutralize any adverse impact the ETS may have on profits. These formulae tell us that the profit impact of the ETS is usually limited. Indeed, under quite general conditions, industry profits are preserved so long as firms are freely allocated a fraction of their total demand for permits, with this fraction being lower than the industry's Herfindahl index. |
| Keywords: | Emissions trading, permit allocation, profit-neutrality, cost pass-through, abatement, grandfathering |
| Date: | 2008–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:0812&r=env |
| By: | Halicioglu, Ferda |
| Abstract: | This study attempts to examine empirically dynamic causal relationships between carbon emissions, energy consumption, income, and foreign trade in the case of Turkey using the time series data for the period 1960-2005. This research tests the interrelationship between the variables using the bounds testing to cointegration procedure. The bounds test results indicate that there exist two forms of long-run relationships between the variables. In the case of first form of long-relationship, carbon emissions are determined by energy consumption, income and foreign trade. In the case of second long-run relationship, income is determined by carbon emissions, energy consumption and foreign trade. An augmented form of Granger causality analysis is conducted amongst the variables. The long-run relationship of CO2 emissions, energy consumption, income and foreign trade equation is also checked for the parameter stability. The empirical results suggest that income is the most significant variable in explaining the carbon emissions in Turkey which is followed by energy consumption and foreign trade. Moreover, there exists a stable carbon emissions function. The results also provide important policy recommendations. |
| Keywords: | CO2 emissions; energy consumption; income; EKC hypothesis; foreign trade. |
| JEL: | O43 O13 C22 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11457&r=env |
| By: | Sova, Ana Maria (CREST & Université Paris 1 Panthéon-Sorbonne); Sova, Robert (CREST & Université Paris 1 Panthéon-Sorbonne); Rault, Christophe (University of Orléans); Caporale, Guglielmo Maria (Brunel University) |
| Abstract: | The aim of the present study is to shed some light on the factors affecting Pollution Abatement and Control Expenditure (PACE) in the context of a transition economy such as Romania, in contrast to the existing literature which mostly focuses on developed economies. Specifically, we use survey data of the Romanian National Institute of Statistics and estimate Multilevel Regression Model (MRM) to investigate the determinants of environmental behaviour at plant level. Our results reveal some important differences vis-à-vis the developed countries, such as a less significant role for collective action and environmental taxes, which suggests some possible policy changes to achieve better environmental outcomes. |
| Keywords: | pollution abatement and control expenditure, transition economy, Multilevel Regression Model (MRM) |
| JEL: | Q52 C23 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3787&r=env |
| By: | Andrei V. Bazhanov |
| Abstract: | I offer an approach linking a welfare criterion to the “sustainable development opportunities” of the economy. This implies a dependence of a criterion on the information about the current state. I consider the problem for the Dasgupta-Heal-Solow-Stiglitz model with externalities. The economy-linked criterion is constructed on an example of the maximin principle applied to a hybrid level-growth measure. This measure includes as special cases the conventional measures of consumption level and percent change as a measure of growth. The hybrid measure or geometrically weighted percent can be used for measuring sustainable growth as an alternative to percent. The closed form solutions are obtained for the optimal paths including the paths, dynamically consistent with the updates in reserve estimates. |
| Keywords: | Essential nonrenewable resource, modified Hotelling Rule, economy-linked criterion, geometrically weighted percent, normative resource peak. |
| JEL: | O13 O47 Q32 Q38 |
| Date: | 2008–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2008_11&r=env |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Persson, Lars (Department of Economics, Umeå University); Sjögren, Tomas (Department of Economics, Umeå University) |
| Abstract: | This paper analyzes the welfare consequences of coordinated tax reforms in an economy where a transboundary environmental externality and an international wage bargaining externality are operative at the same time. We assume that the wage in each country is decided upon in a bargain between trade-unions and firms, and the wage bargaining externality arises because the fall-back profit facing firms depends on the profit they can earn if moving production abroad. Using the noncooperative Nash equilibrium as a reference case, our results imply that the international wage bargaining externality may either reinforce or weaken the welfare gain of a coordinated increase in environmental taxation, depending on (among other things) how the reform affects the wage. For a special case, we also derive an exact condition under which a coordinated increase in the environmental tax leads to higher welfare. |
