nep-res New Economics Papers
on Resource Economics
Issue of 2013‒03‒23
nine papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Designing an optimal 'tech fix' path to global climate stability: R&D in a multi-phase climate policy framework By Zon, Adriaan van; David, Paul
  2. Uranium and nuclear Power: The role of exploration information in framing public policy By Charles F Mason
  3. Green Technologies and the Protracted End to the Age of Oil: A strategic analysis By Niko Jaakkola
  4. Why New Business Models Matter for Green Growth By Andrea Beltramello; Linda Haie-Fayle; Dirk Pilat
  5. Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Empirical Application Using Firm-Level Patent Data By Joëlle Noailly; Roger Smeets
  6. Consumption-Based Approaches in International Climate Policy: An Analytical Evaluation of the Implications for Cost-Effectiveness, Carbon Leakage, and the International Income Distribution By Christian Lininger
  7. A Review of Indian Water Policy By Singh, Krishna M.; Singh, R.K.P.; Meena, M.S.; Kumar, Abhay
  8. Can a Unilateral Carbon Tax Reduce Emissions Elsewhere? By Joshua Elliott; Don Fullerton
  9. The Implications of Natural Resource Exports for Non-Resource Trade By Torfinn Harding; Anthony J Venables

  1. By: Zon, Adriaan van (UNU-MERIT/MGSoG, and Maastricht University); David, Paul (SIEPR, and Economics Department, Standford University, and UNU-MERIT/MGSoG)
    Abstract: The research reported here gives priority to understanding the inter-temporal resource allocation requirements of a program of technological changes that could halt global warming by completing the transition to a "green" (zero net CO2- emission) production regime within the possibly brief finite interval that remains before Earth's climate is driven beyond a catastrophic tipping point. This paper formulates a multi-phase, just-in-time transition model incorporating carbon-based and carbon-free technical options requiring physical embodiment in durable production facilities, and having performance attributes that are amenable to enhancement by directed R&D expenditures. Transition paths that indicate the best ordering and durations of the phases in which intangible and tangible capital formation is taking place, and capital stocks of different types are being utilized in production, or scrapped when replaced types embodying socially more efficient technologies, are obtained from optimizing solutions for each of a trio of related models that couple the global macro-economy's dynamics with the dynamics of the climate system. They describe the flows of consumption, CO2 emissions and the changing atmospheric concentration of green-house gas (which drives global warming), along with the investment dynamics required for the timely transformation of the production regime. These paths are found as the welfare-optimizing solutions of three different "stacked Hamiltonians", each corresponding to one of our trio of integrated endogenous growth models that have been calibrated comparably to emulate the basic global setting for the "transition planning" framework of dynamic integrated requirements analysis modelling (DIRAM). As the paper's introductory section explains, this framework is proposed in preference to the (IAM) approach that environmental and energy economists have made familiar in integrated assessment models of climate policies that would rely on fiscal and regulatory instruments -- but eschew any analysis of the essential technological transformations that would be required for those policies to have the intended effect. Simulation exercises with our models explore the optimized transition paths' sensitivity to parameter variations, including alternative exogenous specifications of the location of a pair of successive climate "tipping points": the first of these initiates higher expected rates of damage to productive capacity by extreme weather events driven by the rising temperature of the Earth's surface; whereas the second, far more serious "climate catastrophe" tipping point occurs at a still higher temperature (corresponding to a higher atmospheric concentration of CO2). In effect, that sets the point before which the transition to a carbon-free global production regime must have been completed in order to secure the possibility of future sustainable development and continued global economic growth.
    Keywords: global warming, tipping point, catastrophic climate instability, extreme weather-related damages, R&D based technical change, embodied technical change, optimal sequencing, multi-phase optimal control, sustainable endogenous growth
    JEL: Q54 Q55 O31 O32 O33 O41 O44
    Date: 2013
  2. By: Charles F Mason
    Abstract: An addressing climate change becomes a high priority it seems likely that there will be a surge in interest in deploying nuclear power. Other fuel bases are too dirty (coal), too expensive (oil, natural gas) or too speculative (solar, wind) to completely supply the energy needs of the global economy. To the extent that the global society does in fact choose to expand nuclear power there will be a need for additional production. That increase in demand for nuclear power will inevitably lead to an increase in demand for uranium. While some of the increased demand for uranium will be satisfied by expanding production from existing deposits, there will undoubtedly be pressure to find and develop new deposits, perhaps quite rapidly. Looking forward, it is important that policies be put in place that encourage an optimal allocation of future resourcs towards exploration. In particular, I argue there is a valid concern that privately optial levels of industrial activity wilol fail to fully capture all potential social gains; these sub-optimal exploration levels are linked to a departure between the private and social values of exploration information.
