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on Energy Economics |
| By: | Ruud Egging; Steven A. Gabriel; Franziska Holz; Jifang Zhuang |
| Abstract: | In this paper, we present a detailed and comprehensive complementarity model for computing market equilibrium values in the European natural gas system. Market players include producers and their marketing arms which we call "transmitters", pipeline and storage operators, marketers, LNG liquefiers, regasifiers, tankers, and three end-use consumption sectors. The economic behavior of producers, transmitters, pipeline and storage operators, liquefiers and regasifiers is modeled via optimization problems whose Karush-Kuhn-Tucker (KKT) optimality conditions in combination with market-clearing conditions form the complementarity system. The LNG tankers, marketers and consumption sectors are modeled implicitly via appropriate cost functions, aggregate demand curves, and ex-post calculations, respectively. The model is run on several case studies that highlight its capabilities, including a simulation of a disruption of Russian supplies via Ukraine. |
| Keywords: | European natural gas market, global LNG market, mixed complementarity problem |
| JEL: | C61 L95 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp732&r=ene |
| By: | Nikolaos Georgantzis (LEE/LINEEX, Universitat Jaume I and University of Cyprus); Enrique Fatas (LINEEX and Applied Economics Department, University of Valencia); Carlos Gutierrez-Hita (Elx University); Aitor Ciarreta |
| Abstract: | We present experimental results from a series of sessions organized using the Power Market simulator; a software designed to realistically replicate the Spanish Electricity Market. In the experiments reported here we compare the status quo to two alternative treatments which represent alternative market structures. In one of them, labeled as vertical separation, we assume that power generating firms and electricity distributors-endsuppliers belong to separate business groups. In the second, we study the effect of entry by independent end-suppliers. Both alternative scenarios dominate the status quo in terms of market efficiency, whereas the latter of them dominates the former. |
| Keywords: | Experimental economics, Spanish Electricity Market, vertical relations. |
| JEL: | C90 L43 L51 L53 L94 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0731&r=ene |
| By: | Paschke, Raphael; Prokopczuk, Marcel |
| Abstract: | In this paper we develop a multi-factor model for the joint dynamics of related commodity spot prices in continuous time. We contribute to the existing literature by simultaneously considering various commodity markets in a single, consistent model. In an application we show the economic significance of our approach. We assume that the spot price processes can be characterized by the weighted sum of latent factors. Employing an essentially-affine model structure allows for rich dependencies among the latent factors and thus, the commodity prices. The co-integrated behavior between the different spot price dynamics is explicitly taken into account. Within this framework we derive closed-form solutions of futures prices. The Kalman Filter methodology is applied to estimate the model for crude oil, heating oil and gasoline futures contracts traded on the NYMEX. Empirically, we are able to identify a common non-stationary equilibrium factor driving the long-term price behavior and stationary factors affecting all three markets in a common way. Additionally, we identify factors which only impact subsets of the commodities considered. To demonstrate the economic consequences of our integrated approach, we evaluate the investment into a refinery from a financial management perspective and compare the results with an approach neglecting the co-movement of prices. This negligence leads to radical changes in the project's assessment. |
| Keywords: | Commodities; Integrated Model; Crude Oil; Heating Oil; Gasoline; Futures; Kalman Filter |
| JEL: | G13 Q40 C50 |
| Date: | 2007–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5412&r=ene |
| By: | Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University); Islam, Nizamul (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Raising the price of fossil fuels is a key component of any effective policy to deal with climate change. Just how effective such policies are is decided by the price elasticities of demand. Many papers have studied this without recognising that not only is there a demand side response: quantities are decided by the price but also there is a reverse causality: the level of consumtion affects the political acceptability of the taxes which are the main component of the final price. Thus prices affect consumption levels, in turn, have an affect on taxes and thus consumer prices. This paper estimates these functions simultaneously to show that there is indeed an effect on the demand elasticity.<p> |
| Keywords: | climate change; simultaneous; tax |
| JEL: | C33 Q54 |
| Date: | 2007–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0274&r=ene |
| By: | Anton Nakov; Andrea Pescatori |
| Abstract: | An exogenous oil price shock raises inflation and contracts output, similar to a negative productivity shock. In the standard New Keynesian model, however, this does not generate any trade-off between inflation and output gap volatility: under a strict inflation-targeting policy, the output decline is exactly equal to the efficient output contraction in response to the shock. Modeling the oil sector from optimizing first principles rather than assuming an exogenous oil price, we show that the presence of a dominant oil supplier (OPEC) leads to inefficient fluctuations in the oil price markup. The latter reflects a dynamic distortion of the production process, and as a result, stabilizing inflation does not automatically stabilize the distance of output from first-best. Our model is a step away from discussing the effects of exogenous oil price changes and toward analyzing the implications of the underlying shocks that cause the oil price to change in the first place. |
