modeling future vehicle sales and stock in china this article presents an updated and upgraded methodology the fuel economy and environmental impacts feei model http www feeimodel org to project vehicle sales and stock in china on the basis of our previous studies the methodology presented has the following major improvements it simulates private car ownership on an income level basis takes into account car purchase prices separates sales into purchases for fleet growth and for replacements of scrapped vehicles and examines various possible vehicle scrappage patterns for china the results show that the sales of private light duty passenger vehicles in china could reach 23 42 million by 2050 with the share of new growth purchases representing 16 28 the total vehicle stock may be 530 623 million by 2050 we compare this study to other publicly available studies in terms of both projection methodology and results a sensitivity analysis shows that vehicle sales are more affected than levels of vehicle stock by the model parameters which makes projecting sales more difficult owing to the lack of reliable input data for key model parameters because it considers key factors in detail the sales and stock projection module of the feei model offers many advantages over previous models and is capable of simulating various policy scenarios

pollution from the electric power sector in japan and efficient pollution reduction abstract under the scheme of the kyoto protocol there are plans for the efficient reduction of carbon dioxide emissions in the electric power sector nuclear power generation which emits no carbon dioxide in the process of generating electricity has come under scrutiny however this energy produces a new environmental issue the disposal of radioactive waste first we derive shadow prices of carbon dioxide and low level waste as marginal abatement costs in the case of the electric power sector in japan employing a directional output distance function it is found that the shadow prices are us 39 per tonne for carbon dioxide and us 1531 per liter for low level waste secondly we calculate the indirect morishima elasticity between carbon dioxide and low level waste in order to identify their substitutability and it is found that the substitution of low level waste for carbon dioxide is easier than the reverse this result suggests that with the amount of generated electricity fixed carbon dioxide can be substituted more easily by low level waste when the relative price of carbon dioxide increases for example as a result of implementation of a carbon dioxide tax or an emissions trading system

financial contracting under extreme uncertainty an analysis of brazilian corporate debentures abstract economic volatility high transaction costs and fragile institutions hinder financial contracting in emerging markets these conditions characterize the economy of brazil yet a nascent corporate bond market thrives i analyze 50 brazilian indenture agreements and find that sample debentures are characterized by i features that mitigate inflation risk for investors ii contingent maturity mechanisms that provide periodic opportunities for exit or renegotiation iii a paucity of covenants that restrict the debtor s investment financing and dividend decisions and iv self enforcement mechanisms that avoid reliance on inefficient institutions analysis of these features enhances our understanding of contracting in emerging economies

estimating the marginal abatement cost curve of co2 emissions in china provincial panel data analysis abstract this paper estimates the marginal abatement cost curve macc of co2 emissions in china based on a provincial panel for the period of 2001 2010 the provincial marginal abatement cost mac of co2 emissions is estimated using a parameterized directional output distance function four types of model specifications are applied to fit the mac carbon intensity pairs the optimal specification controlling for various covariates is identified econometrically a scenario simulation of china s 40 45 carbon intensity reduction based on our macc is illustrated our simulation results show that china would incur a 559 623 yuan t roughly 51 57 increase in marginal abatement cost to achieve a corresponding 40 45 reduction in carbon intensity compared to its 2005 level

optimal path for controlling co2 emissions in china a perspective of efficiency analysis this paper examines the optimal control of co2 emissions from a perspective of efficiency analysis several centralized data envelopment analysis dea models are introduced to study the optimal allocation of co2 emissions under spatial temporal and spatial temporal allocation strategies respectively the models have been used to determine the optimal paths for controlling co2 emissions at provincial and regional levels in china a sensitivity analysis of the optimal path on the emission control coefficient under spatial temporal allocation strategy is further carried out our empirical results show that more developed regions should take emission reduction responsibility earlier than less developed regions in china of the three allocation strategies spatial temporal allocation strategy seems to be a better choice for achieving the optimal control of co2 emissions at country level since it is more encompassing by allowing both timing and spatial substitutions it is also found that there exists an inverted u shape relationship between the aggregate optimal gdp and the emission control coefficient which shows that modest emission reduction policy might be more appropriate for china in order to achieve the joint goals of economic development and co2 emission reduction

an empirical analysis of the co2 shadow price in chinese thermal power enterprises abstract this paper estimates the shadow price of co2 and explores its determinants for thermal power enterprises in china using a parametric quadratic directional distance function we evaluate the inefficiency and shadow price of co2 for 124 power enterprises in 2004 applying deterministic and econometric methods a regression analysis is undertaken to examine the factors that drive shadow prices our results indicate that there are large inefficiencies in terms of electricity production and co2 emissions the shadow price is a negative function of firm size age and coal share and is positively correlated with the technology level this correlation between shadow prices and its determinants is not sensitive to changing assumptions regarding directional vectors although such changes do alter the distribution of shadow prices the large variation witnessed in shadow prices across power enterprises argues in favor of market based regulation such as an emissions trading system as opposed to the command and control regulation currently used in china to minimize overall abatement cost