    Keywords: Uranium and nuclear power, climate change, uranium, public policy
    JEL: E21 E62 F43 H63 O11 Q33
    Date: 2013
  3. By: Niko Jaakkola
    Abstract: This paper considers competition between an oil exporter depleting and selling an exhaustible resource, and an oil importer able to gradually lower the cost of substitutes. R&D into clean fuels begins before the substitutes are competitive, in order to reduce overall development costs. The substitute constrains the oil exporter's market power: after an initial Hotelling-type stage, oil pricing becomes constrained by the ever-cheaper substitute technology. Suppy is thus non-monotonic, initially falling, then forced up by competition from substitute. Climate change slows down substitute development: rapid R&D forces the exporter to extract oil faster, aggravating near-term environmental impacts. If oil extraction becomes more expensive as supplies are depleted, the importer switches into clean fuels once these price oil out of the market; technological development will eventually be hastened to leave more of the oil locked underground. Novel numerical methods for solving PDEs are introduced into a differential game context.
    Keywords: exhaustible resources, oil, alternative fuels, limit pricing, climate change
    JEL: D42 O32 Q31 Q40 Q54
    Date: 2013
  4. By: Andrea Beltramello; Linda Haie-Fayle; Dirk Pilat
    Abstract: New business models can make an important contribution to the transition to green growth. While some new business models involve large firms, others are small start-up firms that seek to exploit technological or commercial opportunities that have been neglected or not yet explored by more established firms. New firms tend to engage in more radical innovation than existing firms, and scaling up new business models can therefore help reduce environmental pollution, optimise the use of natural resources, increase productivity and energy efficiency, and provide a new source of economic growth. Although the market for green goods and services is growing, the development of new business models is affected by a range of barriers, many of which can be addressed by well-designed policies.
    Date: 2013–02
  5. By: Joëlle Noailly; Roger Smeets
    Abstract: This paper investigates the determinants of directed technical change in the electricity generation sector. We use firm-level data on patents filed in renewable (REN) and fossil fuel (FF) technologies by about 7,000 European firms over the period 1978-2006. We separately study specialized firms, that innovate in only one type of technology during the sample period, and mixed firms, that innovate in both technologies. We find that for specialized firms the main drivers of innovation are fossil-fuel prices, market size, and firms' past knowledge stocks. Also, prices and market size drive the entry of new REN firms into innovation. By contrast, we find that innovation by mixed firms is mainly driven by strong path-dependencies since for these firms past knowledge stock is the major driver of the direction of innovation. These results imply that generic environmental policies that affect prices and energy demand are mainly effective in directing innovation by small specialized firms. In order to direct innovation efforts of large mixed corporations with a long history of FF innovation, targeted R&D policies are likely to be more effective.
    JEL: Q4 Q55
    Date: 2013–03
  6. By: Christian Lininger (Wegener Center for Climate and Global Change, University of Graz, Austria)
    Abstract: As an agreement on an international climate treaty appears out of sight in the short run, many countries rely on unilateral greenhouse gas abatement strategies. The reach of such unilateral policies can be extended beyond the borders of the abating country by a switch to a consumption-based policy orientation. Such a policy does not target the emissions discharged on the territory of the country that abates, but the emissions embodied in the goods it consumes. If industrialized countries adopt this approach, they can bring the large and increasing amount of emissions embodied in imports from emerging economies into the scope of the policy. The policy switch could be implemented by means of border carbon adjustments; according to theoretic arguments such adjustments can improve the efficiency of unilateral policies. This paper develops a 2-region, 5-good analytical partial-equilibrium model to study the effects of a switch of the policy base. We especially focus on changes in production technology triggered by the policy. We find that a policy targeting consumption – when using a leakage definition appropriate for consumption-based approaches – does not cause leakage through the non-energy market leakage channel. In addition, the question whether a consumption-based policy is environmentally more effective is decided through policy transmission in non-energy markets, but not in energy markets. Still, despite the many arguments in favour of consumption-based approaches, we find that none of these arguments per se suffices to make a consumption-based policy the environmentally more effective or the more cost-effective option. Whether it is indeed more effective depends on (i) demand and production parameters and (ii) the precise design of the border tax (or any other appropriate policy instrument). In particular, the availability of “green” technology in emerging economies influences the results. Additionally, a switch of the policy base may also cause a substantial redistribution of the costs of the policy between abating and non-abating countries.
