|
on Energy Economics |
|
Issue of 2011‒08‒02
thirty-two papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Platchkov, L.; Pollitt, M. G.; Reiner, D.; Shaorshadze, I. |
| Abstract: | This paper presents results of the 2010 Electricity Policy Research Group (EPRG) public opinion survey. The survey examines the energy policy preferences and attitudes of the British public, the potential for consumer engagement and consumer acceptance of various energy demand response activities. Wherever possible, comparisons were made to EPRG public opinion surveys from 2006 and 2008. Since the global financial crisis of 2008, energy and environmental concerns have decreased in priority, and respondents are more sceptical about government interventions in electricity markets. The share of individuals reporting that they are experiencing serious hardship due to energy prices has gone down from the 2008 level. While roughly half of the respondents would agree to have detailed metered consumption information recorded by their energy providers, they are even more wary about making data available to other entities. Local ownership is a potential motivating factor for public support for local small-scale energy plants. Energy efficiency measures had higher uptake than in previous years, but the widespread measures are typically cheaper and easiest to implement. There is scope for shifting discretionary electricity load to off-peak hours through both Time-of-Use tariffs and smart appliances that require limited user intervention. |
| JEL: | Q40 Q48 Q42 L94 |
| Date: | 2011–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1149&r=ene |
| By: | Roger Fouquet; Peter J.G Pearson |
| Abstract: | The provision of artificial light was revolutionised by a series of discontinuous innovations in lighting appliances, fuels, infrastructures and institutions during the nineteenth and twentieth centuries. In Britain, the real price of lighting fell dramatically (3,000-fold between 1800 and 2000) and quality rose. Along with rises in real income and population, these developments meant that total consumption of lighting was 40,000 times greater by2000 than in 1800. The paper presents estimates of the income and price elasticities of demand for lighting services over the past three hundred years, and explores how they evolved. Income and price elasticities increased dramatically (to 3.5 and -1.7, respectively) between the 1840s and the 1890s and fell rapidly in the twentieth century. Even in the twentieth century and at the beginning of the twenty-first century, rebound effects in the lighting market still appear to be potentially important. This paper provides a first case study of the long run effects of socio-economic change and technological innovation on the consumption of energy services in the UK. We suggest that understanding the evolution of the demand for energy services and the factors that influence it contributes to a better understanding of future energy uses and associated greenhouse gas emissions. |
| Keywords: | Energy Services, Demand, Economic Development, Rebound Effect |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:2011-06&r=ene |
| By: | Ulrich Witt; Julia Sophie Woersdorfer |
| Abstract: | How can economic theory explain the reasons why consumers adopt innovations? Using the example of innovations in washing machines two approaches are compared. The first focuses in the manner of household production theory on changes in constraints without specifying preferences, leading to the well-known time substitution hypothesis. The second approach develops specific hypotheses about consumer preferences and focuses on how technical change accounts for them. The two approaches are empirically evaluated with a data set representing the motives suggested in washer advertisements for purchasing new vintages of machines over the period 1888 to 1989 in the U.S. |
| Keywords: | home production, preferences, consumer motivation, product innovation, innovation diffusion, time substitution hypothesis, direct utility Length 30 pages |
| JEL: | A12 D01 D11 D12 D13 N3 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2011-10&r=ene |
| By: | Newbery, D. |
| Abstract: | The UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) or a premium FiT (pFiT) for all generation regardless of type. I argue that neither is suitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £70 million/yr by 2020, while the cost of the increased risk incurred by a pFiT might add another £180 m/yr. If similar savings were made to projected off-shore wind investments the savings might be three times as high. |
| JEL: | Q42 L14 L94 |
| Date: | 2011–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1143&r=ene |
| By: | Matthias Kalkuhl (Potsdam Institute for Climate Impact Research (PIK)); Ottmar Edenhofer (Potsdam Institute for Climate Impact Research (PIK) and Technical University Berlin); Kai Lessmann (Potsdam Institute for Climate Impact Research (PIK)) |