| Keywords: | Environmental taxes; externalities; policy coordination; trade-unions |
| JEL: | H23 J51 |
| Date: | 2008–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0754&r=env |
| By: | Majah-Leah Ravago (Department of Economics, University of Hawaii at Manoa); James Roumasset (Department of Economics, University of Hawaii at Manoa; University of Hawaii Economic Research Organization); Kimberly Burnett (University of Hawaii Economic Research Organization) |
| Abstract: | What is the role of resource management in sustaining competitiveness for island economies such as the Republic of the Philippines and Hawaii? We review the history of thought on sustainable resource management and sustainable development and then turn to the threats to sustainability from the resource curse and the parallel curse of paradise. We show how the resource curse undermines the pursuit of sustainability and describe innovations in governance that can transform the curse into a blessing. |
| Keywords: | Resource curse, sustainable development, Dutch disease |
| JEL: | Q01 Q33 Q58 |
| Date: | 2008–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:200804&r=env |
| By: | Wang, Jinxia; Mendelsohn, Robert; Dinar, Ariel; Huang, Jikun |
| Abstract: | This paper uses a cross sectional method to analyze irrigation choice and crop choice across 8,405 farmers in 28 provinces in China. The findings show that Chinese farmers are more likely to irrigate when facing lower temperatures and less precipitation. Farmers in warmer places are more likely to choose oil crops, maize, and especially cotton and wheat, and are less likely to choose vegetables, potatoes, sugar, and especially rice and soybeans. In wetter locations, farmers are more likely to choose soybeans, oil crops, sugar, vegetables, cotton, and especially rice, and they are less likely to choose potatoes, wheat, and especially maize. The analysis of how Chinese farmers have adapted to current climate, provides insight into how they will likely adapt when climate changes. Future climate scenarios will cause farmers in China to want to reduce irrigation and shift toward oil crops, wheat, and especially cotton. In turn, farmers will shift away from potatoes, rice, vegetables, and soybeans. However, adaptation will likely vary greatly from region to region. Policy makers should anticipate that adaptation is important, that the magnitude of changes depends on the climate scenario, andthat the desired changes depend on the location of each farm. |
| Keywords: | Crops&Crop Management Systems,Climate Change,Rural Poverty Reduction,Common Property Resource Development,Agriculture&Farming Systems |
| Date: | 2008–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4758&r=env |
| By: | Fuerst, Franz; McAllister, Patrick |
| Abstract: | Evaluating the environmental performance of a building is rapidly gaining importance as a metric in real estate investments. Since interpretation of the technical measurements is difficult and requires high expertise, investors tend to rely on markers as provided by environmental certification standards instead of evaluating environmental performance directly. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. We first estimate the rental regression for a sample of 110 LEED and 433 Energy Star as well as several thousand benchmark buildings to compare the sample to. The results suggest that certified buildings have a rental premium. Furthermore, based on a sample of transaction prices for 292 Energy Star and 30 LEED-certified buildings, we find a price premium of 10% and 31% respectively. |
| Keywords: | Green buildings; LEED; Energy Star certification; commercial real estate; appraisal; partial equilibrium; price premium; innovation diffusion |
| JEL: | C5 C31 M2 O4 R33 Q2 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11446&r=env |
| By: | Yongfu Huang (4CMR, Department of Land Economy, University of Cambridge); Terry Barker (4CMR, Department of Land Economy, University of Cambridge) |
| Abstract: | Under the Kyoto Protocol, the Clean Development Mechanism (CDM) is designed to serve the dual purposes of allowing the industrialised countries to earn credits by investing in project activities that reduce greenhouse gas (GHG) emissions, while contributing to sustainable development in developing countries via the flows of technology and capital. The fact that the geographic distribution of CDM projects is highly uneven motivates this research into whether certain geographic endowments matter for the CDM development. This research suggests that CDM credit flows in a country is positively affected by those in its neighbouring countries. Countries with higher absolute latitudes and elevations tend to initiate more CDM projects, whereas countries having richer natural resources do not seem to undertake more CDM projects. This finding sheds light on the geographic determinants of uneven CDM development across countries, and has implications for developing countries in terms of international cooperation and national capacity building to effectively access the CDM |