| Keywords: | Monetary policy ; Petroleum products - Prices ; Business cycles |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:0710&r=ene |
| By: | erdogdu, oya safinaz |
| Abstract: | It is seen that many developed nations are taking serious actions to use domestic rather than imported energy resources. Contrary, Turkey -a developing country- is getting more dependent on imported resources of energy, such as natural gas. This study analyses the consequences of this policy on some macroeconomic variables. Granger causality test statistics are calculated to search for relations between total energy consumption / imported energy resources and gross domestic product, industrial production index or private sector fixed investment. The results indicate that although total and imported quantity of energy affects gross domestic product, the national income, the origin of energy resource –such as being domestic or not – does not effect industrial production. As for the determinants of energy imports the test statistics indicate that private sector investment Granger causes energy imports. |
| Keywords: | Energy consumption; Granger causality; VAR |
| JEL: | C32 Q43 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5413&r=ene |
| By: | Hakan Yetkiner (Department of Economics, Izmir University of Economics); Adrian von Zon (Department of Economics, Maastricht University) |
| Abstract: | In this short paper we add a non-renewable resource sector to van Zon and Yetkiner (2003) that extended Romer (1990) by including energy consumption of intermediate goods in a context of endogenous and embodied technical change. Van Zon and Yetkiner (2003) showed that the growth rate depends negatively on the growth of exogenous real energy prices. In this paper, we endogenise the growth rate of real energy prices by introducing a non-renewable resource sector into the model. This allows us to study the comparative statics of the model. We show that changes in technology parameters promote growth, while others disfavour growth. |
| Keywords: | Endogenous growth; energy-saving technological change; Hotelling’s rule |
| JEL: | O31 Q43 O41 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:izm:wpaper:0701&r=ene |
| By: | Céline Gisèle Jung (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); André Fontana (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.) |
| Abstract: | When the recovery of mixed plastics is not economically viable, the main issue today is land filling or incineration. The present study shows the opportunities in producing gaseous or liquid substitution fuels by pyrolysis or gasification. By both processes, the issued fuels characteristics are quite different so that the application fields have to be optimized. If plastics are mixed with other waste, sorting could be too expensive. Using our predictive model, pyrolysis mass balance could be evaluated so that the fuels qualities could be predicted. |
| Keywords: | pyrolysis, gasification, mass balance, energy balance, waste plastics, substitution fuels |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:07-026&r=ene |
| By: | Alain Jean-Marie; Philippe Fabien Prieur; Philippe Mabel Tidball |
| Abstract: | We consider an OLG model with emissions arising from production and potential irreversible pollution. Pollution control goes through a system of permits and private agents can also maintain the environment. In this setting, we prove that there exist multiple equilibria. Due to the possible irreversibility of pollution, the economy can be dragged into both environmental and poverty traps. First, we show that choosing a global quota on emissions at the lowest level beyond a critical threshold is a means to avoid the two types of traps. Next, we analyze the impact of a political reform on other equilibria. When the agents do not engage in maintenance, a fall in the quota implies a reduction of pollution but is detrimental to capital accumulation while, in the other case, it procures a double dividend. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:06&r=ene |
| By: | Rasha Ahmed (University of Connecticut); Kathleen Segerson (University of Connecticut) |
| Abstract: | The paper investigates alternative policies to regulate emissions from polluting product markets, specifically considering the case of the automobiles market. The two policies we consider are: a quota that limits the quantity produced of the polluting model and a more flexible average efficiency standard that requires a minimum energy efficiency across all models produced by a firm, similar to the US Corporate Average Fuel Economy (CAFE) standards. We use a duopoly model of vertical differentiation where firms produce both an economy (i.e., low polluting) version and a luxury (i.e., high polluting) version of a given product. We show that while a quota can raise firm profit over a certain range, CAFE always reduces firm profit relative to the pre-regulation. We also show that while the quota reduces emissions, it is possible that emissions increase under CAFE. The optimal policy choice will depend on the magnitude of unit damages. We show that when unit damages are sufficiently high, the quota policy is more efficient than the average efficiency standard. This suggests that instead of tightening CAFE to limit damages from emissions, policy makers can shift to a quota policy which is both welfare enhancing and more profitable for firms. |
| Keywords: | automobiles market, emission control, green markets, energy/fuel efficiency |
| JEL: | Q48 Q58 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2007-40&r=ene |