| Abstract: | This paper evaluates the consequences of renewable energy policies on welfare, resource rents and energy costs in a world where carbon pricing is imperfect and the regulator seeks to limit emissions to a (cumulative) target. We use a global general equilibrium model with an intertemporal fossil resource sector. We calculate the optimal second-best renewable energy subsidy and compare the resulting welfare level with an efficient first-best carbon pricing policy. If carbon pricing is permanently missing, mitigation costs increase by a multiple (compared to the optimal carbon pricing policy) for a wide range of parameters describing extraction costs, renewable energy costs, substitution possibilities and normative attitudes. Furthermore, we show that small deviations from the second-best subsidy can lead to strong increases in emissions and consumption losses. This confirms the rising concerns about the occurrence of unintended side effects of climate policy { a new version of the green paradox. We extend our second-best analysis by considering two further types of policy instruments: (1) temporary subsidies that are displaced by carbon pricing in the long run and (2) revenue-neutral instruments like a carbon trust and a feed-in-tariff scheme. Although these instruments cause small welfare losses, they have the potential to ease distributional conflicts as they lead to lower energy prices and higher fossil resource rents than the optimal carbon pricing policy. |
| Keywords: | Feed-in-Tariff, Carbon Trust, Carbon Pricing, Supply-Side Dynamics, Green Paradox, Climate Policy |
| JEL: | Q4 Q52 Q54 Q58 D58 H21 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.48&r=ene |
| By: | Emanuele Massetti (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo per i Cambiamenti Climatici); Elena Claire Ricci (Università degli Studi di Milano and Fondazione Eni Enrico Mattei) |
| Abstract: | We extend the WITCH model to consider the possibility to produce and trade electricity generated by large scale concentrated solar power plants in highly productive areas that are connected to the demand centres through High Voltage Direct Current (HVDC) cables. We find that it becomes optimal to produce with this source only from 2040 and trade from 2050. In the second half of the century, CSP electricity shares become very significant especially when penetration limits are imposed on nuclear power and on carbon capture and storage operations (CCS). Climate policy costs can be reduced by large percentages, up to 66% with respect to corresponding scenarios without the CSP-powered Super-Grid option and with limits on nuclear power and CCS. We also show that MENA countries have the incentive to form a cartel to sell electricity to Europe at a price higher than the marginal cost. Therefore we advocate the institution of an international agency with the role to regulate a hypothetic Mediterranean electricity market. |
| Keywords: | Climate Policy, Integrated Assessment, Renewable Energy, Concentrated Solar Power, Power Grid, Electricity Trade |
| JEL: | Q2 Q43 Q54 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.47&r=ene |
| By: | Pieter HIMPENS; Joris MORBEE; Stef PROOST |
| Abstract: | The taxation of nuclear energy is studied using a stylized model of the electricity sector, with one dominant nuclear producer and a competitive fringe of fossil-fuel plants. We show that an unanticipated tax on nuclear production can generate significant government revenue in the short run without disturbing the market, but will harm investment incentives in the long run, especially if the government cannot credibly commit to a future tax rate. Even if the government is capable of credibly committing to an optimal long-run tax, government revenues from the long-run tax will be very low due to the market power of the incumbent. Lifetime extension agreements negotiated with multiple potential players, and competitive auctioning of new nuclear licenses are shown to be the most attractive policies. The analytical results are illustrated with a numerical simulation for the case of Belgium. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.16&r=ene |
| By: | Nepal, R.; Jamasb, T. |
| Abstract: | Interconnections can be an effective way to increase competition in wholesale electricity markets in particular for smaller markets with few actors. This paper quantitatively examines the potentials for interconnections in the Irish Single Electricity Market (SEM). We use a time-varying Kalman filter technique to assess the degree of market integration between SEM and other large, mature and interconnected wholesale electricity markets in Europe. The results indicate a low degree of market integration between SEM and other European markets and thereby raising the possibility to benefit from increased electricity trade. As wholesale prices in SEM remain relatively high and volatile; a larger interconnector capacity can promote competition, close the gap with the European wholesale prices, improve security of supply, and mitigate price volatility. The results indicate that wholesale spot trading of renewable may not increase market integration. The results suggest that an interconnector capacity amounting to about 21% of generation capacity in SEM is likely to achieve an integration coefficient of 0.86 similar to what currently exists between the markets in Austria and the Netherlands. |
| JEL: | L94 C22 D02 G1 |
| Date: | 2011–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1144&r=ene |