    Keywords: Unilateral climate policy, consumption-based accounting, carbon leakage, border carbon adjustments, trade and environment
    JEL: Q54 Q56 F18 H23
    Date: 2013–03
  7. By: Singh, Krishna M.; Singh, R.K.P.; Meena, M.S.; Kumar, Abhay
    Abstract: Abstract: Water is essential for human survival but water-related illnesses are the most common health threat in the developing world. An estimated 25 000 people die every day as a result of water-related diseases Human existence depends on water. Water interacts with solar energy to determine climate and it transforms and transports the physical and chemical substances necessary for all life on earth. Competition among agriculture, industry and cities for limited water supplies is already constraining development efforts in many countries including India. As populations expand and economies grow, the competition for limited supplies is most likely to intensify, resulting in potential conflict situation among water users in days to come. Despite shortages of water, its misuse is widespread, be it in small communities or large cities, farmers or industries, developing countries or industrialized economies every where the mismanagement of water resources is evident. Surface water quality is deteriorating in key basins from urban and industrial wastes. At present, 2.4 billion people depend on irrigated agriculture for jobs, food and income (some 55 percent of all wheat and rice output is irrigated). Over the next 30 years, an estimated 80 percent of the additional food supplies required to feed the world will depend on irrigation. Ministry of Water Resources, Government of India, in January 2012, released a draft National Water Policy for the consideration and opinion of state governments and other stakeholders. The need for a holistic national policy has its genesis in the changing patterns of water use across India – both personal and industrial use. This includes the imperatives of providing both clean drinking water and adequate resources for irrigation; the move to look at renewable sources of energy like hydro power; and natural disaster management and rehabilitation following devastating floods and drought. The policy also seeks to offer economic incentives and penalties to reduce pollution and wastage. For reversing the usual approach of projecting a future demand and bringing about a supply-side response to meet that demand, we must start from the fact that the availability of fresh water in nature is finite, and learn to manage our water needs within that availability. This means a restraint on the growth of 'demand' for water (other than basic needs) which will be difficult and will involve painful adjustments; but this has become inevitable. So, to have a more equitable and inclusive water resources management, the primacy has to shift from large, centralized, capital-intensive 'water resource development' (WRD) projects with big dams and reservoirs and canal systems, to small, decentralized, local, community-led, water-harvesting and watershed-development programmes, with the big projects being regarded as projects of the last resort; and the exploitation of groundwater will have to be severely restrained in the interest of resource-conservation as well as equity.
    Keywords: Water Policy, India, Agriculture
    JEL: Q0 Q01 Q1 Q18
    Date: 2013–02–14
  8. By: Joshua Elliott; Don Fullerton
    Abstract: One country that tries to reduce greenhouse gas emissions may fear that other countries get a competitive advantage and increase emissions (“leakage”). Estimates from computable general equilibrium (CGE) models such as Elliott et al (2010a,b) indicate that 15% to 25% of abatement might be offset by leakage. Yet the Fullerton et al (2012) analytical general equilibrium model shows an offsetting term with negative leakage. To derive analytical expressions, their model is quite simple, with only one good from each country or sector, a fixed stock of capital, competitive markets, and many identical consumers that purchase both goods. Their model is not intended to be realistic, but only to demonstrate the potential for negative leakage. Most CGE models do not allow for negative leakage. In this paper, we use a full CGE model with many countries and many goods to measure effects in a way that allows for negative leakage. We vary elasticities of substitution and confirm the analytical model’s prediction that negative leakage depends on the ability of consumers to substitute into the untaxed good and the ability of firms to substitute from carbon emissions into labor or capital.
    JEL: H23 Q56 Q58
    Date: 2013–03
  9. By: Torfinn Harding; Anthony J Venables
    Abstract: Foreign exchange windfalls such as those from natural resource revenues change non-resource exports, imports, and the capital account. We study the balance between these responses and, using data on 41 resource exporters for 1970-2006, show that the response to a dollar of resource revenue is, approximately, to decrease non-resource exports by 75 cents and increase imports by 25 cents, implying a negligible effect on foreign saving. The negative per dollar impact on exports is larger for countries which have good institutions and higher income levels. These countries have a higher share of manufacturing in their non-resource exports, and we show that manufactures are more susceptible than other products to being crowded out by resource exports.
    Keywords: natural resources, Dutch disease, resource curse, trade, exports, imports
    JEL: E21 E62 F43 H63 O11 Q33
    Date: 2013

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