transition towards a low carbon economy a computable general equilibrium analysis for poland in the transition to sustainable economic structures the european union assumes a leading role with its climate and energy package which sets ambitious greenhouse gas emission reduction targets by 2020 among eu member states poland with its heavy energy system reliance on coal is particularly worried on the pending trade offs between emission regulation and economic growth in our computable general equilibrium analysis of the eu climate and energy package we show that economic adjustment cost for poland hinge crucially on restrictions to where flexibility of emission abatement revenue recycling and technological options in the power system we conclude that more comprehensive flexibility provisions at the eu level and a diligent policy implementation at the national level could achieve the transition towards a low carbon economy at little cost thereby broadening societal support

u s comparative advantage in bioenergy a heckscher ohlin ricardian approach much of the current literature on trade in biofuels is focused on the partial equilibrium welfare effects in the u s ethanol sector of potentially distorting policy instruments such as tax credits to blenders and import tariffs see elobeid and tokgoz 2006 de gorter and just 2007 however recent studies by the oecd 2006 and the world bank kojima mitchell and ward 2007 have expanded the analysis to consider the future prospects for trade in both ethanol and biodiesel paying particular attention to current production costs across countries and the connection between thresh old prices for crude oil prices and biofuel pro duction costs as well as the land requirements needed to meet the types of biofuel production mandates being implemented in the united states the european union eu and else where two key stylized facts can be gleaned from these latter studies while increasing crude oil prices have improved the economic viability of say u s corn based ethanol brazil continues to have a significant comparative advantage in producing ethanol from sugarcane oecd 2006 kojima mitchell and ward 2007 sec ond the land requirements necessary to meet targets being set for the proportion of biofu els used in transport fuel consumption show that again brazil has a clear comparative ad vantage for example brazil only requires 3 of its agricultural land to meet a 10 share of biofuels in domestic transport fuel consump tion compared to 30 36 and 72 re spectively in the united states canada and the e u oecd 2006 this all seems to point to a simple but rather predictable story of trade in biofuels in the absence of trade distorting policy instru ments brazil currently has a comparative and maybe even an absolute advantage in produc ing biofuels based on lower ethanol feedstock costs and relative abundance of agricultural land even in the presence of trade distortions brazil exported 20 of its production during the 2006 7 harvest season kojima mitchell and ward 2007 and this would increase sub stantially if the united states removed its ethanol import tariff of 54 cents per gallon elobeid and tokgoz 2006 however the mar gin for competitiveness in biofuels is rather narrow only 10 of production being traded internationally of which brazil accounts for 50 kojima mitchell and ward 2007 this is a static story though based on cur rent crop yields as well as existing biofuel production technologies consequently in try ing to analyze the potential for united states comparative advantage in biofuels production it is important to account for technological innovation that may occur within the next decade notably in the production of ethanol from cellulosic material to that end a styl ized trade model is set out in the first part of this article which allows for the possibil ity that the united states could become a fu ture exporter of biofuels the model draws on a heckscher ohlin ricardo approach origi nally due to davis 1995 as well as analysis of trade in the presence of external economies helpman and krugman 1985 given this analysis the second part of the article is con cerned with the possibility that current u s policy toward corn based ethanol production may actually stymie the potential for future exports drawing on recent literature analyz ing the infant industry argument for protec tion saure 2007

renewable energy expansion in the chilean power market a dynamic general equilibrium modeling approach to determine co2 emission baselines abstract over the last decade a high dependency on carbon intensive fuels in the chilean power sector has led to environmental concerns particularly regarding rapid growth in co2 emissions more recently the power sector has experienced significant structural changes with a rapid expansion of renewables in the energy matrix and this trend is expected to cause significant variations in future co2 emission baseline scenarios to investigate the economy wide impact of renewable energy expansions in chile s energy mix this research based on a computable general equilibrium cge model examines different co2 emission baseline scenarios however because traditional cge modeling approaches cannot capture the impact of a sector s recent structural changes we present a step by step approach to incorporate different energy matrices from an external engineering bottom up model into the cge model the results indicate that the business as usual bau scenario in which structural changes are not considered significantly overstates expected emissions conversely considering structural changes in our cge model shows chile advancing towards its declared nationally determined contribution ndc to reduce greenhouse gas emissions furthermore the methodology implemented in the study has the advantage of being a simple integrated approach that is coherent with current modeling capacities in many developing contexts