| Keywords: | Clean Development Mechanism; Geography; Natural Resources; Spatial Dependence |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200840&r=env |
| By: | BOUCEKKINE, Raouf (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); HRITONENKO, Natali (Prairie View A&M University); YATSENKO, Yuri (Houston Baptist University) |
| Abstract: | The paper examines the Porter and induced-innovation hypotheses in a firm model where: (i) the firm has a vintage capital technology with two complementary factors, energy and capital ; (ii) scrapping is endogenous; (iii) technological progress is energy-saving and endogenous through purposive R&D investment; (iv) the innovation rate increases with R&D investment and decreases with complexity; (v) the firm is subject to emission quotas which put an upper bound on its energy consumption at any date; (vi) energy and capital prices are exogenous. Balanced growth paths are first characterized, and a comparative static analysis is performed to study a kind of long-term Porter and induced-innovation hypotheses. In particular, it is shown that tighter emission quotas do not prevent firms to grow in the long-run, thanks to endogenous innovation, but they have an inverse effect on the growth rate of profits. Some short-term dynamics are also produced, particularly, to analyze the role of initial conditions and energy prices in optimal firm behavior subject to environmental regulation. Among numerous results, we show that (i) firms which are historically “small” polluters find it optimal to massively pollute in the short run: during the transition, new and clean machines will co-exist with old and dirty machines in the productive sectors, implying an unambiguously dirty transition; (ii) higher energy prices induce a shorter lifetime for capital goods but they depress investment in both new capital and R&D, featuring a kind of reverse Hicksian mechanism. |
| Keywords: | matching problem, von Neumann-Morgenstern stable sets, farsighted stability |
| JEL: | C71 C78 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvco:2008024&r=env |
| By: | Tord Kjellstrom (Australian National University); R. Sari Kovats (London School of Hygiene and Tropical Medicine); Simon J. Lloyd (London School of Hygiene and Tropical Medicine); Tom Holt (University of East Anglia); Tol, Richard S. J. (Economic and Social Research Institute (ESRI)) |
| Abstract: | Global climate change will increase outdoor and indoor heat loads, and may impair health and productivity for millions of working people. This study applies physiological evidence about effects of heat, climate guidelines for safe work environments, climate modelling and global distributions of working populations, to estimate the impact of two climate scenarios on future labour productivity. In most regions, climate change will decrease labour productivity, under the simple assumption of no specific adaptation. By the 2080s, the greatest absolute losses of population based labour work ability as compared with a situation of no heat impact (11-27%) are seen under the A2 scenario in South-East Asia, Andean and Central America, and the Caribbean. Climate change will significantly impact on labour productivity unless farmers, self-employed and employers invest in adaptive measures. Workers may need to work longer hours to achieve the same output and there will be economic costs of occupational health interventions against heat exposures. |
| Keywords: | Climate change, heat, work, labour productivity |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp260&r=env |
| By: | Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Natali, HRITONENKO; Yuri, YATSENKO |
| Abstract: | The paper examines the Porter and induced-innovation hypotheses in a firm model where : (i) the firm has a vintage capital technology with two complementary factors, energy and capital; (ii) scrapping is endogenous; (iii) technological progress is energy-saving and endogenous trough purposive R&D investment; (iv) the innovation rate increases with R&D investment and decreases with complexity; (v) the firm is subject to emission quotas which put an upper bound on its energy consumption at any date; (vi) energy and capital prices are exogenous. Balanced growth paths are first characterized, and a comparative static analysis is performed to study a kind of long-term Porter and induced-innovation hypotheses. In particular, it is shown that tighter emission quotas do not prevent firms to grow in the long-run, thanks to endogenous innovation, but they have an inverse effect on the growth rate of profits. Some short-term dynamics are also produced, particularly, to analyze the role of initial conditions and energy prices in optimal firm behavior subject to environmental regulation. Among numerous results, we show that (i) firms which are historically ÒsmallÓ polluters find it optimal to massively pollute in the short run : during the transition, new and clean machines will co-exist with old and dirty machines in the productive sectors, implying an unambiguously dirty transition; (ii) higher energy prices induce a shorter lifetime for capital goods but they depress investment in both new capital and R&D, featuring a kind of reverse Hicksian mechanism. |