| By: | Hennessy, Hugh; FitzGerald, John |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp396&r=ene |
| By: | Trevor Houser (Peterson Institute for International Economics); Shashank Mohan (Rhodium Group) |
| Abstract: | As US gasoline prices approached $4 a gallon in spring 2011, energy security moved to the forefront of the American political debate. Politicians have been quick to offer silver bullet solutions to lower gas prices and make America more energy secure. Houser and Mohan analyze the various recent policy proposals, from expanded offshore drilling to new vehicle efficiency standards, and compare their effects on US oil imports, US oil demand, gasoline prices, and energy expenditures over the 2011–2035 period. They find that despite recent political rhetoric, when it comes to energy security there is no policy panacea. Current proposals vary widely in the time frame, magnitude, and nature of their impact. Rather than debate whether expanded domestic production, improved efficiency, or development of oil alternatives is the right course to take, the United States needs to start moving down all three roads simultaneously to significantly alter the country’s energy trajectory. An "all of the above" strategy is required, which combines increased domestic production (important in the near term) with long-term investments in energy-efficient vehicles and oil alternatives, whether electric, natural gas, or biofuels. A carbon tax, while still a long shot politically, would deliver further energy security gains and help reduce the US deficit in the process. But even if all proposals currently on the table are adopted, the US will remain dependent on the international oil market for decades to come. Therefore Washington needs a strategy for improving the stability and reliability of that market, something missing from the current policy debate. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb11-10&r=ene |
| By: | Chevallier, Julien; Chèze, Benoît; Gastineau, Pascal |
| Abstract: | This article provides jet fuel demand projections at the worldwide level and for eight geographical zones until 2025. Air traffic forecasts are performed using dynamic panel-data econometrics. Then, the conversion of air traffic projections into quantities of jet fuel is accomplished by using a complementary approach to the ‘Traffic Efficiency’ method developed previously by the UK Department of Trade and Industry to support the Intergovernmental Panel on Climate Change (IPCC, 1999). According to our main scenario, air traffic should increase by about 100% between 2008 and 2025 at the world level, corresponding to a yearly average growth rate of 4.7%. World jet fuel demand is expected to increase by about 38% during the same period, corresponding to a yearly average growth rate of 1.9% per year. According to these results, energy efficiency improvements allow reducing the effect of air traffic rise on the increase in jet fuel demand, but do not annihilate it. Jet fuel demand is thus unlikely to diminish unless there is a radical technological shift, or air travel demand is restricted. |
| Keywords: | Energy efficiency; Jet fuel demand forecasts; Macro-level methodology; |
| JEL: | Q48 L93 C23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/6792&r=ene |
| By: | Ron Alquist; Lutz Kilian; Robert J. Vigfusson |
| Abstract: | We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions? How does one quantify risks associated with oil price forecasts? Can joint forecasts of the price of oil and of U.S. real GDP growth be improved upon by allowing for asymmetries? |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1022&r=ene |
| By: | Alessandro Cologni (Edison Trading, Edison S.p.A); Matteo Manera |
| Abstract: | Previous literature has suggested that different mechanisms of transmission of exogenous oil shocks are responsible for the negative effects on the economic performances of oil exporting countries. This paper aims at providing further evidence on the role of sectoral reallocation between private and public sectors in explaining the impact of shocks to oil revenues on the economic growth rates of major oil producing countries (namely the GCC - Gulf Corporation Council - countries). The effects of oil shocks and expansionary fiscal policy on the business cycle of oil producing countries are examined. The possibility to distinguish between various components of public sector spending policy (that is, purchases of consumption goods, investments in productive activities and compensation for public employees) is, in particular, allowed for. A real business cycle (RBC) model is calibrated to fit the data on an “average” oil producing country. Results from the simulation of the theoretical model suggest that the possibility that crowding-out effects of public over private investments can explain a large fraction of the negative effects of shocks to oil revenues on the private sector of the economy. In addition, since the growth in size of the public sector is unable to compensate for the reduction in size of the private sector, an increase in oil revenues has the effect to decrease total output. An expansionary fiscal policy is argued to have significant positive effects on private investments, employment and overall production. On the contrary, a shock to government consumption expenditure impacts negatively the level of public investment. As employment in the public sector increases significantly, public output responds positively to a shock in government consumption expenditure. Finally, an instantaneous negative effect on total investments and on the stock of capital in the economy is predicted. However, driven by the increase of the number of employees in the economy, total output expands. |
| Keywords: | Oil Shocks, Dutch Disease, Resource Curse and Real Business Cycle Modelling |
| JEL: | C61 E22 E62 Q48 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.55&r=ene |
| By: | Bazhanov, Andrei |
| Abstract: | An extensive literature shows the importance of investment policy for sustainability of resource-based economies. The approaches of these studies are mostly based on theoretical results that examine the role of investments in a competitive optimizing economy. This paper extends some of these results by considering the dependence of current consumption change on investment under distortions causing modification of the standard Hotelling rule (HR). This extension implies that resource policy in the presence of the distortions can be more important for sustainability than under the standard HR. The examples of the analysis for distorted resource-based economies are provided. |
| Keywords: | nonrenewable resource; sustainable development; resource policy; genuine investment; Hotelling rule |
| JEL: | Q32 Q38 O43 O13 |
| Date: | 2011–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32428&r=ene |
| By: | Alessandro Cologni (Edison Trading, Edison S.p.A); Matteo Manera (Department of Statistics, University of Milan-Bicocca, and Fondazione Eni Enrico Mattei) |
| Abstract: | In this paper, decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation. Under the assumptions of exogenous oil prices and world oil demand, we are able to describe the relationship between oil production levels and changes in the conditions in world oil markets. Intertemporal production decisions by a representative oil producer are modelled by means of a partial equilibrium model. In this theoretical model, oil producers are subject to exogenous shocks in world oil demand and prices. Oil companies can change output levels only by incurring a fixed cost. Results from the simulation of this model show a strong relationship between oil production and changes in world oil consumption. On the contrary, the effects of changes in real oil prices on oil production decisions seem to be much lower. Results from the simulation of the theoretical model are then empirically investigated using time-series econometric techniques. The empirical evidence supports the hypothesis that several oil producing countries are characterized by different responses to changes in world oil demand and in real oil prices. For many countries production rapidly adjusts to changes in consumption whereas responses of oil production to innovations in real oil prices are found to be not statistically significant. In addition, when non-linearities in the relationship between exogenous variables and output levels are allowed for, evidence of asymmetric effects of output levels to shocks in demand levels and oil prices is found. |
| Keywords: | Oil Production, Exogenous Shocks, Theoretical Modelling, Time Series Analysis |
| JEL: | C22 D21 Q41 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.54&r=ene |
| By: | Abdou Kâ Diongue (Saint-Louis Université - Sénégal); Gaël Giraud (Centre d'Economie de la Sorbonne - Paris School of Economics et ESCP-Europe); Cécile Renouard (ESSEC - Business School) |
| Abstract: | Extractive industries face two main challenges in terms of CSR and poverty reduction : 1) recognize that societal activity is part of their core business ; 2) take part in socio-economic projects that contribute to their stakeholders' empowerment and not only to their living conditions. Based on surveys achieved in Nigeria in 2008, the paper presents two societal performance indices meant to be complementary : the Poverty Exit Index (PEI) and the Relational Capability Index (RCI). We show that, while they have fostered the PEI of the local communities, the development projects of the oil companies had a rather negative impact on their RCI. We then identify key variables that can influence positively the RCI and on which a sensible development policy should focus. |
| Keywords: | Development indices, capability approach, relational capability, development, poverty, impact assessment. |
| JEL: | C43 D21 F21 L71 O12 O55 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:11043&r=ene |
| By: | Anne Neumann; Juan Rosellón; Hannes Weigt |
| Abstract: | We propose a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system. |
| Keywords: | regulation, transportation network, investment |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1145&r=ene |
| By: | Kojima, Masami; Bacon, Robert; Zhou, Xin |