political uncertainty and macroeconomic performance abstract it is often claimed that politically induced economic flucturations are harmful for the society in this paper we show that this conjecture is not necessarily correct and such fluctuations can actually improve society s macroeconomic performance

removal of u s ethanol domestic and trade distortions impact on u s and brazilian ethanol markets we analyze the impact of trade liberalization and removal of the federal tax credit in the united states on u s and brazilian ethanol markets using a multi market international ethanol model calibrated on 2005 market data and policies the removal of trade distortions induces a 23 2 percent increase in the price of world ethanol on average between 2006 and 2015 relative to the baseline the u s domestic ethanol price decreases by 14 1 percent which results in a 7 5 percent decline in production and a 3 2 percent increase in consumption the lower domestic price leads to a 2 5 percent rise in the share of fuel ethanol in gasoline consumption u s net ethanol imports increase by 192 8 percent brazil responds to the higher world ethanol price by increasing its production by 8 8 percent on average total ethanol consumption in brazil decreases by 3 2 percent and net exports increase by 61 9 percent relative to the baseline the higher ethanol price leads to a 4 7 percent increase in the share of sugarcane used in ethanol production the removal of trade distortions and 51 per gallon tax credit to refiners blending ethanol induces a 22 5 percent increase in the world ethanol price

why money talks and wealth whispers monetary uncertainty and mystique this paper analyzes the effect of monetary uncertainty on the inflationary bias and the variance of output and inflation monetary policy uncertainty is modeled as a shock to the central banker s preference for inflation stabilization relative to output stabilization that cannot be observed by the public we find that the mean and variance of inflation increase with the variance of this preference shock however unlike other studies we find that monetary uncertainty may very well have a positive effect on output stabilization and therefore also on society s welfare

intermediate products and the theory of international trade a generalization of the pure intermediate good case empirical studies of neoclassical factorproportions trade theory have long recognized that hypotheses concerning relative factor intensity must be defined in terms of gross factor intensities accounting for intensities of intermediate products rather than simply in net factor intensity terms i e at the last stage of production only nevertheless development of the pure theory of international trade has generally neglected intermediate products the justification for this convenience has in part been based on a study by jaroslav vanek which demonstrated that the introduction of interindustry flows in a two good model did not affect the traditional theorems rybczynski stolper samuelson or heckscher ohlin defined in net factor intensity terms however in a recent study raveendra batra and francisco casas demonstrated that the introduction of a pure intermediate commodity one that is produced solely for use in the production of final goods complicates the issue considerably thev show in fact that most of the traditional trade theorems defined in net terms may not hold without additional provisions if such intermediate products are introduced in the model p 297 the basic difference between the batra casas model with pure intermediate products and vanek s interindustry flow model is the possibility of a conflict between the net and gross factor intensity ranking of final products 2 the conditions which batra and casas demonstrate are necessary in order to ensure a uniform ranking of final commodities according to net and gross factor intensitv were derived under the explicit assumption that the intermediate good is totally supplied from domestic production the purpose of the present paper is to generalize the batracasas model to allow the intermediate good to be imported in some proportion 3 the analytical approach of the present paper is quite different from that taken by batra and casas however here the problem is treated as a problem of ex post factor intensity measurement although the underlying model and necessary conditions to ensure its proper functioning are implicitly the same as described by batra and casas in section i a measure of gross factor intensity appropriate in an economy importing intermediate inputs is developed in the following section this measure is applied to the batra casas model under alternative assumptions regarding the supply source of the intermediate good it is shown that if some proportion of the intermediate good is imported then net and gross factor intensity rankings can be assured to be uniform if and only if in addition to the

development of the electricity environmental policy cge model gtap e powers a case of the carbon tax in south africa abstract a new carbon price mechanism with full emission coverage is developed within the framework of a global computable general equilibrium model gtap e powers to enhance the capacity and accuracy for climate change and energy policy assessment the model developed is then used to examine the potential impacts of the carbon tax in south africa results show that incorporation of non co2 emissions in the model significantly alters the results of which the economy of south africa experiences higher costs compared to the case that only has co2 emissions when more sectors are included in the policy it also puts higher costs on the economy as higher levels of emissions are subject to the carbon tax results also show that south africa only experiences small tradeoffs from introducing the carbon tax in all scenarios that is with a tax rate of 9 15 the country is able to reduce its emission levels by 12 25 15 6 at the costs of real gdp reduction by 1 17 1 59 fossil based industrial sectors are particularly worst off while clean and renewable energy sectors strongly expand their production the results indicate that south africa is likely to move to a low carbon and sustainable economy with such a policy

technology and the demand for imports in the pure theory of international trade traded goods are generally viewed as finished products this is in sharp contrast with the fact that the bulk of world trade is in intermediate products to reconcile theory with facts a number of models of trade in intermediate products have been proposed in recent years most of these models have been used to investigate the validity of well known trade theorems in the presence of intermediate products 2 hence most of these models are rather complex generally allowing for two factors of production and two final goods as well as for one or two pure intermediate products 3 another feature common to most of these models and that is borrowed from standard trade theory is the assumption that production is nonjoint in input quantities 4 this assumption leads to a number of remarkable theoretical results but it also greatly increases the number of possible patterns of production and of interindustry flows and it thus adds to the complexity of the models furthermore if the number of goods is larger than the number of factors nonjointness leads to indeterminacy unless additional assumptions are made 6 these assumptions typically are that some goods are not produced domestically 7 or that some goods are not traded internationally 8 this further multiplies the number of possible cases and it explains perhaps why none of the models proposed so far has emerged as the benchmark model much in the same way as for

an introduction to the wage curve en conomists and policymakers are interested in understanding the forces that determine the level of unemployment and the level of wages this paper describes an empirical discovery made with the help of international microeconometric evidence covering more than a dozen nations about a link between these two variables the connection can be portrayed on a graph with the level of unemployment on the horizontal axis and the level of wages on the vertical axis then the wage curve as shown in figure 1 is a downwardsloping locus this relationship tells us that holding others things constant if a region has a rise in unemployment in a particular year those who live there will have a fall in their wages in that year what does this curve mean how in a field where fully controlled experiments are almost impossible could there be any convincing scientific basis for this wage curve what is the relationship between the wage curve and a phillips curve other than that the curve of figure 1 looks like a phillips curve with the vertical axis mislabeled how does the wage curve fit into existing economic knowledge and is the empirical finding consistent with competitive theory this paper sketches answers to these kinds of questions the discussion draws on our book the wage curve blanchflower and oswald 1994 where the points raised here are investigated more fully it also rests upon work done by other economists whose work is listed in the paper and the bibliography

the effects of energy price technology and disaster shocks on china s energy environment economy system abstract this paper constructs a dynamic stochastic general equilibrium dsge model to analyze the effects of energy price technology and disaster shocks on china s energy environment economy 3e system it also studies stylized facts as well as co integration and error correction dynamic analyses of this system the disaster shock is modeled as a two state markov switching process the results show that both technology and energy price shocks increase the ratio of environmental investment to gdp the improvement in technology and rising energy prices helps to reduce co2 pollution and improve economic restructuring among the three kinds of shocks technology shock is the most important the robustness of the model is tested through statistical methods

the alcohol program the rational for the launching of the alcohol program from sugarcane in brazil in the mid 1970 s is described as an answer to the first oil crisis as well as a solution to the problem of the fluctuating sugar prices in the international market the technical characteristics of ethanol as a fuel are given as well as a discussion of the evolution of the cost of production environmental and social consequences regarding costs ethanol production was close to 100 dollars a barrel in the initial stages of the program in 1980 falling rapidly due to economies of scale and technological progress to half that value in 1990 followed by a slower decline in recent years considering the hard currency saved by avoiding oil importation through the significant displacement of gasoline by ethanol and the decrease in the amount of external debt that the displaced oil importation was able to provide it is possible to demonstrate that the alcohol program has been an efficient way of exchanging dollar debt by national currency subsidies which are paid by the liquid fossil fuel users even with this economic gains for society the continuity of the program is difficult to maintain two solutions to this problem are discussed internal expansion of the use of ethanol and exports to industrialized countries where it could be used as an octane enhancer the main attractiveness of the program the reduction of co2 emissions as compared to fossil fuels is stressed mainly as a solution for industrialized countries to fulfill their commitments with the united nations framework climate change convention

removing distortions in the u s ethanol market what does it imply for the united states and brazil we analyze the impact of trade liberalization and removal of the federal tax credit in the united states on ethanol markets using a multimarket international ethanol model we find that u s trade barriers have been effective in protecting the ethanol industry under current policy there is separability of the u s ethanol market from world markets with trade liberalization the ethanol market deepens making it less susceptible to price volatility the effect of trade liberalization extends beyond ethanol markets affecting agricultural markets the results show that the impact of removal of the tax credit overrides the impact of the tariff removal copyright 2008 oxford university press

inflation targets and contracts with uncertain central banker preferences within a standard model of monetary delegation the authors show that the optimal linear inflation contract performs strictly better than the optimal inflation target when there is uncertainty about the central banker s preferences the optimal combination of a contract and a target performs best and eliminates the inflation bias and any variability not associated with supply shocks however variability due to shocks is enhanced by uncertain central banker preferences quadratic contracts are shown to overcome this problem partly but the advantages of delegation may still be dominated by the excess variability due to shocks hence the credibility stabilization tradeoff is restored

foreign trade and its impact on employment the mexican case abstract this paper discusses the relationship between foreign trade and employment in a small open economy and carries out some empirical work using mexican data it is argued that employment multipliers are not stable if intermediate inputs are imported actual employment multipliers will be given by the relationship between effective demand and installed capacity in each sector and will depend strongly on whether quotas or tariffs are in operation it is also found that mexican exports are capital intensive relative to its imports

the hidden costs of renewables promotion the case of crop based biogas abstract this paper finds that specific characteristics of bioenergy investments namely long times to build relatively high variable costs and the managerial ability of corrective actions during the project help bioenergy producers to respond to market uncertainties this effect is shown to compromise the economic effectiveness of bioenergy policies the paper compares the effectiveness of financial and regulatory incentive programs aiming to stimulate production of crop based biogas a stylized stochastic real options based investment model is developed to analyze the investment behavior of biogas producers under alternative policies the model is solved by a numerical approach combining stochastic simulations and the genetic algorithm technique unless bioenergy schemes account for structural characteristics of the bioenergy industry they will tend to encourage investments in unused production capacities this would cause additional welfare costs and benefit mainly crop producers

non competitive market behaviour in the international coking coal market in this paper a primal dual programming model of international coking coal trade is constructed to test for non competitive market behaviour world trade in 1996 is simulated under perfect competition and various non competitive market structures statistical tests are used to compare simulated trade flows with actual data assuming cournot nash behaviour an all consumer oligopsony market structure is preferred to alternative models under an all consumer oligopsony world coking coal prices and trade are lower than under perfect competition under an oligopsonistic structure welfare gains from productivity increases in australian coal mines might largely accrue to coal buyers

application of computable general equilibrium cge to climate change mitigation policy a systematic review abstract with the growing literature related to climate change mitigation measures and policy interventions a systematic review of the application of computable general equilibrium cge model is inevitable therefore this article aims to characterise the relevant studies define a comparative framework to identify the current state of the art and the gaps in applied general equilibrium models firstly the systematic review found a total of 301 research articles from scopus and web of science databases and finally analysed 154 articles based on inclusion and exclusion criteria from 67 refereed journals the review analysis found that application of cge model is very vital in addressing climate change mitigation issues at the national regional and global levels however china attracted the most substantial research interests followed by the usa india and australia among others which are in line with their share of greenhouse gas emissions in the world most of the research themes focus on the carbon tax emission reduction target emission trading renewable energy energy efficiency and carbon capture and storage as primary drivers of low carbon economy nevertheless there is a trend of employing more static cge model compared to the dynamic cge although application of the latter has a limitation of providing right inputs to the macroeconomic policy finally research directions and gaps envision other complementary models such as dynamic stochastic general equilibrium dsge and agent based model abm for proper policy interventions

spatially uneven development and low carbon transitions insights from urban and regional planning the ageing of existing energy system infrastructure the threat of climate change and uncertainty in the movement of energy prices have resulted in a widespread agreement on the need for a transition to a low carbon energy system yet the nature of this transition i e what when how and where and its socio economic outcomes at different scales are not well understood the interdependence of the energy sector and economic growth has been mostly studied at the national level via some general equilibrium or econometric models whilst sub national studies at community or urban levels mostly focus on the governance of transitions hence we suggest that a regional perspective to energy policy and research promises to integrate these two approaches by providing a more robust and comprehensive understanding of the implications of low carbon transitions as well as contributing to the development of more effective policies by building on recent ideas on geographical aspects of energy transitions this article offers insights on the changing relationship between the spatial organisation of economic activities and energy systems and identifies tools and methods from urban and regional planning to help with the delivery of efficient and equitable policy outcomes

is bioenergy trade good for the environment we analyze the impacts of bioenergy trade on greenhouse gas emissions using a two good three factor model bioenergy is an agricultural good used as a substitute for fossil fuels in industry governments tax domestic pollution without international coordination we assume that northern countries have higher labor productivity than southern ones and that agriculture is less pollution intensive than industry after taxation we show that whereas southern countries impose a lower tax rate than northern ones they do not necessary have a competitive advantage in industry and that compared to autarky trade liberalization either increases or decreases worldwide emissions depending on regional comparative advantages

the costs of compliance a cge assessment of canada s policy options under the kyoto protocol canada has committed itself under the kyoto protocol to reduce greenhouse gas emissions between 2008 and 2012 on average by six per cent from the base 1990 level as of 2009 however canada s greenhouse gas emissions are far above its 1990 level which calls for stringent short term policy measures if canada is to meet its legally binding commitment this paper uses a multi region multi commodity static general equilibrium model to quantify the economic impacts of alternative compliance strategies for canada in the context of climate policies undertaken by other kyoto parties the numerical results confirm fears by canadian policymakers of substantial economic adjustment costs should canada fulfill its kyoto commitments solely through domestic action however a rigorous use of the project based cdm on top of international emissions trading could allow canada to live up to its international climate policy commitment at politically much more tolerable costs

why money talks and wealth whispers monetary uncertainty and mystique we demonstrate that in important cases propositions 3 and 4 in eijffinger hoeberichts and schaling journal of money credit and banking may 2000 may fail moreover their monetary policy delegation arrangement which advocates that central banker preference uncertainty may be desirable is dominated by other arrangements without any such uncertainty finally their way of modelling preference uncertainty leads to arbitrary effects on average monetary policy without these preference uncertainty is never desirable

trade spatial separation and the environment we develop a simple two sector dynamic model to show how pollution can provide a motive for trade by spatially separating incompatible industries we assume that the production of smokestack manufactures generates pollution which lowers the prod uctivity of an environmentally sensitive sector farming two identical unregulated countries will gain from trade if the share of world income spent on smokestack goods is high in contrast when the share of world income spent on the dirty good is low trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of smokestack goods 1999 elsevier science b v all rights reserved

the eu 20 20 2020 targets an overview of the emf22 assessment three computable general equilibrium models are used to estimate the economic implications of a stylized version of eu climate policy if implemented at the lowest possible cost the 20 emissions reduction would lead to a welfare loss of 0 5 2 0 by 2020 second best policies increase costs a policy with two carbon prices one for the ets one for the non ets could increase costs by up to 50 a policy with 28 carbon prices one for the ets one each for each member state could increase costs by another 40 the renewables standard could raise the costs of emissions reduction by 90 overall the inefficiencies in policy lead to a cost that is 100 125 too high the models differ greatly in the detail of their results the ets non ets split may have a negligible impact on welfare while the renewables standard may even improve welfare the models agree however that the distortions introduced by total eu package imply a substantial welfare loss over and above the costs needed to meet the climate target the marginal total and excess costs reported here are notably higher than those in the impact assessment of the european commission

when and how should infant industries be protected abstract this paper develops and analyzes a welfare maximizing model of infant industry protection the domestic infant industry is competitive and experiences dynamic learning effects that are external to firms the competitive foreign industry is mature and produces a good that is an imperfect substitute for the domestic good a government planner can protect the infant industry using domestic production subsidies tariffs or quotas in order to maximize domestic welfare over time as protection is not always optimal although the domestic industry experiences a learning externality the paper shows how the decision to protect the industry should depend on the industry s learning potential the shape of the learning curve and the degree of substitutability between domestic and foreign goods assuming some reasonable restrictions on the flexibility over time of the policy instruments the paper subsequently compares the effectiveness of the different instruments given such restrictions the paper shows that quotas induce higher welfare levels than tariffs in some cases the dominance of the quota is so pronounced that it compensates for any amount of government revenue loss related to the administration of the quota including the case of a voluntary export restraint where no revenue is collected in similar cases the quota may even be preferred to a domestic production subsidy

economywide implications from us bioenergy expansion the energy independence and security act of 2007 eisa sets a goal for 36 billion gal lons of biofuels available by 2022 according to the renewable fuels standard rfs the rfs is accompanied by tax credits which are sub ject to change tax credits are used as produc tion incentives for different types of ethanol made from corn starch and cellulosic material 1 there are arguments for and against the use of tax credits generally tax credits are considered as welfare reducing instruments similar to subsi dies however tax credits could be rationalized as improving energy security and reducing green house gas emissions as they can correct for mar ket failures wallace e tyner 2007 and paul n leiby 2007 furthermore tax incentives for an infant industry such as cellulosic ethanol might be justified where there are dynamic learning costs ian sheldon and matthew roberts 2007 it is estimated that tax credits could cost taxpay ers nearly 28 7 billion annually by 2022 harry

impacts of trade liberalizations under the uruguay round on the world sugar market the impacts of the uruguay round policy provisions on the world sugar market show that these policies will stabilize the world sugar price at slightly higher levels than in the baseline global sugar consumption will increase as a result of the income growth caused by the uruguay round economic resources will be allocated more efficiently among the sugar industries of the various countries however the impacts on the sugar industries in countries with strong producer supports will be rather small because the negotiation process of the uruguay round has accommodated the changes in sugar policies already implemented by individual countries in the past few years low cost sugar producing countries will benefit from the higher world sugar price and consumers in countries with protected markets will benefit from lower domestic prices

world crude oil and natural gas a demand and supply model abstract this paper examines world markets for crude oil and natural gas over the period 1918 1999 it analyzes the time series properties of output and prices and estimates demand and supply elasticities during 1918 1973 and 1973 1999 oil and gas prices were stable during the first period they became volatile afterwards reflecting deep changes in the market structure following the oil shock in 1973 demand price elasticities were too low however demand income elasticities were high supply price elasticities were also too low the elasticity estimates help to explain the market power of the oil producers and price volatility in response to shocks and corroborate elasticity estimates in energy studies

coherence causality and effectiveness of the eu environmental policy system results of complementary statistical and econometric analyses this paper presents the first empirical test of coherence i e consistency of policies within a framework causality i e logical priority of objectives over policies and effectiveness i e ability of policies to tackle challenges as defined by objectives of the overall eu environmental policy system to do so i applied complementary statistical cross sectional and time series and econometric dynamic tri probit analyses to an original panel dataset based on addressed issues i e pollution vs resource trans boundary vs domestic flow vs stock rather than on implemented policies i e eu legislation aiming at optimal pollution production optimal resource use and market competition it would be impossible to perform similar analyses by referring to realized policies rather than tackled issues due to the unbalanced sample characterizing the former with respect to the latter as well as due to overlapping objectives interrelated policies and non univocal relationships between objectives and policies in contrast with previous studies of single eu environmental policies characteristics of the eu environmental policy or eu environmental objectives i found that the overall eu environmental policy system is internally coherent dynamically causal and ex ante effective moreover the evidence suggests that many issues are correlated trans boundary issues became more relevant in 2012 pollution production was more significant than resource use and flow issues were more important than stock issues from 1995 to 2010 finally i show that few objectives overlapped a safe environment objective 1987 1997 was preferred to a greenhouse gas ghg reduction objective 2003 2012 but pursued with a 2 year lag although the latter has recently become preferred to the former in addition a ghg reduction objective was preferred to a sustainable development objective 1998 2002

optimal linear contracts under common agency and uncertain central bank preferences we analyze the effects of imperfectly known central banker s preferences on optimal linear contracts offered by the government and an interest group these effects depend on the type of uncertainty faced by the principals when the central bank s output target is uncertain the results by campoy and negrete public choice 137 197 206 2008 under perfectly known preferences obtain uncertainty about the central banker s degree of conservatism or about its degree of selfishness has a multiplicative impact on the principals instruments in the agent s best response function this may generate an inflation bias independently of the type of contract offered by the interest group