nep-res New Economics Papers
on Resource Economics
Issue of 2017‒03‒26
three papers chosen by
Maximo Rossi
Universidad de la República

  1. Energy prices, environmental policies and investment: Evidence from listed firms By Dennis Dlugosch; Tomasz Kozluk
  2. Foreign Direct Investment and The Pollution Haven Hypothesis: Evidence from Listed Firms By Grégoire Garsous; Tomasz Kozluk
  3. Providing Efficient Network Access to Green Power Generators : A Long-term Property Rights Perspective By Petropoulos, G.; Willems, Bert

  1. By: Dennis Dlugosch (OECD); Tomasz Kozluk (OECD)
    Abstract: The 2°C (or less) limit on global warming agreed at the UN Climate Change Conference of 2015 in Paris effectively implies that manufacturing industries in developed countries have to undertake significant investments, in particular in more energy efficient production technology. To implement policies making the most of such a change, policymakers need to know what consequences climate policies have on business investment. This paper sheds light on the relationship between environmental policies, energy prices and firm-level investment using a sample of listed firms over the period 1995-2011 in 30 OECD economies. Higher energy price inflation is associated with a small, but statistically significant decrease in total investment across firms, though in the most energy intensive sectors, total investments are actually found to increase. However, for domestic investment, effects of higher energy price inflation are negative, independent of the energy intensity of industries. The gap in reactions between total and domestic investment is likely driven by increased offshoring in response to higher energy price inflation, in line with the Pollution Haven Hypothesis. We also find tentative evidence that the negative effects of rising energy prices on investment can be largely attributed to tightening upstream environmental policies.
    Keywords: energy prices, environmental policies, investment
    JEL: E22 Q41 Q58
    Date: 2017–03–23
  2. By: Grégoire Garsous (OECD); Tomasz Kozluk (OECD)
    Abstract: Business has often been arguing against the introduction of a carbon tax because it would induce a pollution haven effect – reducing the competitiveness of domestic production and shifting both production and emissions to countries where fossil fuels are cheaper. In this paper, we shed light on such claims by estimating the effect of energy prices on one of the possible channels of the pollution haven effect - foreign direct investment (FDI). Using data for listed firms in 23 OECD countries, we find that the effect of higher domestic energy prices on firms’ outward stock of FDI has been significant and positive, but small in magnitude. This effect seems driven by more permanent shocks to energy prices, in particular by those coming from more stringent upstream environmental policies.
    Keywords: energy prices, environmental policies, FDI, pollution haven
    JEL: F21 Q41 Q58
    Date: 2017–03–23
  3. By: Petropoulos, G.; Willems, Bert (Tilburg University, Center For Economic Research)
    Abstract: Coordinating the timing of new production facilities is one of the challenges of liberalized power sectors. It is complicated by the presence of transmission bottlenecks, oligopolistic competition and the unknown prospects of low-carbon technologies. We build a model encompassing a late and early investment stage, an existing dirty (brown) and a future clean (green) technology and a single transmission bottleneck, and compare dynamic efficiency of several market designs. Allocating network access on a short-term competitive basis distorts investment decisions, as brown firms will preempt green competitors by investing early. Dynamic efficiency is restored with long-term transmission rights that can be traded on a secondary market. We show that dynamic efficiency does not require the existence of physical rights for accessing the transmission line, but financial rights on receiving the scarcity revenues generated by the transmission line suffice.
    Keywords: network access; congestion management; renewable energy sources; power markets
    JEL: L94 L13 C72 D43
    Date: 2017

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