| Abstract: | Household surveys in Guatemala, India, Indonesia, Kenya, Pakistan, and Sri Lanka were analyzed using a two-stage Heckman model to examine the factors influencing the decision to use liquefied petroleum gas (stage 1) and, among users, the quantity consumed per person (stage 2). In the first stage, liquefied petroleum gas selection in all six countries increased with household expenditure and the highest level of education attained by female and male household members. Electricity connection increased, and engagement in agriculture and increasing household size decreased, liquefied petroleum gas selection in five countries; urban residence increased selection in four countries; and rising firewood and kerosene prices increased selection in three countries each. In the second stage, the quantity of liquefied petroleum gas consumed increased with rising household expenditure and decreasing price of liquefied petroleum gas in every country. Urban residence increased and engagement in agriculture decreased liquefied petroleum gas consumption. Surveys in Albania, Brazil, Mexico, and Peru, which did not report quantities, were also examined by calculating quantities using national average prices. Although fuel prices faced by individual households could not be tested, the findings largely supported those from the first six countries. Once the education levels of men and women were separately accounted for, the gender of the head of household was not statistically significant in most cases across the ten countries. Where it was significant (five equations), the sign of the coefficient was positive for men, possibly suggesting that female-headed households are burdened with unmeasured economic disadvantages, making less cash available for purchasing liquefied petroleum gas. |
| Keywords: | Energy Production and Transportation,Markets and Market Access,Energy Conservation&Efficiency,Renewable Energy,Energy and Environment |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5731&r=ene |
| By: | Punabantu, Siize |
| Abstract: | The recent earthquake in Japan and its impact on the Fukushima nuclear power plant is a tragic reminder of humanity’s ever growing dependence on energy for its socioeconomic development. Energy plays a central role in determining the effectiveness of economics. However, are the fundamental difficulties associated with understanding the true nature of energy impeding development? This paper is a reflection on theoretical physics from an economic vantage point. As difficult as it may seem to band them together as this article will attempt to do, physics and economics are conjoined. Space, Time , Matter and Energy all play a significant role in the capacity of economics to better provide for humanity. For example, energy; its, provision, evolution and consumption play a significant role in the capacity of economics to develop strategies with which to satisfactorily manage human development. The impact the price of oil has on the global economy is testimony to the impact the cost of energy has on economies and governments in general. If global incomes could rise or the cost of energy could fall this could significantly increase its affordability. Therefore, advances in physics and the natural sciences in general can have a positive impact on economics. |
| Keywords: | Scarcity; money; money supply; energy; zero cost energy; open market operations; resource creation; economic thought; poverty; wealth; cost; market efficiency; supply; demand; money; price; time; space; matter; mark-up; cost plus pricing; rationality; operating level economics; economic growth; paradox |
| JEL: | Q32 Q38 B40 A20 Q42 Q40 C70 A10 |
| Date: | 2011–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32050&r=ene |
| By: | Buscemi, Antonino; Yallwe, Alem Hagos |
| Abstract: | Abstract: The paper summarized some theories and facts related to Environment, Energy and Economics. This work paper provides some highlights about the theoretical issues and facts regarding to environmental pollutions and its effect on economy and the importance of relying on other source energy to fulfil the increasing demand of power or electricity. Moreover, the paper also discussed by making comparison between industrialized and developing countries about their effect on environment and their capacity in producing nuclear energy and production level and also the link between environmental science and economics. This paper concluded that the industrialized countries are not fulfilling their commitments. About 7 Billion Metric Tons of carbon equivalent harmful greenhouse gases are omitted by industrialized countries every year and the share of U.S.A is 24% followed by Japan & Developed European Nations which accounts 26%. Whereas developing nations contributes 13% other than china. Currently only eight countries are known to have a nuclear weapons capability and sixty further nuclear power reactors are under construction, equivalent to 17% of existing capacity, while over 150 are firmly planned, equivalent to 46% of present capacity. Sixteen countries depend on nuclear power for at least a quarter of their electricity. From developed countries, France is the first country that gets around three quarters of its power from nuclear energy. Whereas most developing countries under design and some of them have small share as compared to industrialized countries. After the disaster in Japan, many countries have changed policies on the implementation of nuclear power plants. In addition, the Italian Parliament was suspended for one year, the work of approving projects on the production of energy through nuclear power plants. |