the choice of call provision terms evidence of the existence of agency costs of debt an examination of the provisions of bond issues reveals that most bonds prohibit firms from calling the issue during the initial years after which time the bond can be called at the option of the firm a substantial number of firms however also reserve the right to call the issue during this initial period for purposes other than refinancing at a lower coupon rate the additional flexibility which accompanies the option of early redemption can be used to reduce the agency costs of debt associated with future investment opportunities informational asymmetry and the risk incentive problem using a sample of newly issued bonds statistical tests are performed to show that there are in fact differences between firms which do and do not reserve the right of early redemption this paper shows that these differences provide empirical evidence which is consistent with the hypothesis that firms use the option of early redemption to reduce agency costs one of the decisions which a firm must make when it floats a bond issue concerns the use of a call provision if a call provision is included in the bond then the terms of the call provision must be specified such as the years to the first call the initial call price the call price in subsequent years and the circumstances under which a call provision can be used previous work in the area of call provisions focused on fluctuations in interest rates as the reason for their existence it was shown by krause 12 however that in an efficient capital market any call provision decision based on interest rate uncertainty is irrelevant recent work in agency theory has shown that the existing contractual relationships between bondholders and stockholders may not be a zero sum game under these circumstances such financing decisions as capital structure debt maturity and call provisions may not be irrelevant an examination of the call provisions of currently outstanding bond issues reveals an institutional feature which is often overlooked many bonds have a standard call provision which restricts the firm from calling the issue for a stated number of years followed by a period during which firms have the option to call the bond at a stated call price another group of bond issues however contain a two tiered type of call provision which allows the corporation to call the bond for purposes other than refinancing at a lower coupon rate during the initial years of the life of the bond after this initial period the firm has the option of calling the bond issue for any purpose

ambiguity aversion and incompleteness of financial markets it is widely thought that incomes risks can be shared by trading in financial assets but financial assets typically carry some risk idiosyncratic to them hence disposing incomes risk using financial assets will involve buying into the inherent idiosyncratic risk however standard theory argues that diversification would reduce the inconvenience of idiosyncratic risk to arbitrarily low levels this argument is less robust than what standard theory leads us to believe ambiguity aversion can exacerbate the tension between the two kinds of risks to the point that classes of agents may not want to trade some financial assets thus theoretically the effect of ambiguity aversion on financial markets is to make the risk sharing opportunities offered by financial markets less complete than it would be otherwise

eu climate policy up to 2020 an economic impact assessment in its fight against climate change the eu is committed to reducing its overall greenhouse gas emissions to at least 20 below 1990 levels by 2020 to meet this commitment the eu builds on segmented market regulation with an eu wide cap and trade system for emissions from energy intensive installations ets sectors and additional measures by each eu member state covering emission sources outside the cap and trade system the non ets sector furthermore the eu has launched additional policy measures such as renewable energy subsidies in order to promote compliance with the climate policy target basic economic reasoning suggests that emission market segmentation and overlapping regulation can create substantial excess costs if we focus only on the climate policy target in this paper we evaluate the economic impacts of eu climate policy based on numerical simulations with a computable general equilibrium model of international trade and energy use our results highlight the importance of initial market distortions and imperfections as well as alternative baseline projections for the appropriate assessment of eu compliance cost

marginal abatement costs of greenhouse gas emissions from european agriculture cost effectiveness and the eu non ets burden sharing agreement abstract we propose a quantitative assessment of the marginal abatement costs mac of greenhouse gas emissions from european agriculture and analyze the implications of the non ets burden sharing agreement bsa for this sector this assessment is based on mac reduced forms the generic specification of which enables simple parameterization and numerical computations such mac curves are parameterized for each member state using the outputs of a detailed model of the european agricultural supply they are then used to compute total and marginal abatement costs involved by the bsa targets as well as the cost effective effort sharing the corresponding emission price and abatement costs the main findings are i flexibility mechanisms such as a cap and trade system for agricultural emissions could reduce the total costs of meeting the 10 eu abatement target by a factor two to three relative to the strict implementation of each country s target ii the corresponding equilibrium emission price is found to be 32 42 tco2eq depending on the assumption regarding business as usual emissions and iii a cap and trade system with allowances based on the bsa targets would involve substantial transfers from eu 15 countries to new member states an important share of which being made of hot air

callable bonds reinvestment risk and credit rating improvements role of the call premium we identify the call premium in nonconvertible callable bonds as an effective contracting provision to address agency conflict due to reinvestment risk and credit rating improvements we analyze 4 495 bonds issued between 1980 and 2012 when interest rates are high a majority of investment grade issues and almost the entire subset with long maturities 20 years include a call premium when interest rates are low virtually all investment grade issues with long and short maturities are callable at par high yield issues are limited to short maturities by about 4 1 they include a call premium regardless of interest rate levels

