discounting and divergence of opinion the objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates among others we tackle the following questions is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors more generally can the arrow debreu prices the risk free rates the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates is it socially efficient when diversity of opinion is taken into account to reduce the discount rate per year for more distant horizons if so what is the trajectory of the decline

maritime oil freight flows to 2050 delphi perceptions of maritime specialists abstract this paper aims to synthesise maritime specialists perceptions of changing patterns of maritime oil freight flows to 2050 debate spans published maritime oil flows globally diverse drivers of future flows including economic growth shipping market changes and haul lengths a classic delphi study to explore the perceptions of likely trends and flows to 2050 recruited a panel of early career and established maritime specialists many with long term career commitments to this industry underpinned by market volatility and legislative uncertainty the perceptions of both groups coincided and were conservative local sourcing new arctic seaways and fossil fuel intolerance will tend to reduce oil freight work but perceptions of ship re routing to avoid for example emission control areas and piracy would tend to lengthen hauls in advanced industrial nations reducing energy intensities and diminishing social tolerance of fossil fuels imply gradually reducing maritime oil shipments however to achieve radical national commitments to carbon emissions reductions will necessitate specialist education for naturally conservative maritime professionals and vigorous oil import reduction policies to curtail domestic demand for oil shipments

the evolution of time preference with aggregate uncertainty we examine the evolutionary foundations of intertemporal preferences when all the risk affecting survival and reproduction is idiosyncratic evolution selects for agents who maximize the discounted sum of expected utility discounting at the sum of the population growth rate and the mortality rate aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate and can push agents away from exponential discounting

re analyzing the economic impact of a global bunker emissions charge abstract regulating bunker emissions continues to be a challenging task largely due to the lack of a globally coordinated scheme providing economic and political incentives to potential participating countries this paper analyses the economic costs and benefits of imposing a global carbon tax on international bunker emissions by employing a computable general equilibrium model approach under the assumption of an emissions reduction of 5 below 2000 levels by 2020 we demonstrate that a global bunker emissions charge on one hand reduces trade volume and change trade patterns between countries and regions while on the other hand accelerates the adoption of energy saving technologies and reallocates the supply of international transportation services throughout the world the net economic impact though negative on average is modest compared to the benefits obtained from the emissions reduction if revenues from a bunker emissions charge are properly distributed among countries and regions the losses to disadvantaged countries are likely to be offset by the benefits to advantaged countries this finding provides useful insights for policy makers a global bunker emissions charge could in future be an economically feasible strategy to reduce the increasing bunker emissions through the implementation requires more political effort and wisdom

variance stabilizing transformations for electricity spot price forecasting most electricity spot price series exhibit price spikes these extreme observations may significantly impact the obtained model estimates and hence reduce efficiency of the employed predictive algorithms for markets with only positive prices the logarithmic transform is the single most commonly used technique to reduce spike severity and consequently stabilize the variance however for datasets with very close to zero like the spanish or negative like the german prices the log transform is not feasible what reasonable choices do we have then to address this issue we evaluate 16 variance stabilizing transformations within a comprehensive forecasting study involving two model classes regression models neural networks and 12 datasets from diverse power markets we show that the probability integral transform combined with the standard gaussian distribution yields the best approach significantly better than many of the considered alternatives

making a case for robust optimization models robust optimization searches for recommendations that are relatively immune to anticipated uncertainty in the problem parameters stochasticities are addressed via a set of discrete scenarios this paper presents applications in which the traditional stochastic linear program fails to identify a robust solution despite the presence of a cheap robust point limitations of piecewise linearization are discussed we argue that a concave utility function should be incorporated in a model whenever the decision maker is risk averse examples are taken from telecommunications and financial planning

a note on the normalization of spanish electricity spot prices merit order of renewable generation has produced an increasing relevant number of zero values in spanish electricity spot prices since 2010 in contrast with the rest of markets which rarely present zero values this letter shows that existing methodologies for normalizing the price distribution fail to yield a proper normalization this letter proposes a new algorithm based on nataf transformation which addresses this issue and ensures a correct normalization numerical results validate the proposed algorithm

