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on Energy Economics |
| By: | Baumeister, Christiane; Kilian, Lutz |
| Abstract: | The U.S. Energy Information Administration (EIA) regularly publishes monthly and quarterly forecasts of the price of crude oil for horizons up to two years, which are widely used by practitioners. Traditionally, such out-of-sample forecasts have been largely judgmental, making them difficult to replicate and justify. An alternative is the use of real-time econometric oil price forecasting models. We investigate the merits of constructing combinations of six such models. Forecast combinations have received little attention in the oil price forecasting literature to date. We demonstrate that over the last 20 years suitably constructed real-time forecast combinations would have been systematically more accurate than the no-change forecast at horizons up to 6 quarters or 18 months. MSPE reduction may be as high as 12% and directional accuracy as high as 72%. The gains in accuracy are robust over time. In contrast, the EIA oil price forecasts not only tend to be less accurate than no-change forecasts, but are much less accurate than our preferred forecast combination. Moreover, including EIA forecasts in the forecast combination systematically lowers the accuracy of the combination forecast. We conclude that suitably constructed forecast combinations should replace traditional judgmental forecasts of the price of oil. -- |
| Keywords: | forecast combination,real-time data,model misspecification,structural change,oil price |
| JEL: | Q43 C53 E32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:201311&r=ene |
| By: | Baumeister, Christiane; Kilian, Lutz |
| Abstract: | Notwithstanding a resurgence in research on out-of-sample forecasts of the price of oil in recent years, there is one important approach to forecasting the real price of oil which has not been studied systematically to date. This approach is based on the premise that demand for crude oil derives from the demand for refined products such as gasoline or heating oil. Oil industry analysts such as Philip Verleger and financial analysts widely believe that there is predictive power in the product spread, defined as the difference between suitably weighted refined product market prices and the price of crude oil. Our objective is to evaluate this proposition. We derive from first principles a number of alternative forecasting model specifications involving product spreads and compare these models to the no-change forecast of the real price of oil. We show that not all product spread models are useful for out-of-sample forecasting, but some models are, even at horizons between one and two years. The most accurate model is a time-varying parameter model of gasoline and heating oil spot spreads that allows the marginal product market to change over time. We document MSPE reductions as high as 20% and directional accuracy as high as 63% at the two-year horizon, making product spread models a good complement to forecasting models based on economic fundamentals, which work best at short horizons. -- |
| Keywords: | oil price,Futures,WTI,Brent,Acquisition Cost,Refined products,Crack spread,Forecast accuracy,Real-time data |
| JEL: | Q43 C53 G15 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:201309&r=ene |
| By: | Antonios Antypas; Phoebe Koundouri; Nikolaos Kourogenis |
| Abstract: | A model is introduced for the description of natural resourcesíprice paths, which, in contrast to the existing literature, captures non-linear trends by means of a simple trigonometric function. This model is then compared by means of a set of model selection criteria with a quadratic trend model and with a more general one that nests both models. All models are estimated on the price series of eleven major natural resources. In most cases, the trigonometric trend model is selected as the one better Ötting the data, providing evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp126&r=ene |
| By: | Kirk Hamilton; Giles Atkinson |
| Abstract: | Questions about the ultimate size of mineral and energy resource endowments and the degree of fiscal prudence which should be exercised by countries engaged in resource extraction have become central for many developing countries during the recent resource boom. To explore this question, a model of optimal resource extraction and discovery combines two polar assumptions: (i) that discovering a resource today drives up the cost of future resource discoveries, and (ii) that extracting resources yields knowledge which reduces the cost of discovery. While the model shows that resource discoveries should be valued at marginal discovery cost in measures of national saving and income, the ultimate size of the resource which can be exploited is the result of the interplay between rising discovery costs and accumulating knowledge. Empirical tests of this model show that the resulting income estimates would be extremely volatile for many extractive economies, owing to the lumpiness of resource discoveries. Two alternative accounting approaches, based on Hicksian concepts, yield more intuitive and less volatile income estimates. The question of fiscal prudence for extractive economies hinges upon how optimistic countries are about the risks in future mineral and energy markets, and how far into the future these countries are willing to project optimistic trends when making decisions about how much to consume and how much to save out of current resource revenues. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp117&r=ene |
| By: | Nicola Brandt; Paul Schreyer; Vera Zipperer |
| Abstract: | Traditional measures of multi-factor productivity (MFP) growth generally do not recognise natural capital as inputs into the production process. Since productivity growth is measured as the residual between output and input growth, it will pick up the growth in unmeasured inputs, which can lead to a bias. The purpose of this paper is to gain a better understanding of the role of natural capital for productivity measurement and as a source of economic growth. To this aim, aggregate economy productivity measures mostly from the OECD Productivity Database are extended by incorporating natural capital as an additional input factor into the production function. More specifically, this paper considers oil, gas and various minerals as natural capital inputs, drawing on data from the World Bank. Results suggest that failing to account for natural capital tends to lead to an underestimation of productivity growth in countries where the use of natural capital in production is declining because of a dwindling natural capital stock. In return, productivity growth is sometimes overestimated in times of natural resource booms, if natural capital is not taken into account as an input factor. The direction of the adjustment to productivity growth depends on the rate of change of natural capital extraction relative to the rate of change of other inputs. The extended framework also makes the contribution of natural capital to economic growth explicit. This can be useful for countries relying on nonrenewable resources to better understand the need to develop other sources of growth, for example by investing in human or productive capital, to prepare for times when resources endowments become scarce. While the measurement of natural capital remains very incomplete, leaving out natural forests, water and soil, the measurement framework can readily be applied to more encompassing data on the natural capital stock, once it becomes available. Productivité multi-factorielle avec capital naturel Des mesures traditionnelles de croissance de la productivité multifactorielle, en général, ne prennent pas en compte le capital naturel en tant que facteur de production. Comme la croissance de productivité est la différence entre la croissance de la production et des intrants, cette mesure sera biaisée dès qu’il y aura des intrants non-mesurés, comme par exemple le capital naturel. L’objectif de ce rapport est donc de mieux comprendre le rôle du capital naturel dans les mesures de productivité, et comme source de croissance économique. Ainsi, il enrichit des mesures de productivité à l’échelle de l’économie agrégée, pour la plupart extraites de la base de données de productivité de l’OCDE, en intégrant explicitement le capital naturel comme facteur de production. Plus spécifiquement, le rapport considère le pétrole, le gaz naturel et des minéraux variés comme des éléments du capital naturel, en se servant des données de la Banque Mondiale. Les résultats suggèrent qu’ignorer le capital naturel a tendance à mener à une sous-estimation de la croissance de productivité dans les pays où l’utilisation du capital naturel est en déclin à cause des réserves en voie de disparition. En revanche, la croissance de productivité est parfois surestimée pendant des périodes de hausse des prix des ressources naturelles. La direction de la correction de la mesure de croissance de productivité dépend du taux de croissance relatif de l’extraction du capital naturel par rapport au taux de croissance des autres intrants. La mesure de productivité ainsi enrichie permet aussi de mesurer explicitement la contribution du capital naturel à la croissance économique. Ceci peut s’avérer très utile pour des pays dépendant des ressources naturelles non-renouvelables pour mieux comprendre leur besoin d’investir dans le capital humain ou productif pour se préparer pour des périodes de pénurie de leurs ressources naturelles. Même si la mesure de capital naturel utilisée dans ce rapport reste très restreinte, ne prenant en compte ni les forêts vierges, ni l’eau ou le sol, le cadre proposé peut facilement être appliqué à des données plus complètes, dès qu’elles seront disponibles. |
| Keywords: | multifactor productivity, green productivity, natural capital stock, natural resource accounting, productivité multifactorielle, productivité verte, stock de capital naturel, comptabilité des ressources naturelles |
| JEL: | D24 O47 Q3 Q50 Q56 |
| Date: | 2013–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1092-en&r=ene |
| By: | Alexandre Gohin |
| Abstract: | The European public policy in favor of the biodiesel consumption is highly debated. Available estimates of the induced land use changes conclude that this policy is inefficient to reduce emissions of GreenHouse Gas. We show that the crop yield evolutions in these estimates are significantly lower than the observed and expected evolutions. This difference is directly related to biased calibration choice of behavioral parameters. We show using the GTAP-BIO framework that a consistent calibration of these parameters leads to a strong reduction (by around 80% in the long run) of the land use changes and induced emissions. |
| Keywords: | Biofuel, Europe, land use changes |
| JEL: | Q11 Q15 Q48 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:rae:wpaper:201313&r=ene |
| By: | Ciaian, Pavel; Kancs, d'Artis; Rajcaniova, Miroslava |
| Abstract: | This is the rst paper that estimates the global land use change impact of growth of the bioenergy sector. Applying time-series analytical mechanisms to fuel, biofuel and agricultural commodity prices and production, we estimate the long-rung relationship between energy prices, bioenergy production and the global land use change. Our results suggest that rising energy prices and bioenergy production signicantly contribute to the global land use change both through the direct and indirect land use change impact. Globally, the total agricultural area yearly increases by 35578.1 thousand ha due to increasing oil price, and by 12125.1 thousand ha due to increasing biofuel production, which corresponds to 0.73% and 0.25% of the total world-wide agricultural area, respectively. Soya land use change and wheat land use change have the highest elasticities both with respect to oil price and biofuel production. In contrast, non-biomass crops (grassland and rice) have negative land use change elasticities. Region-specic results suggest that South America faces the largest yearly total land use change associated with oil price increase (+10600.7 thousand ha), whereas Asia (+8918.6 thousand ha), South America (+4024.9 thousand ha) and North America (+1311.5 thousand ha) have the largest yearly total land use change associated with increase in biofuel production. |
| Keywords: | Land use change; bioenergy; commodity prices; biofuel support policies; |
| Date: | 2013–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:ner:leuven:urn:hdl:123456789/413548&r=ene |
| By: | Baumeister, Christiane; Kilian, Lutz |
| Abstract: | U.S. retail food price increases in recent years may seem large in nominal terms, but after adjusting for inflation have been quite modest even after the change in U.S. biofuel policies in 2006. In contrast, increases in the real prices of corn, soybeans, wheat and rice received by U.S. farmers have been more substantial and can be linked in part to increases in the real price of oil. That link, however, appears largely driven by common macroeconomic determinants of the prices of oil and agricultural commodities rather than the pass-through from higher oil prices. We show that there is no evidence that corn ethanol mandates have created a tight link between oil and agricultural markets. Rather increases in food commodity prices not associated with changes in global real activity appear to reflect a wide range of idiosyncratic shocks ranging from changes in biofuel policies to poor harvests. Increases in agricultural commodity prices in turn contribute little to U.S. retail food price increases, because of the small cost share of agricultural products in food prices. There is no evidence that oil price shocks have caused more than a negligible increase in retail food prices in recent years. Nor is there evidence for the prevailing wisdom that oil-price driven increases in the cost of food processing, packaging, transportation and distribution are responsible for higher retail food prices. Finally, there is no evidence that oil-market specific events or for that matter U.S. biofuel policies help explain the evolution of the real price of rice, which is perhaps the single most important food commodity for many developing countries. -- |
| Keywords: | globalization,inflation,consumer prices,pass-through,agriculture,crop prices,corn,ethanol,biofuel,food crisis,food price volatility |
| JEL: | Q42 Q11 Q43 E31 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:201310&r=ene |
| By: | Vandyck, Toon |
| Date: | 2013–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:ner:leuven:urn:hdl:123456789/415718&r=ene |
| By: | World Bank |
| Keywords: | Environment - Climate Change Mitigation and Green House Gases Environment - Environment and Energy Efficiency Private Sector Development - E-Business Energy - Energy Production and Transportation Energy - Energy and Environment |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:16263&r=ene |
| By: | World Bank |
| Keywords: | Energy - Energy and Environment Environment - Climate Change Mitigation and Green House Gases Oil Refining and Gas Industry Environment - Environment and Energy Efficiency Energy - Energy Production and Transportation Industry |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:16264&r=ene |
| By: | Faulstich, Martin; Heinrichs, Bernhard; Neldner, Wolfgang; Runkel, Peter; Hülz, Martina; Stefansky, Andreas |
| Abstract: | Im Sommer 2011 wurde ein umfangreiches Gesetzespaket zur Umsetzung der Energiewende beschlossen. Ein Kernelement ist der beschleunigte Ausbau des Stromnetzes durch ein koordiniertes Vorgehen in der gesamten Prozesskette von der Bedarfsfeststellung bis zur abschließenden Inbetriebnahme. Die ersten Schritte zur Bedarfsfeststellung sind getan. So legt der mittlerweile beschlossene Bedarfsplan die erforderlichen Ausbaumaßnahmen für das Übertragungsnetz mit den jeweiligen Anfangs- und Endpunkten fest, aber noch nicht die für die Neubaumaßnahmen zu ermittelnden Trassenkorridore. Dies ist gemäß § 4 NABEG Aufgabe der Bundesfachplanung, einer Raumverträglichkeitsprüfung, die dem Raumordnungsverfahren nach § 15 ROG nachgebildet ist, aber (anders als ein Raumordnungsverfahren) mit verbindlichen Vorgaben für das nachfolgende Planfeststellungsverfahren endet. Die Akademie für Raumforschung und Landesplanung (ARL) hat die Studie „ARLBausteine für einen raumverträglichen Netzausbau“ in Auftrag gegeben, durch deren Ergebnisse sie praxisorientierte Hilfestellung zur Planung der Ausbaumaßnahmen für das Übertragungsnetz geben möchte. Das Augenmerk liegt dabei auf der Bundesfachplanung nach dem NABEG. Die Erkenntnisse der Studie beziehen sich auf ausgewählte Aspekte des raumverträglichen Netzausbaus von Höchstspannungsleitungen. Sie sind in Teilen aber auch für das Verteilernetz anwendbar. Die Hinweise richten sich hauptsächlich an die verfahrensleitende Behörde (BNetzA), beziehen aber auch die Perspektive der Antragsteller (etwa im Hinblick auf Abschnittsbildung und Antragsunterlagen) ein. Dem Bearbeitungsteam der Studie stand der Ad-hoc-Arbeitskreis „Raumverträglicher Netzausbau“ zur Seite, der den Arbeitsprozess in enger Abstimmung begleitet und an dem Entwurf der Studie mitgewirkt hat. Der Ad-hoc-Arbeitskreis „Raumverträglicher Netzausbau“ der ARL fasst seine bei der Begleitung der Studie gewonnenen Erkenntnisse insbesondere zur Fortentwicklung der Bundesfachplanung nach dem NABEG in den folgenden Empfehlungen zusammen. -- |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arlpos:93&r=ene |
| By: | Baran Doda |
| Abstract: | This empirical paper focuses on the relationship between changes in GDP and CO2 emissions as a country’s economy moves through periods of growth and decline. Using a comprehensive panel, I document substantial heterogeneity in the relationship across countries. Specifically, countries can be classi?ed into one of the following three groups. Group D (for decline) includes countries where the emissions growth rate is more strongly associated with the GDP growth rate in periods of GDP decline than in periods of GDP growth. Group G (for growth) includes countries where the degree of association is stronger in periods of GDPgrowth. Finally, in group S (for symmetrical) it is not possible to reject the hypothesis that the relationship is the same for growth and decline. According to a simple count criterion, approximately a third of the countries in the sample fall into each group. Notably, China and the US, currently the world’s largest emitters by a substantial margin, are in group D. These results have potentially important consequences for long-term emissions projections. They also suggest that macroeconomic stabilization policies may have adverse emissions consequences by limiting the cleansing e?ect of periods in which GDP declines. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp116&r=ene |
| By: | Misato Sato; Karsten Neuhoff; Verena Graichen; Katja Schumacher; Felix Matthes |
