nep-res New Economics Papers
on Resource Economics
Issue of 2010‒12‒11
two papers chosen by
Maximo Rossi
Universidad de la Republica

  1. The Role of Energy in Economic Growth By David I. Stern
  2. The Economic Geography of European Carbon Market Trading By Eric Knight

  1. By: David I. Stern (Arndt-Corden Department of Economics, Crawford School of Economics and Government, The Australian National University)
    Abstract: Physics shows that energy is necessary for economic production and, therefore, economic growth but the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. This paper reviews the relevant biophysical theory and mainstream, resource economics, and ecological economics models of growth. A possible synthesis of energy-based and mainstream models is presented. This model shows that when energy is scarce it imposes a strong constraint on the growth of the economy but when energy is abundant its effect on economic growth is much reduced. This explains the industrial revolution as a releasing of the constraints on economic growth due to the development of methods of using coal and the discovery of new fossil fuel resources. Time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when capital and other production inputs are included in the vector autoregression model. There are, however, various mechanisms that can weaken the links between energy and growth. The empirical literature finds that energy used per unit of economic output has declined in developed and some developing countries, due to both technological change and to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Substitution of other inputs for energy and sectoral shifts in economic activity play smaller roles.
    Keywords: Energy, Economic Growth, Survey
    JEL: N70 O40 Q43
    Date: 2010–10
    URL: http://d.repec.org/n?u=RePEc:een:ccepwp:0310&r=res
  2. By: Eric Knight (Department of Geography and the Environment, University of Oxford)
    Abstract: The European Union Emissions Trading Scheme (EU ETS) is the world’s first regional 10 carbon trading market. This article is a quantitative attempt to examine the temporal and spatial geography of European carbon trading. We show that carbon markets are especially sensitive to two factors: staging across time (Phase I versus II of the EU ETS) and across space (energy market structures in Europe). Carbon markets serve as a vehicle to better understand the economic geography of financial markets. Building on the theoretical vocabulary of the geography of finance, the article suggests that certain national factors (market structure) and institutional factors (regulatory phases) better explain how carbon markets operate than company level differences. These findings indicate that geographers have a key role to play in highlighting the local ramifications of carbon markets if and when the world moves towards its ambition for a global carbon market.
    Keywords: Climate change, tradable permits, European Union
    JEL: Q54 R12
    Date: 2010–10
    URL: http://d.repec.org/n?u=RePEc:een:ccepwp:0510&r=res

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