| Keywords: | matching problem, von Neumann-Morgenstern stable sets, farsighted stability |
| JEL: | C71 C78 |
| Date: | 2008–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2008017&r=env |
| By: | Lindhjem, Henrik; Navrud, Ståle |
| Abstract: | The aggregate welfare measure for a change in the provision of a public good derived from a contingent valuation (CV) survey will be much higher if the same elicited mean willingness to pay (WTP) is added up over individuals rather than households. A trivial fact, however, once respondents are part of multi-person households it becomes almost impossible to elicit an “uncontaminated” WTP measure that with some degree of confidence can be aggregated over one or the other response unit. The literature is mostly silent about which response unit to use in WTP questions and in some CV studies it is even unclear which type has actually been applied. We test for differences between individual and household WTP in a novel, web-administered, split-sample CV survey asking WTP for preserving biodiversity in old-growth coniferous forests in Norway. Two samples are asked both types of questions, but in reverse order, followed by a question with an item battery trying to reveal why WTP may differ. We find in a between-sample test that the WTP respondents state on behalf of their households is not significantly different from their individual WTP. However, within the same sample, household WTP is significantly higher than individual WTP; in particular if respondents are asked to state individual before household WTP. Our results suggest that using individual WTP as the response unit would overestimate aggregate WTP, and thus bias welfare estimates in benefit-cost analyses. Thus, the choice of response format needs to be explicitly and carefully addressed in CV questionnaire design in order to avoid the risk of unprofitable projects passing the benefit-cost test |
| Keywords: | Contingent valuation; household; individual; WTP |
| JEL: | H41 Q51 Q57 |
| Date: | 2008–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11469&r=env |
| By: | Tuan, Tran Hu; Lindhjem, Henrik |
| Abstract: | We conduct a meta-analysis (MA) of around 100 studies valuing nature conservation in Asia and Oceania. Dividing our dataset into two levels of heterogeneity in terms of good characteristics (endangered species vs. nature conservation more generally) and valuation methods, we show that the degree of regularity and conformity with theory and empirical expectations is higher for the more homogenous dataset of contingent valuation of endangered species. For example, we find that willingness to pay (WTP) for preservation of mammals tends to be higher than other species and that WTP for species preservation increases with income. Increasing the degree of heterogeneity in the valuation data, however, preserves much of the regularity, and the explanatory power of some of our models is in the range of other MA studies of goods typically assumed to be more homogenous (such as water quality). Subjecting our best MA models to a simple test forecasting values for out-of-sample observations, shows median (mean) forecasting errors of 24 (46) percent for endangered species and 46 (89) percent for nature conservation more generally, approaching levels that may be acceptable in benefit transfer for policy use. We recommend that the most prudent MA practice is to control for heterogeneity in regressions and sensitivity analysis, rather than to limit datasets by non-transparent criteria to a level of heterogeneity deemed acceptable to the individual analyst. However, the trade-off will always be present and the issue of acceptable level of heterogeneity in MA is far from settled |
| Keywords: | Valuation; biodiversity; Asia; meta-analysis; meta-regression; benefit transfer. |
| JEL: | Q26 H41 Q51 Q57 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11470&r=env |
| By: | Hiroe Ishihara (University of Cambridge, Department of Land Economy); Unai Pascual (University of Cambridge, Department of Land Economy) |
| Abstract: | Since the 1990s, a growing number of authors have argued that social capital has positive effects in creating collective action and achieving favourable economic/political outcomes. However, in this paper we argue that despite this plethora of social capital literature, the connection between social capital and collective action is far from clear. By drawing on to a pluralistic perspective, i.e. ecological economics, sociology and anthropology, and introducing two key concepts, common knowledge and symbolic power, we aim at unravelling the missing links between social capital and collective action for environmental governance. By introducing these two concepts we aim to recapture a recursive relationship between social structure and human agency and to regain the explanatory power of the concept of social capital. |
| Keywords: | Social Capital, institutions, collective action, ‘common knowledge’, ‘symbolic power’, human agency |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200838&r=env |
| By: | OGGIONI, Giorgia (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)) |
| Abstract: | The inception of the Emission Trading System in Europe (EU-ETS) has made power price more expensive. This affects the competitiveness of electricity intensive industrial consumers and may force them to leave Europe. Taking up of a proposal of the industrial sector, we explore the possible application of special contracts, based on the average cost pricing system, which would mitigate the impact of CO2 cost on their electricity price. The model supposes fixed generation capacities. A companion paper treats the case with capacity expansion. We first consider a reference model representing a perfectly competitive market where all consumers (households and industries) are price-takers and buy electricity at the short-run marginal cost. We then change the market design assuming that large industrial consumers pay power either at a single or at a nodal average cost price. The analysis of these problems is conducted with simulation models applied to the Northwestern European market. The equilibrium models developed are implemented in the GAMS environment. |
| Keywords: | average cost pricing, complementarity conditions, EU-ETS, Northwestern Europe market. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvco:2008001&r=env |
| By: | Alvaro Escribano Saez; J. Luis Guasch |
| Abstract: | Developing countries are increasingly concerned about improving country competitiveness and productivity, as they face the increasing pressures of globalization and attempt to improve economic growth and reduce poverty. Among such countries, Investment Climate Assessments (ICA) surveys at the firm level, have become the standard way for the World Bank to identify key obstacles to country competitiveness, in order to prioritize policy reforms for enhancing competitiveness. Given the surveys objectives and the nature and limitations of the data collected, this paper discusses the advantages and disadvantages of using different productivity measures. The main objective is to develop a methodology to estimate, in a consistent manner, the productivity impact of the investment climate variables. The paper applies it to the data collected for ICAs in four countries: Costa Rica, Guatemala, Honduras and Nicaragua. Observations on logarithms (logs) of the variables are pooled across three countries (Guatemala, Honduras and Nicaragua). Endogeneity of the production function inputs and of the investment climate variables is addressed by using a variant of the control function approach, based on individual firm information, and by aggregating investment climate variables by industry and region. It is shown that it is possible to get robust results for 10 different productivity measures. The estimates for the four countries show how relevant the investment climate variables are to explain the average level of productivity. IC variables in several categories (red tape, corruption and crime, infrastructure and, quality and innovation) account for over 30 percent of average productivity. The policy implications are clear: investment climate matters and the relative impact of the various investment climate variables indicate where reform efforts should be directed in each country. It is argued that this methodology can be used as a benchmark to assess productivity effects in other ICA surveys. This is important because ICA surveys are available now for more than 65 developing countries. |
| Keywords: | Total factor productivity, Investment climate, Competitiveness, Firm level determinants of productivity, Robust productivity impacts, |
| JEL: | D24 L60 O54 C01 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we081911&r=env |
| By: | EHRENMANN, Andreas (Electrabel); SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)) |