convertible bond design and capital investment the role of call provisions if firms issue convertible securities to facilitate sequential investment the securities should be engineered to give sufficient flexibility to accommodate timing of follow on investment we examine call provisions in convertible bonds and argue that firms with investment options expected to expire sooner later will offer weaker stronger call protection we find that issues with weak or no call protection are offered by firms that invest greater amounts soon after issuance than those issuing convertibles with strong protection moreover capital expenditure levels during the 5 year period following issuance are inversely related to the length of call protection periods most convertible bonds and notes have call provisions and most provisions have important qualifications or protection broadly speaking convertibles may have absolute protection not callable hard call protection noncallable for a specified period provisional or soft call protection callable if certain conditions on stock price are met or no protection callable anytime in this study we investigate the relations between the strength and length of call protection and firms subsequent investment behavior our hypothesis is a natural implication of the sequential financing motive for convertible debt financing for example in mayers 1998 firms finance their planned multistage investment programs with convertibles besides mayers sequential financing motive other explanations for convertible financing include theories based on post issuance risk shifting jensen and meckling 1976 green 1984 heterogeneous risk assessment brennan and schwartz 1988 and asymmetric information stein 1992 in a recent study lewis rogalski and seward 2001 offer an explanation based on equity market rationing stein s 1992 model has at least an implicit role for callability but we believe mayers explanation has direct implications for the nature of call provisions that we examine here he argues that convertible financing is well suited to

marginal co2 abatement costs findings from alternative shadow price estimates for shanghai industrial sectors abstract shanghai one of the most developed cities in china is implementing a pilot regional carbon emission trading scheme estimating the marginal abatement costs of co2 emissions for the industrial sectors covered in shanghai s emission trading scheme provides the government and participating firms useful information for devising compliance policies this paper employs multiple distance function approaches to estimating the shadow prices of co2 emissions for shanghai industrial sectors our empirical results show that the overall weighted average of shadow price estimates by different approaches ranges between 394 5 and 1906 1 yuan ton which indicates that model choice truly has a significant effect on the shadow price estimation we have also identified a negative relationship between the shadow price of co2 emissions and carbon intensity and the heavy industries with higher carbon intensities tend to have lower shadow prices it has been suggested that shanghai municipal government take various measures to improve its carbon market e g using the marginal abatement costs of participating sectors firms as a criterion in the initial allocation of carbon emission allowances

plant level productivity efficiency and environmental performance of the container glass industry this paper presents a methodology and empirical results based on themalmquist productivity index we measure productivity while treatingpollution as an undesirable output our estimates show that technicalchange has contributed to productivity and environmental performancegrowth in the container glass industry an energy and pollution intensivesector changes in inter plant efficiency over time have made thisproductivity growth more rapid than otherwise would have occurred withthe underlying technical change the efficiency estimates show that thereare both opportunities to improve productivity and reduce pollution in thisindustry as well as productivity losses associated with the emissionscontrol the shadow prices for nox the undesirable output we analyze is quite high compared to other regulated sectors

financial contracting and the choice between private placement and publicly offered bonds the financial contracting in private placement bonds and publicly offered bonds are different our data show that private placement bonds are more likely to have restrictive covenants than public bonds private placement bonds are also more likely to be issued by smaller and riskier firms for investment grade firms that issue bonds in both markets our analysis shows that firms select the bond type to minimize financing costs we find significant differences in the pricing of private placement and publicly offered bonds and some of these differences appear to be related to the different institutional features between the two markets

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

marginal abatement costs of co2 emission reductions geographical flexibility and concrete ceilings an assessment using the poles model abstract the kyoto protocol envisage the setting up of flexibility mechanisms allowing annex b countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency the current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for annex b countries and also of introducing ceilings to trade this paper analyses the stakes and economic potential of adopting this instrument both for those countries that made commitments in kyoto and for developing countries it is based on a formal approach that allows for a consistent framework of analysis the emission permit market is in fact simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the poles model after analysing these marginal abatement cost curves and comparing them with those produced by other models we explore two different configurations for a competitive market a market limited to the annex b countries and a world market the results produced by the model show that widening the market to include developing countries is more effective than the annex b market solution it reduces the cost of implementing kyoto for oecd countries and at the same time allows the countries of the south to benefit from selling the permits this research also shows that introducing restrictions on exchanges for annex b countries could have a counter productive redistribution effect with the ethical argument that underlies that particular measure

compensating wage differentials for schooling risk in denmark in this paper we analyse the association between wage differentials and risk using detailed information on length and type of education as seen in danish administrative registers our contribution to the literature is that we distinguish between transitory time series and permanent cross sectional income shocks and estimate the compensation for both sorts of risk we find that wage risk in a given education cell is associated with higher wages while skewness is associated with lower wages as a robustness check we see that ad hoc risk measures based on earnings mobility indicators confirm these findings

negotiated measurement rules in debt contracts this paper investigates contractual definitions of net income and net worth and the cross sectional variation in definitions of net income in a large sample of private debt contracts to shed light on the debt contracting demand for accounting numbers the descriptive evidence indicates that removing transitory earnings is one principal concern in the measurement of earnings but not in the measurement of net worth in the extreme contracts are never written on comprehensive income as an earnings concept whereas accumulated other comprehensive income is included in net worth in most contracts in contrast conservative adjustment in the sense of including certain types of negative earnings but not the corresponding positive earnings does not seem to be a primary consideration in measuring net income and net worth cross sectionally i find that net income is more likely to be defined differently from the gaap when net income plays a more important role in a contract when the loan maturity is longer and when transitory earnings are less useful for debt contracting collectively the evidence shows that debt contracting parties choose contracting variables in a manner consistent with efficient contracting and that transitory earnings are relatively less useful in measuring firm performance for debt contracting

the optimality of call provision terms there is substantial variation in fixed price call provision terms call price premium and call protection i investigate determinants of call price call protection and estimated call option value

measuring environmental efficiency of industry a case study of thermal power generation in india technical and environmental efficiency of some coal fired thermal power plants in india is estimated using a methodology that accounts for firm s efforts to increase the production of good output and reduce pollution with the given resources and technology the methodology used is directional output distance function estimates of firm specific shadow prices of pollutants bad outputs and elasticity of substitution between good and bad outputs are also obtained the technical and environmental inefficiency of a representative firm is estimated as 0 06 implying that the thermal power generating industry in andhra pradesh state of india could increase production of electricity by 6 while decreasing generation of pollution by 6 this result shows that there are incentives or win win opportunities for the firms to voluntarily comply with the environmental regulation it is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms this result calls for the use of economic instruments like pollution taxes instead of command and control regulation used currently in india to reduce air pollution

the call sinking fund and term to maturity features of corporate bonds an empirical investigation do bond issuing firms attempt to choose the call sinking fund and term to maturity features of bonds to improve shareholder wealth this paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model the model is estimated on a sample of bonds issued between 1982 and 1986 model estimates show that a bond s call sinking fund and term to maturity features are statistically related to the issuing firm s retention ratio ratio of convertible to long term debt two year change in net operating income and whether the firm is listed on the nyse and included in the s p400 these findings support the view that firms financing highquality projects but facing information asymmetries choose shorter term medium term callable bonds with and without the sinking fund feature

evaluating corporate bonds and analyzing claim holders decisions with complex debt structure abstract although many different aspects of debt structures such as bond covenants and repayment schedules are empirically found to significantly influence values of bonds and equity many theoretical structural models still oversimplify debt structures and fail to capture phenomena found in financial markets this paper proposes a carefully designed structural model that faithfully models typical complex debt structures containing multiple bonds with various covenants for example the ability for an issuing firm to meet an obligation is modeled to rely on its ability to meet previous repayments and the default trigger is shaped according to the characteristics of its debt structure such as the amount and schedule of bond repayments thus our framework reliably provides theoretical insight and concrete quantitative measurements consistent with extant empirical research such as the shapes of yield spread curves under various firm s financial statuses and the impact of payment blockage covenants on newly issued and other outstanding bonds we also develop the forest a novel quantitative method to handle contingent changes in the debt structure due to premature bond redemptions a forest consists of several trees that capture different debt structures for instance those before or after a bond redemption this method can be used to analyze how poison put covenants in the target firm s bonds influence the bidder s costs of debt financing for a leveraged buyout or investigate how the presence of wealth transfer among the remaining claim holders due to a bond redemption influences the firm s call policy or further reconcile conflicts among previous empirical studies on call delay phenomena

bond calls credible commitment and equity dilution a theoretical and clinical analysis of simultaneous tender and call stac offers this paper is an exploration of the ability of game theory to explain real world corporate maneuvering we explore this issue by investigating bond tender offers accompanied by a threat to call nontendered bonds so called simultaneous tender and call stac offers we argue that stacs engender a transparent game played by bondholders and shareholders we model this game and use this model to predict the outcome of stacs finally we investigate the issue of whether this theoretical model explains the outcomes of four actual stac issues made by james river may department stores and houston lighting power company our clinical analysis provides support for the explanatory power of our model calibrating the predictions of the model with data from these stacs we demonstrate a correspondence between theory and actual corporate behavior as predicted by our model subgame perfection or threat credibility and preplay coordination are central to explaining the outcomes of the stacs