| Keywords: | Environment; Economics; Energy; |
| JEL: | A12 N00 |
| Date: | 2011–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:30998&r=ene |
| By: | Emanuele Massetti (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Centre for Climate Change (CMCC)); Robert Mendelsohn (Yale University) |
| Abstract: | Many nonmarket valuation models, such as the Ricardian model, have been estimated using cross sectional methods with a single year of data. Although multiple years of data should increase the robustness of such methods, repeated cross sections suggest the results are not stable. We argue that repeated cross sections do not properly specify the model. Panel methods that correctly specify the Ricardian model are stable over time. The results suggest that many cross sectional methods including hedonic studies and travel cost studies could be enhanced using panel data. |
| Keywords: | Climate Change, Impacts, Agriculture, Hedonic Models |
| JEL: | Q1 Q12 Q51 Q54 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.50&r=ene |
| By: | Omar J. Casas; Rosario Romera |
| Abstract: | This paper provides a formulation of a stochastic dynamic game that arise in the real scenario of international environmental agreements on the transnational pollution control. More specifically, this agreements try to reduce the environmental damage caused by the stock pollutant that accumulates in the atmosphere, such as CO2. To improve the non-cooperative equilibrium among countries, we propose the criteria of the minimization of the expected discounted total cost with monetary transfers between the countries involved as an incentive to cooperation. Moreover, it considers the formulation of Stochastic Dynamic Games as Markov Decision Processes, using tools of Stochastic Optimal Control and Stochastic Dynamic Programming. The performance of the proposed schemes is illustrated by its application to such environmental problem. |
| Keywords: | Environmental pollutant control, Markov decision processes, Stochastic dynamic programming, Stochastic dynamic games, Optimal abatement policies |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws112217&r=ene |
| By: | Anthoff, David; Rose, Steven; Tol, Richard S. J.; Waldhoff, Stephanie |
| Abstract: | The social cost of carbon is an estimate of the benefit of reducing CO2 emissions by one ton today. As such it is a key input into cost-benefit analysis of climate policy and regulation. We provide a set of new estimates of the social cost of carbon from the integrated assessment model FUND 3.5 and present a regional and sectoral decomposition of our new estimate. China, Western Europe and the United States have the highest share of harmful impacts, with the precise order depending on the discount rate. The most important sectors in terms of impacts are agriculture and increased energy use for cooling. We present an extensive sensitivity analysis with respect to the discount rate, equity weights, different socio economic scenarios and values for the climate sensitivity parameter. -- |
| Keywords: | Climate change,social cost of carbon |
| JEL: | Q54 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201118&r=ene |
| By: | Kousky, Carolyn; Kopp, Robert E.; Cooke, Roger |
| Abstract: | Reducing greenhouse gas emissions not only lowers expected damages from climate change but also reduces the risk of catastrophic impacts. However, estimates of the social cost of carbon, which measures the marginal value of carbon dioxide abatement, often do not capture this risk reduction benefit. Risk-averse individuals are willing to pay a risk premium, an additional amount beyond the difference in expected damages, to reduce risks. The authors review methods used and estimates obtained for calculating a risk premium to be included in the social cost of carbon. While more research is needed in this area, work to date suggests a positive risk premium on the social cost of carbon is warranted. -- |
| Keywords: | Climate change,social cost of carbon,risk premium |
| JEL: | Q54 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201119&r=ene |
| By: | Kopp, Robert E.; Golub, Alexander; Keohane, Nathaniel O.; Onda, Chikara |
| Abstract: | Drawing upon climate change damage functions previously proposed in the literature that we have calibrated to a common level of damages at 2.5 C, we examine the effect upon the social cost of carbon (SCC) of varying the specification of damages in a DICE-like integrated assessment model. In the absence of risk aversion, all of the SCC estimates but one agree within a factor of two. The effect of varying calibration damages is mildly sublinear. With a moderate level of risk aversion included, however, the differences among estimates grow greatly. By combining elements of different damage specifications and roughly taking into account uncertainty in calibration, we have constructed a composite damage function that attempts to approximate the range of uncertainty in climate change damages. In the absence of risk aversion, SCC values calculated with this function are in agreement with the standard quadratic DICE damage function; with a coefficient of relative risk aversion of 1.4, this damage function yields SCC values more than triple those of the standard function. -- |
| Keywords: | Climate change,social cost of carbon |
| JEL: | Q54 Q58 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201122&r=ene |
| By: | Nkonya, Ephraim; Gerber, Nicolas; Baumgartner, Philipp; von Braun, Joachim; De Pinto, Alex; Graw, Valerie; Kato, Edward; Kloos, Julia; Walter, Teresa |
| Keywords: | cost of inaction, desertification, drought, Economics, Land degradation, prevention of land degradation, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1086&r=ene |
| By: | Breisinger, Clemens; Zhu, Tingju; Al Riffai, Perrihan; Nelson, Gerald; Robertson, Richard; Funes, Jose; Verner, Dorte |
| Abstract: | There is broad consensus among scientists that climate change is altering weather patterns around the world. However, economists are only beginning to develop tools that allow for the quantification of such weather changes on countries' economies and people. This paper presents a modeling suite that links the downscaling of global climate models, crop modeling, global economic modeling, and subnational-level computable equilibrium modeling. Important to note is that this approach allows for decomposing the potential global and local economic effects on countries, including various economic sectors and different household groups. We apply this modeling suite to Syria, a relevant case study given the country's location in a region that is consistently projected to be among those hit hardest by climate change. Despite a certain degree of endogenous adaptation, local impacts of climate change (through declining yields) are likely to affect Syria beyond the agricultural sector and farmers and also reduce economy-wide growth and incomes of urban households in the long term. The overall effects of global climate change (through higher food prices) are also negative, but some farmers can reap the benefit of higher prices. Combining local and global climate change scenarios shows welfare losses across all rural and urban household groups of between 1.6 – 2.8 percent annually, whereas the poorest household groups are the hardest hit. Finally, while there is some evidence that droughts may become more frequent in the future, it is clear that even without an increase in frequency, drought impacts will continue to put a significant burden on Syria's economy and people. Action to mitigate the negative effects of climate change and variability should to be taken on the global and local level. A global action plan for improving food security and better integration of climate change in national development strategies, agricultural and rural policies, and disaster risk management and social protection policies will be keys for improving the resilience of countries and people to climate change. |
| Keywords: | Climate change, Development, drought, Growth, Poverty, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1091&r=ene |
| By: | Fofana, Ismael |
| Abstract: | This study applied at the farm level in Tunisia aims at understanding the effects of climate change on agricultural productivity and income in Africa. Possible future climates are presented through different climate scenarios. The latter combines three levels of increasing temperature (1°centigrade (C), 2°C, and 3°C) with two levels of decreasing precipitation (10 and 20 percent) and a doubling of carbon dioxide concentration in the atmosphere (350 to 700 parts per million). The farming system of production is replicated through a bioeconomic model; that is, one that couples a cropping system model and an economic model run sequentially. The study reveals that land productivity and farm income decline under climate change. Depending on the changes in precipitation, farm productivity falls by 15 to 20 percent and farm income 5 to 20 percent when the temperature increases moderately (1°C). As the climate warms up (2°C and 3°C), farm productivity and income are severely affected, by 35 to 55 percent and 45 to 70 percent, respectively. When simple adaptation strategies based on new management techniques for hard wheat are tested - more irrigation and fertilization - compensations for the negative effects of climate change are found to be worthwhile only for a 1°C increase in temperature. However, the success of adaptation strategies highly depends on the availability of more water and lower additional cost to mobilize them at the farm level. |
| Keywords: | adaptation strategies, Bioeconomic modeling, Agriculture, Climate change, farm income, productivity, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1095&r=ene |
| By: | Bryan, Elizabeth; Ringler, Claudia; Okoba, Barrack; Koo, Jawoo; Herrero, Mario; Silvestri, Silvia |
| Abstract: | Changes in the agriculture sector are essential to mitigate and adapt to climate change, ensure food security for the growing population, and improve the livelihoods of poor smallholder producers. What agricultural strategies are needed to meet these challenges? To what extent are there synergies among these strategies? This paper examines these issues for smallholder producers in Kenya. Several practices emerge as triple wins in terms of climate adaptation, GHG mitigation, and productivity and profitability. In particular, integrated soil fertility management and improved livestock feeding are shown to provide multiple benefits across the agroecological zones examined. In addition, irrigation and soil and water conservation are also shown to be essential in the arid zone. The results suggest that agricultural investments targeted towards triple-win strategies will have the greatest payoff in terms of increased resilience of farm and pastoralist households to climate change, rural development, and climate change mitigation for generations to come. |
| Keywords: | Adaptation, agricultural land management, Climate change, livestock feeding, mitigation, Resilience, synergies, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1098&r=ene |
| By: | Kragt, Marit Ellen; Pannell, David J.; Robertson, Michael J.; Thamo, Tas |
| Abstract: | Carbon sequestration in agricultural soil has been identified as a potential strategy to offset greenhouse gas emissions. Within the public debate, it has been claimed that provision of positive incentives for farmers to change their land management will result in substantial carbon sequestration in agricultural soils at a low carbon price. There is, however, little information about the costs or benefits of carbon sequestration in agricultural soils to test these claims. In this study,the cost-effectiveness of alternative land-use and land-management practices that can increase soil carbon sequestration is analysed by integrating biophysical modelling of carbon sequestration with whole-farm economic modelling. Results suggest that, for a case study model of a crop-livestock farm in the Western Australian wheatbelt, sequestering higher levels of soil carbon by changing rotations (to include longer pasture phases) incur considerable opportunity costs. Under current commodity prices, a profit-maximising farmer would require over $60 compensation for every additional tonne of CO2-e stored in soil, depending on their adoption of residue retention practices. Lower carbon prices are likely to generate only modest increases in soil carbon sequestration. |
| Keywords: | APSIM, Bioeconomic Modelling, Carbon Farming, Climate Change Mitigation, MIDAS, Soil Carbon Sequestration, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Farm Management, |
| Date: | 2011–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uwauwp:109247&r=ene |
| By: | Jacques, Jean-François; Bayramoglu, Basak |
| Abstract: | We investigate the relative efficiency of an agreement based on a uniform standard without transfers and one based on differentiated standards with transfers when strictly identical countries deal with transboundary pollution. We especially ask what role fixed cost plays. Two approaches are examined: the Nash bargaining solution, involving two countries, and the coalition formation framework, involving numerous countries and emphasizing self-enforcing agreements. In the former, in terms of welfare, strictly identical countries may wish to reduce their emissions in a non-uniform way under the differentiated agreement. For this result to hold, the fixed cost of investment in abatement technology must be sufficiently high. The nature of the threat point of negotiations, however, also plays a crucial role. As concerns global abatement, the two countries abate more under the uniform agreement than under the differentiated one. In terms of coalition formation when numerous countries are involved, a grand coalition could emerge under a differentiated agreement. |
| Keywords: | bargaining; standards; costs; Transboundary pollution; |
| JEL: | Q52 Q58 F53 C71 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5873&r=ene |
| By: | ZhongXiang Zhang |
| Abstract: | China’s unilateral pledge to cut its carbon intensity by 40-45 percent by 2020 relative to its 2005 levels raises both the stringency issue, and given that China’s pledge is in the form of carbon intensity, reliability issues concerning China’s statistics on energy and GDP. Moreover, as long as China’s commitments differ in form from those of other major greenhouse gas emitters, China is constantly confronted with both criticism on its carbon intensity commitment being less stringent and the threats of trade measures. In response to these concerns and to put China in a positive position, this paper will map out a realistic roadmap for China’s specific climate commitments towards 2050, with its main distinguishing features including China taking on absolute emission caps around 2030 and the three transitional periods of increasing climate obligations before that. With current international climate negotiations flawed with a focus on commitments on the targeted date of 2020 that does not accommodate well the world’s two largest greenhouse gas emitters, the paper suggests a new direction to break the current impasse in international climate negotiations. |
| Keywords: | Carbon Intensity, Post-Copenhagen Climate Change Negotiations, Climate Commitments, China |
| JEL: | Q42 Q43 Q48 Q52 Q53 Q54 Q58 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.49&r=ene |