| Abstract: | Former generation capacity expansion models were formulated as optimization problems. These included a reliability criterion and hence guaranteed security of supply. The situation is different in restructured markets where investments need to be incentivised by the margin resulting from electricity sales after accounting for fuel costs. The situation is further complicated by the payments and charges on the carbon market. We formulate an equilibrium model of the electricity sector with both investments and operations. Electricity prices are set at the fuel cost of the last operating unit when there is no curtailment, and at some regulated price cap when there is curtailment. There is a CO2 market and different policies for allocating allowances. Todays situation is quite risky for investors. Fuel prices are more volatile than ever; the total amount of CO2 allowances and the allocation method will only be known after investments has been decided. The equilibrium model is thus one under uncertainty. Agents can be risk neutral or risk averse. We model risk aversion through a CVaR of the net margin of the industry. The CVaR induces a risk neutral probability according to which investors value their plants. The model is formulated as a complementarity problem (including the CVaR valuation of investment). An illustration is provided on a small problem that captures the essence of today electricity world: a choice restricted to coal and gas, a peaky load curve because of wind penetration, uncertain fuel prices and an evolving carbon market (EU-ETS). We show that we might have problem of security of supply if we do not implement a capacity market. |
| Keywords: | capacity adequacy, risk functions, stochastic equilibrium models |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvco:2008007&r=env |
| By: | Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena |
| Abstract: | Most empirical studies show strong detrimental evidence that regulatory, and administrative, barriers to entry have on productivity and on firm growth. In this paper we evaluate and measure the total factor productivity (TFP) impacts of having; low quality physical infrastructures (electricity, telecommunications, transport, customs, etc.) and bad social infrastructures (rules of law, informality, corruption, etc.). We suggest evaluating the impact on average productivity (TFP) and on the allocative efficiency of production among firms based on several versions of the Olley and Pakes (O&P) decompositions. We evaluate the advantages and disadvantages of each the O&P decomposition in terms of their IC explanatory power. Once we have measured those IC impacts, we compare them with other sources of empirical information obtained from firm’s perceptions on main bottlenecks for firm growth and from doing business reports of the World Bank (2007). For the econometric analysis, we use firm level data bases from Turkey’s manufacturing sector based on Investment Climate surveys (ICs) done by the World Bank. These ICs are done in many other developing countries and therefore we propose to make crosscountry comparisons based on a new demean concept of TFP that also reduces the heterogeneity if using several robust productivity measures within each country. |
| Keywords: | Total factor productivity, Investment climate, Firm level determinants of allocative efficiency, Robust productivity impacts, Cross country comparisons of demean TFP |
| JEL: | D61 L60 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we082012&r=env |
| By: | Beard, Rodney |
| Abstract: | Cross disciplinary dialogue between economics and ecology has within economics centered on the two subdisciplines of bioeconomics and ecological economics. This division in economics re ects the division in ecology between population and sys- tems ecologists. Recent developments in ecology are aimed at a more integrated approach to ecologic al research. One example of such an approach is that of models based on thermodynamic reaction networks. By applying the \Law of Mass Action" to biochemical descriptions of ecological networks, it is possible to reformulate eco- logical systems models as population dynamic models, which can then be embedded within a bioeconomic model framework. Analysis of bioeconomic models far from thermodynamic equilibrium is then possible from within either a steady-state or ergodic framework. The Glansdorff-Prigogine or other related stability criteria from non-equilibrium thermodynamics may then be applied to the study of bioeconomic systems. |
| Keywords: | Ecological economics; bioeconomic modelling; resource economics |
| JEL: | B49 B59 Q57 |
| Date: | 1995 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11443&r=env |
| By: | Alvaro Escribano Saez; J. Luis Guasch; Manuel De Orte; Jorge Pena |