| Abstract: | One of the central debates surrounding the design of the EU Emissions Trading Scheme is the approach to addressing carbon leakage. Correctly identifying the conomic activities exposed to the risk of carbon leakage represents the first step in mitigating the risk effectively. Several metrics and methods have been proposed to separate sectors which are at risk from those which are not. This study sets out a simple analytical framework and several indicators to measure the relative potential exposure of manufacturing sectors to emissions leakage. These indicators are applied to detailed UK and German data. This illustrates that, when applied to high quality data, simple metrics can be used to identify carbon-intensive-trade-exposed sectors. We find that, of the 159 industrial sub-sectors examined, CO2 cost impacts are focused on a few industrial sub-sectors. The 25 highest ranking sub-sectors collectively account for around 13% of total UK CO2 emissions (from both direct and indirect energy use), 1% of total UK GDP, and 0.5% of total UK employment. For Germany, the equivalent figures are 22% of total CO2 emissions, 2% of GDP and 1% of employment. That the vulnerable sectors account for small shares of emission, value-added and employment does not mean that their potential emissions leakage can be ignored. Rather, the focus on specific sub-sectors provides possibilities for tailored and technical solutions where leakage is a valid concern, thus improving robust economic performance and the credibility of the EU ETS as an instrument for delivering emissions reductions. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp113&r=ene |
| By: | Alex Bowen; Emanuele Campiglio; Massimo Tavoni |
| Abstract: | Transitioning to a low-carbon economy will require significant investment to transform energy systems, alter the built environment and adapt infrastructure. A strategy to finance this investment is needed if the limit of a 2°C increase in global mean temperatures is to be respected. Also, high-income countries have pledged to pay the “agreed full incremental costs” of climate-change mitigation by developing countries, which are not necessarily the same as incremental investment costs. Building on simulations using Integrated Assessment Models and historical evidence, this paper explores some of the issues posed by this dual financing challenge. We discuss the fiscal self-reliance of the energy sector, finding that carbon pricing would generate sufficient fiscal revenues within each region to finance total energy investment. Even when allowing for trade in emission permits regional carbon fiscal revenues should still suffice to cover both their own energy sector investment and permit purchases from abroad. We show that incremental investment (and saving) needs are well within the range of past variation, and argue that the challenge is rather to ensure that the revenues are complemented by investment in the appropriate sectors. But fairness and equity are likely to warrant transfers from advanced industrial countries to developing nations. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp122&r=ene |
| By: | Rick Van der Ploeg; Armon Rezai |
| Abstract: | Climate change must deal with two market failures, global warming and learning by doing in renewable use. The social optimum requires an aggressive renewables subsidy in the near term and a gradually rising carbon tax which falls in long run. As a result, more renewables are used relative to fossil fuel, there is an intermediate phase of simultaneous use, the carbonfree era is brought forward, more fossil fuel is locked up and global warming is lower. The optimal carbon tax is not a fixed proportion of world GDP. The climate externality is more severe than the learning by doing one. � |
| Keywords: | climate change, integrated assessment, Ramsey growth, carbon tax, renewables subsidy, learning by doing, directed technical change, multiplicative damages, additive damages |
| JEL: | H21 Q51 Q54 |
| Date: | 2013–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-123&r=ene |
| By: | Stephen P. Holland; Jonathan E. Hughes; Christopher R. Knittel; Nathan C. Parker |
| Abstract: | Renewable fuel standards, low carbon fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land- use costs from erosion and habitat loss are between $277 and $693 million. A low carbon fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to fuels and can over or under-incentivize innovation. These results highlight the potential negative efficiency effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy. |
| JEL: | H4 Q2 Q4 Q5 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19636&r=ene |
| By: | Carla Valdivia de Richter |
| Abstract: | As Mexico seeks to boost economic growth, pressures on its natural resources and environmental outcomes may intensify, jeopardizing the sustainability of that growth and the well-being of the population. Costs of environmental degradation were estimated at approximately 5% of GDP in 2011, primarily from the health impact of air pollution, while overexploitation of natural resources – such as water – threatens their sustainability. Subsidies and prices do not reflect environmental externalities or cost of providing natural resources, including scarcity costs. They result in poor environmental outcomes, represent a heavy burden on the government budget and, contrary to their original objective, have not efficiently tackled poverty and inequality. Such subsidies should be gradually removed. In the energy sector, reforms are needed in order to allow the state-owned oil company PEMEX to become more efficient operationally and environmentally, and to better provide fiscal revenues. Les défis de la croissance verte et la nécessité d'une réforme de l'énergie au Mexique Comme le Mexique cherche à stimuler la croissance économique, les pressions sur les ressources naturelles et les effets sur l’environnement peuvent s'intensifier, ce qui compromet la durabilité de cette croissance et le bien-être de la population. Les coûts de la dégradation de l'environnement ont été estimés à environ 5% du PIB en 2011, essentiellement dus à l'impact sanitaire de la pollution de l'air, tandis que la surexploitation des ressources naturelles - comme l'eau - menace leur pérennité. Les subventions et les prix ne reflètent pas les externalités environnementales ou le coût de l’approvisionnement de ressources naturelles, y compris les coûts de rareté. Elles se traduisent par des résultats médiocres pour l'environnement, représentent un lourd fardeau pour le budget de l'État et, contrairement à leur objectif initial, n'ont pas été très efficace contre la pauvreté et l'inégalité. Ces subventions devraient être progressivement supprimées. Dans le secteur de l'énergie, des réformes sont nécessaires afin de permettre à la compagnie pétrolière publique PEMEX de devenir plus efficace sur le plan opérationnel et de l'environnement, et à améliorer la prestation des recettes fiscales. |
| Keywords: | Mexico, climate change, green growth, water sustainability, energy, énergie, durabilité de l’eau, changement climatique, croissance verte, Mexique |
| JEL: | H23 O44 Q4 Q5 |
| Date: | 2013–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1095-en&r=ene |
| By: | Karlygash Kuralbayeva |
| Abstract: | I build an equilibrium search and matching model of an economy with an informal sector and rural-urban migration to analyze the effects of budget-neutral green tax policy (raising pollution taxes, while cutting payroll taxes) on the labor market. The key results of the paper suggest that when general public spending varies endogenously in response to tax reform and higher energy taxes can reduce the income from self-employed work in the informal sector, green tax policy can produce a triple dividend: a cleaner environment, lower unemployment rate and higher after-tax income of the private sector. This is due to the ability of the government, by employing public spending as an additional policy instrument, to reduce the overall tax burden when an increase in energy tax rates does not exceed some threshold level. Thus governments should employ several instruments if they are concerned with labor market implications of green tax policies. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp139&r=ene |
| By: | Rick Van der Ploeg |
| Abstract: | Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment. � |
| Keywords: | social cost of carbon, tipping point, positive feedback, climate |
| JEL: | D81 H20 Q31 Q38 |
| Date: | 2013–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-122&r=ene |
| By: | Johan Eyckmans; Sam Fankhauser; Snorre Kverndokk |
| Abstract: | This paper discusses the ethical underpinnings of climate finance. We ask what the optimal flow of financial assistance for mitigation (to reduce emissions), adaptation (to become climate resilient) and development (to increase income) would be if rich countries care about the inter- and intragenerational distribution of consumption in the world. The question is framed as a two-period game of transfers between two regions, North and South. We show that the level of financial assistance from the North will depend on the North’s concern about well-being in the South, which we model as a Fehr-Schmidt utility function. Our main conclusion is that in the absence of market failures (e.g., barriers to adaptation or a weak carbon constraint) the most effective instrument to promote adaptation and mitigation in the South is a development transfer. In pure equity terms, development aid is a more effective instrument for achieving both intergenerational- and intragenerational equity. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp123&r=ene |
| By: | Alexandre Marcellesi; Nancy Cartwright |
| Abstract: | N/A |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp120&r=ene |
| By: | Emeline Bezin |
| Abstract: | We develop an overlapping generations model within which the evolution of pollution and the formation of environmental concern are endogenous. On the one hand, people heterogeneously concerned with environmental issues contribute to pollution which is a public bad. On the other hand, the transmission of environmental attitudes is the result of some economic choice which is affected by pollution. The model predicts that the long run proportion of environmentally concerned individuals will always be high. Though, depending on the pollution-generating technology, the transition from a low-environmentally concerned society to a high-environmentally concerned one is accompanied by two different outcomes regarding the long run level of pollution. If the technology is “clean”, there is a stable steady state level of pollution. However, if it is “dirty”, pollution experiences an unlimited growth which eventually causes an environmental disaster. This result captures some stylized facts regarding the joint evolution of environmental concern and pollution in developing nations. In the latter case, we show that intergenerational transfers from the older generation to the young working one restore the possibility to reach a stationary level of pollution. |
| Keywords: | Overlapping generations, pollution, environmental concern, cultural transmission,environmental policy |
| JEL: | Q50 D90 J11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:rae:wpaper:201309&r=ene |
| By: | In Chang Hwang (Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands); Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom; Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands; Department of Spatial Economics, Vrije Universiteit, Amsterdam, The Netherlands; Tinbergen Institute, Amsterdam, The Netherlands; CESifo, Munich, Germany); Marjan W. Hofkes (Department of Economics, Vrije Universiteit, Amsterdam, The Netherlands; Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands; Department of Spatial Economics, Vrije Universiteit, Amsterdam, The Netherlands) |
| Abstract: | We develop a climate-economy model with active learning. We consider three ways of active learning: improved observations, adding observations from the past and improved theory from climate research. From the model, we find that the decision maker invests a significant amount of money in climate research. Expenditures to increase the rate of learning are far greater than the current level of expenditure on climate research, as it helps in taking improved decisions. The optimal carbon tax for the active learning model is nontrivially lower than that for the uncertainty model and the passive learning model. |
| Keywords: | Climate policy; deep uncertainty; active learning; Bayesian statistical decision; integrated assessment; dynamic programming |
| JEL: | Q54 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:6513&r=ene |
| By: | Simon Dietz; Anca N. Matei |
| Abstract: | Economic evaluation of climate policy is notoriously dependent on assumptions about time and risk preferences, since reducing greenhouse gas emissions today has a highly uncertain pay-off, far into the future. These assumptions have always been much debated. Rather than occupy a position in this debate, we take a non-parametric approach here, based on the concept of Time-Stochastic Dominance. Using an integrated assessment model, we apply Time-Stochastic Dominance analysis to climate change, asking are there global emissions abatement targets that everyone who shares a broad class of time and risk preferences would agree to prefer? Overall we find that even tough emissions targets would be chosen by almost everyone, barring those with arguably `extreme' preferences. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp136&r=ene |
| By: | Mr Derek Bond; Professor Elaine Ramsey; Mr Stuart Thompson |
| Abstract: | The paper has been prepared on behalf of the ERDF INTERREG IVB transnational NPP funded NEES (Natural - Energy Efficient - Sustainable) project. The NEES consortium is concerned with the issues relating to sustainable construction and energy efficiency in the northern periphery of Europe. This submission decribes a number of best practice examples and barriers identified by NEES partners within their own regions. The barriers include - • Geographical dispersion of the sustainable building industries hinders the sharing of knowledge, expertise and contacts; • Lack of maintenance of the physical, intellectual and educational sustainable building infrastructures; • Serious deficiency in traditional and sustainable building skills poses serious problems for maintenance, retro-fitting and new build; • Lack of conclusive data makes it difficult to accurately compare the whole life carbon costs of different materials; • High levels of both physical and human capital have been invested in energy intensive construction methods which has resulted in little interest in sustainable alternatives. This submission makes a number of suggestions to help alleviate the barriers identified - • Fund the development of regional knowledge exchange hubs to help manage support for the sustainable construction industries; • Encourage new education initiatives and awareness raising activities around both the benefits of using sustainable materials and the demand for skilled employees; • Update building regulations to place a higher emphasis on sustainability in conjunction with energy efficiency; • Develop the supply of locally-sourced sustainable materials and encourage consumers to select them so as to minimise the (potentially significant) carbon costs of transportation. |
| Keywords: | NEES, Natural Energy Efficient Sustainable, All Party Parliamentary Group for Excellence in the Built Environment, construction, Green Deal, INTERREG IVB, ERDF, Northern Periphery Programme, best practice, barriers |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:fsr:consul:2&r=ene |
| By: | Antoine CAZALS (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Alexandre Sauquet (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I) |
| Abstract: | Is there a strategically beneficial time for political leaders to make international environmental commitments? Based on the political cycles theory we argue that leaders have incentives to delay costly ratification of international environmental agreements to the post-electoral period. However, the cost of participating in these agreements are often lower for developing countries, and they may benefit from indirect gains, which may make them more prone to ratifying in the pre-electoral period. These hypotheses are empirically assessed by studying the ratification process of 48 global environmental agreements censused in the ENTRI database from 1976 to 1999. We use a duration model in which time is measured on a daily basis, enabling us to precisely identify pre- and post-electoral periods -- a significant challenge in political cycles studies. Our investigation reveals the existence of political ratification cycles that are of substantial magnitude and non-linear over the pre- and post-electoral years. |
| Keywords: | International Environmental Agreements;Political cycles;Ratification;duration model |
| Date: | 2013–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00903653&r=ene |
| By: | Mark C. Freeman; Ben Groom |
| Abstract: | The case for using declining social discount rates when the future is uncertain is now widely accepted in both academic and policy circles. We present sharp upper and lower bounds for this term structure when we have limited knowledge about the nature of our uncertainty. At horizons beyond 75 years, these bounds are widely spread even if there is agreement on the support and first four moments of the relevant underlying probability distribution. Hence, even in the unlikely event that there is consensus between experts on the primitives of the social discount rate, estimates of the present value of intergenerational costs and benefits, such as the Social Cost of Carbon, can potentially lie anywhere within a wide range. This makes it di¢ cult to prescribe crisp policy recommendations for long-term investments. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp138&r=ene |
| By: | Martin Weitzman |
| Abstract: | Thus far, most approaches to resolving the global warming externality have been quantity based. With n different national entities, a meaningful comprehensive treaty involves negotiating n different binding emissions quotas (whether tradeable or not). In post-Kyoto practice this n-dimensional coordination problem has proven intractable and has essentially devolved into sporadic regional volunteerism. By contrast, on the price side there is a natural one-dimensional focus on negotiating a single binding carbon price, the proceeds from which are domestically retained. Significantly (and unlike negotiated quantities) the negotiated uniform price on carbon emissions embodies an automatic "countervailing force" against free-riding self interest by incentivizing agents to internalize the externality. The model of this paper indicates an exact sense in which each agent's extra cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing (via the higher emissions price) all other agents to simultaneously lower their emissions. With some further restrictions, the theoretical model shows that population-weighted majority rule for a uniform price on carbon emissions can come as close to global efficiency as the median marginal benefit (per capita) is close to the mean marginal benefit (per capita). |
| JEL: | Q5 Q54 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19644&r=ene |