a quasi feed in tariff policy formulation in micro grids a bi level multi period approach abstract a quasi feed in tariff qfit policy formulation is presented for micro grids that integrates renewable energy generation considering policy makers and generation companies gencos objectives assuming a bi level multi period formulation that integrates physical characteristics of the power grid the upper level problem corresponds to the pm whereas the lower level decisions are made by gencos we consider that some gencos are green energy producers while others are black energy producers policy makers incentivize green energy producers to generate energy through the payment of optimal time varying subsidy price the policy maker s main objective is to maximize an overall social welfare that includes factors such as demand surplus energy cost renewable energy subsidy price and environmental standards the lower level problem corresponding to the gencos is based on maximizing the players profits the proposed qfit policy differs from the fit policy in the sense that the subsidy price based contracts offered to green energy producers dynamically change over time depending on the physical properties of the grid demand and energy price fluctuations the integrated problem solves for time varying subsidy price and equilibrium energy quantities that optimize the system welfare under different grid and system conditions

climate policy and the social cost of power generation impacts of the swedish national emissions target the purpose of this paper is to discuss how the design of climate policy in a small open economy may affect the internalization of carbon related external costs and ultimately the social choice between different power generation technologies empirically we focus on the swedish case and analyze three climate policy regimes out of which two represent different national goal formulations and thus compliance strategies the results show that the social choice between power generation technologies in sweden will be significantly influenced by the choice of climate policy regime most notably if sweden would abandon its present national target for carbon dioxide emissions and instead make full use of the country s participation in international emissions trading natural gas fired power would replace onshore wind power as the power generation source with the lowest social cost

electric power system planning with renewable energy accommodation for supporting the sustainable development of tangshan city china abstract in this study considering break the original energy structure dominated by coal and make the most use of renewable energy in the future an inexact stochastic robust mixed integer programming itsrmp method was developed for supporting regional electric power system management in tangshan city china the developed method incorporated interval parameter programming ipp stochastic robust optimization sro two stage stochastic programming tsp and mixed integer programming mip within a general optimization framework to reflect uncertainties expressed as interval values and probability distributions in the regional electric power system three scenarios corresponding to different subsidy price levels and three cases associated with different pollutants emission reduction levels were designed the electricity generation schemes facility expansion pollutant emission and system cost considering the subsidy policy and air pollution mitigation control had been obtained the results indicated that subsidy policy would exert an important influence on the development of tangshan s electric power system which can reduce the cost advantage of conventional power generation and enhance the development enthusiasm of renewable power generation to power enterprises in detail the electricity generation amount of renewable energy would increase with the improvement of subsidy price level moreover decision makers could identify the possible policy implementations and enforcements under considering the trade off among system economy security and environmental objectives the modeling results were valuable for promoting new energy accommodation and supporting the sustainable development of social economy

the effect of allowance allocations on cap and trade system performance abstractan implication of the coase theorem is that under certain conditions the market equilibrium in a cap and trade system will be cost effective and independent of the initial allocation of tradable rights that is the overall cost of achieving a given aggregate emission reduction will be minimized and the final allocation of permits will be independent of the initial allocation we call this the independence property this property is important because it means that the government can establish the overall pollution reduction goal for a cap and trade system by setting the cap and leaving it up to the legislature to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs we examine the conditions under which the independence property is likely to hold both in theory and in practice

designing a climate change policy for the international maritime transport sector market based measures and technological options for global and regional policy actions abstract the international maritime transport sector has a significant abatement potential and some technical improvements that reduce ghg emissions would already be profitable without any policy in place this paper analyses in depth the limits and opportunities of policy options currently under consideration at the international level to stimulate the sector to reduce its ghg emissions in particular in order for the maritime transport sector to become more environmentally friendly the flexible nature of international market based measures and the european union emission trading scheme provide a definite window of opportunity without placing unnecessary high burden on the sector however the development of a regional policy such as at european level for the international maritime transport sector faces several obstacles allocation of emissions carbon leakage permit allocation treatment of the great variety in ship type size and usage and transaction cost global market based policies could overcome most of these challenges this paper provides an in depth analysis of the policy instruments currently under discussion to reduce the sector s burden on the environment and focuses on economic theory legal principles technological options and the political framework that together make up the basis of decision making regarding the international maritime transport sector s climate change policies