| Abstract: | Government policies and behavior exert a strong influence on the investment climate through their impact on costs, risks and barriers to competition. Key factors affecting the investment climate through their impact on costs are: corruption, taxes, the regulatory burden and extent of red tape in general, factor markets (labor, intermediate materials and capital), the quality of infrastructure, technological and innovation support, and the availability and cost of finance. While the investment climate surveys are quite useful in identifying major issues and bottlenecks as perceived by firms, the data collected is also meant to provide the basic information for an econometric assessment of the impact or contribution of the investment climate (IC) variables on productivity. We believe that improving the investment climate (IC) is a key policy instrument to promote economic growth and to mitigate the institutional, legal, economic and social factors that are constraining the convergence of per capita income and labor productivity of Turkey relative to more developed countries. For that, we need to identify the main investment climate variables that affect economic performance measures like total factor productivity, employment, wages, exports and foreign direct investment and this is the main goal of this paper. In turn, that quantified impact is used in the advocacy for, and design of, investment-climate reforms. |
| Keywords: | Investment climate, firm level determinants of TFP, Employment, Wages, Exports and FDI, Mean contributions of investment climate |
| JEL: | D24 L60 F18 J23 C01 C33 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we082113&r=env |
| By: | MORENO-TERNERO, Juan D. (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); ROEMER, John E. (Yale University) |
| Abstract: | We analyze a model of resource allocation in which agents' abilities (to transform the resource into an interpersonally comparable outcome) and initial endowments may differ. We impose ethical and operational axioms in this model and characterize some allocation rules as a result of combining these axioms. Two focal (and polar) egalitarian rules are singled out. On the one hand, the rule that allocates the resource equally across agents. On the other hand, the rule tha allocates the resource so that the distribution of final outcomes is exicographically maximized. |
| Keywords: | resource allocation, egalitarianism, priority, solidarity, composition. |
| JEL: | D63 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvco:2008018&r=env |
| By: | Brekke, Kjell Arne (Dept. of Economics, University of Oslo); Golombek, Rolf (Frisch Centre); Kittelsen , Sverre (Frisch Centre) |
| Abstract: | The European Union has introduced directives that aim to liberalize and integrate electricity and gas markets in Western Europe. While progress has been made, particularly in electricity markets, there have been setbacks: for example, because of concerns about national interests and security of supply. Thus it is possible that only part of the energy industry in Western Europe will be liberalized. We use a numerical model to assess what types of liberalization – electricity vs. natural gas; domestic markets vs. international trade – are most influential in decreasing prices and increasing welfare in Western Europe. We find that a partial liberalization of electricity markets has greater quantity and welfare effects than a partial liberalization of gas markets, and that liberalizations of domestic energy markets have (overall) greater effects than liberalizations of trade in energy between Western European countries. Finally, the shortrun effects primarily parallel the long-run effects, though they are significantly smaller. |
| Keywords: | energy markets; liberalization; price discrimination; resource rent |
| JEL: | C15 C68 Q40 Q48 |
| Date: | 2008–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2008_001&r=env |
| By: | Gary Clyde Hufbauer |
| Abstract: | This paper opens with a short recollection of the Kiel Week Conference of 2002, recorded in a volume edited by Horst Siebert, titled Global Governance: An Architecture for the World Economy. Assess-ments and forecasts made at that time are scored against subsequent developments. Security relations between the great powers are asserted to define the space for global economic governance. Over the next thirty years, the security context is not likely to provide the same inspiration for global economic institutions as the Cold War once did; instead, economic institutions will stand or fall on their own merits in meeting urgent challenges. The paper identifies and evaluates six challenges that are already with us, but which do not impose immediate acute costs on the great powers: climate change, financial crises, the world trading system, oil supplies, immigration, and economic responses to political chaos. A few of these, but not the majority, are seen as good candidates for global governance in the next decade. The paper concludes with speculation on four very low probability challenges that would im-pose acute costs (or present great opportunities) if they occur: pandemics, terrorism on the high seas, treasures from the deep seabed, and the prospect of a killer asteroid |
| Keywords: | climate change, financial crises, the world trading system, oil supplies, immigration |
| JEL: | Q54 F36 F13 Q41 F22 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1460&r=env |