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

the tradable permits approach to protecting the commons lessons for climate change tradable permit approaches for rationing access to the commons have been applied to many different types of resources in many different countries this essay reviews the experience with three main applications of tradable permit systems air pollution control water supply and fisheries management as well as some unique related programmes the purpose of the review is to draw together what we have learned about tradable permits in practice that might offer some useful insights for the implementation of the three tradable permit mechanisms that are part of the kyoto protocol copyright 2003 oxford university press

recent advances in electricity price forecasting a review of probabilistic forecasting abstract since the inception of competitive power markets two decades ago electricity price forecasting epf has gradually become a fundamental process for energy companies decision making mechanisms over the years the bulk of research has concerned point predictions however the recent introduction of smart grids and renewable integration requirements has had the effect of increasing the uncertainty of future supply demand and prices academics and practitioners alike have come to understand that probabilistic electricity price and load forecasting is now more important for energy systems planning and operations than ever before with this paper we offer a tutorial review of probabilistic epf and present much needed guidelines for the rigorous use of methods measures and tests in line with the paradigm of maximizing sharpness subject to reliability the paper can be treated as an update and a further extension of the otherwise comprehensive epf review of weron 1 or as a standalone treatment of a fascinating and underdeveloped topic that has a much broader reach than epf itself

arima models to predict next day electricity prices price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets both for spot markets and long term contracts price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit this paper provides a method to predict next day electricity prices based on the arima methodology arima techniques are used to analyze time series and in the past have been mainly used for load forecasting due to their accuracy and mathematical soundness a detailed explanation of the aforementioned arima models and results from mainland spain and californian markets are presented

the emergence of a regional financial architecture in asia this paper provides an assessment of monetary and financial cooperation in asia since the regional financial crisis of 1997 98 with a view to determining whether the emerging regional financial architecture in asia is compatible with the global financial architecture and what are the prospects for possible economic and monetary union monetary and financial cooperation has focused on four architectural pillars economic policy surveillance crisis prevention liquidity support and bond market development which can be consistent with the global architecture however progress toward full integration is likely to be gradual and experimental given the lack of strong regional institutions regional economic disparities and the need to build political commitment to such a goal

numerical analysis of non constant pure rate of time preference a model of climate policy abstract when current decisions affect welfare in the far distant future as with climate change the use of a declining pure rate of time preference prtp provides potentially important modeling flexibility the difficulty of analyzing models with non constant prtp limits their application we describe and provide software available online to implement an algorithm to numerically obtain a markov perfect equilibrium for an optimal control problem with non constant prtp we apply this software to a simplified version of the numerical climate change model used in the stern review for our calibration the policy recommendations are less sensitive to the prtp than widely believed

the role of economics in climate change policy many policy problems have frustratingly long histories of inefficient regulation that can be difficult or impossible to reverse even where large efficiency gains might be had from doing so climate change is an exception however because little real action has been undertaken to date it presents an unusual opportunity for an efficient economic policy to be employed right from the beginning however the opportunity could easily be lost ongoing negotiations conducted under the auspices of the united nations framework convention on climate change have so far produced the kyoto protocol a deeply flawed agreement that manages to be both economically inefficient and politically impractical in this article we examine the key economic characteristics of climate change and argue that economic theory provides good guidance on the design of an efficient and politically realistic policy because climate change involves vast uncertainties and has potentially enormous distributional effects neither of the standard market based environmental policy instruments is a viable approach a tradable permit system would be inefficient and an emissions tax would be politically unrealistic however a hybrid policy combining the best features of the two would be an efficient and practical approach we then compare our hybrid proposal to the kyoto protocol and argue that it overcomes the protocol s shortcomings

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

redefining the merit order of stochastic generation in forward markets this letter proposes a new merit order for the dispatch of stochastic production in forward markets e g day ahead markets the proposed merit order considers not only the marginal cost of the stochastic generating unit which is often very low or zero but also the projected cost of balancing its energy deviations during the real time operation of the power system we show through an illustrative example that the proposed merit order leads to increased market efficiency as the penetration of stochastic generation in the electricity market grows

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis