measuring the financial impact of demand response for electricity retailers abstract due to the integration of intermittent resources of power generation such as wind and solar the amount of supplied electricity will exhibit unprecedented fluctuations electricity retailers can partially meet the challenge of matching demand and volatile supply by shifting power demand according to the fluctuating supply side the necessary technology infrastructure such as advanced metering infrastructures for this so called demand response dr has advanced however little is known about the economic dimension and further effort is strongly needed to realistically quantify the financial impact to succeed in this goal we derive an optimization problem that minimizes procurement costs of an electricity retailer in order to control demand response usage the evaluation with historic data shows that cost volatility can be reduced by 7 74 peak costs drop by 14 35 and expenditures of retailers can be significantly decreased by 3 52

carbon pass through in the electricity sector an econometric analysis abstract we conduct an econometric analysis to investigate the carbon pass through in the greek electricity sector for this reason we utilize a rich micro level panel dataset including hourly data for 24 thermal power plants spanning the period from january 2014 to december 2017 in order to study the pass through of emissions costs to wholesale electricity prices we employ an instrumental variable approach our findings survived several robustness checks accounting for logged linear and non linear econometric specifications the empirical results indicate the existence of an almost complete pass through revealing that retailers fully internalize the cost of co2 permits this study incurs important policy implications since the complete pass through signify that wholesale electricity prices will increase at least in the short run however the overall effect on retail prices will be mostly affected by the amount of co2 permits and the fuel energy mix

an overview of hofstede inspired country level culture research in international business since 2006 kirkman lowe gibson s 2006 jibs article summarized and critiqued international business research inspired by the most cited book in the field hofstede s 1980 culture s consequences international differences in work related values hofstede 1980 2001 they identified a number of issues in this research and offered several recommendations for improving it in the future thus laying a strong foundation for hofstede related work since 2006 in this commentary we assess kirkman et al s 2006 impact on the field our review shows that their ideas have informed and inspired their own and other scholars work and have led to significant progress in the way in which hofstede s framework has been used in international business in the last decade here we specifically focus on the country level culture studies and assess how research has implemented kirkman et al s three main recommendations to explore cultural dimensions beyond those introduced by hofstede to distinguish between country effects and cultural effects and to show not only if culture matters but also how much it matters in addition to the overview we provide a comprehensive test of these recommendations showing how they can be put into research practice underscoring the theoretical and empirical relevance of the original 2006 article our commentary concludes with additional ideas on further strengthening hofstede inspired research at the country level of analysis

combining day ahead forecasts for british electricity prices abstract this paper considers how well the approach of combining forecasts extends to the context of electricity prices with the increasing popularity of regime switching and time varying parameter models for predicting power prices the multi model and evolutionary considerations that usually support the combining of simpler time series methods may be less applicable when the individual models incorporate these features we address this question with a backtesting analysis on british day ahead prices furthermore given the volatility of power prices and concerns about accurate forecasting under extreme price excursions we evaluate the results using various error metrics including expected shortfall the comparisons are furthermore carefully simulated to consider model selection uncertainty in order to realistically test the value of combining as an ex ante policy overall our results support combining for both accurate operational planning and risk management

conspicuous consumption and sophisticated thinking consumers purchase conspicuous goods to satisfy not only material needs but also social needs such as prestige in an attempt to meet these social needs producers of conspicuous goods like cars perfumes and watches highlight the exclusivity of their products in this paper we propose a monopoly model of conspicuous consumption using the rational expectations framework and then examine how purchase decisions are affected by the desire for exclusivity and conformity we show that snobs can have an upward sloping demand curve but only in the presence of consumers who are weakly followers laboratory tests lend support for this model prediction and for the rational expectations framework the experimental results suggest that subjects used some degree of sophisticated thinking to arrive at their first period decisions their behavior in the subsequent trials however can be adequately captured by a purely adaptive learning mechanism we discuss the implications of consumer learning for optimal dynamic pricing policy by a monopolist

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

oil and gas markets in the uk evidence from a cointegrating approach the paper examines the relationship between uk wholesale gas prices and the brent oil price over the period 1996 2003 in order to investigate whether oil and gas prices decoupled during this period as orthodox gas market liberalisation theory suggests tests for unit roots and cointegration are carried out and it is discovered that a long run equilibrium relationship between uk gas and oil prices exists moreover this relationship pre dates the opening of the uk mainland europe interconnector following a recursive methodology hansen h and johansen s 1999 some tests for parameter constancy in cointegrated var models econometrics journal 2 306 333 it was found that the cointegrating relationship is present throughout the sample period however the long run solutions seem to be more volatile evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas these findings do not support the assumption that gas prices and oil prices decouple

fitting semiparametric markov regime switching models to electricity spot prices abstract recently regime switching models have become the standard tool for modeling electricity prices these models capture the main properties of electricity spot prices well but estimation of the model parameters requires computer intensive methods moreover the distribution of the price spikes must be fully specified although the high volatility of the spikes makes it difficult to check such distributional assumptions consequently there are a number of competing proposals for the distribution in the spike regime as an alternative we propose a semiparametric markov regime switching model that leaves the distribution under the spike regime unspecified we show that the model parameters can be estimated by employing robust statistical techniques this presents an alternative to the existing estimation methods that are based on computer intensive numerical maximization of the likelihood function the model in combination with the estimation framework is easier to estimate needs less computation time and distributional assumptions to show its advantages we compare the proposed model with a well established markov regime switching model in a simulation study furthermore we apply the model to log prices for the australian electricity market the results are in accordance with the results from the simulation study indicating that the proposed model might be advantageous whenever the distribution of the spike process is not sufficiently known the results are thus encouraging and suggest the use of our approach when modeling electricity prices and pricing derivatives

analysis of the nonlinear response of electricity prices to fundamental and strategic factors this paper seeks to characterize the nonlinear effects of exogenous factors on wholesale electricity price formation using a special type of regime switching the logistic smooth transition regression model we capture the mean reverting and spiky characteristics of spot prices and at the same time estimate their rather complex relationships to fundamentals we show that for different trading periods within the day prices can be a function of fundamentally different drivers in addition to including the usual fuel price demand and reserve margin drivers this analysis tests whether a market concentration variable is as significant in the high frequency context as it is known to be over the longer term the analysis is also innovative in testing the nonlinear influence of carbon emission trading

the influence of operational flexibility on the exploitation of co2 reduction potential in industrial energy production energy conservation is a key measure for reducing co2 emissions however realising the emission reduction potential of an energy conservation investment depends on many factors such as energy prices the eu emissions trading scheme has made the investment analysis more complicated and increased the economic value of operational flexibility under fluctuating carbon prices the different operational options in industrial energy production complicate the estimation of co2 reduction potential in the investment phase increasing operational flexibility enables optimisation in the economic dimension which may lead to less than optimum co2 reduction in our case study which analysed the effects of an energy conservation investment made in the pulp and paper industry the deviation from the expected emission reduction was around 30 over the period from 2000 to 2007 however it seems that with high carbon prices increasing operational flexibility has no significant effect on the carbon emissions in policy making the freedom of action that is made possible by increasing operational flexibility should be taken into account when evaluating the contribution of an individual energy efficiency investment towards meeting the national targets for energy efficiency improvement and co2 emission reduction

national business ideology and employees prosocial values employees prosocial values have been shown to foster helping cooperating and volunteering behaviors which in turn increase firm performance however despite the importance of prosocial values there is a general neglect of this area in the international arena as more trade occurs globally interest in cross cultural prosocial values is growing we therefore build on socialization theory and introduce national business ideology as a country level determinant of employees prosocial values we thus argue that transformational leadership and professional altruism are key elements of a national business ideology s stimulation of employees prosocial values while corporate corruption is considered to be an impediment based on 19 026 individuals from 17 countries our cross level analyses point to the national business ideology explaining national level variances above and beyond cultural aspects results support our hypothesis that national business ideology including transformational leadership and professional altruism is positively related to employees prosocial values the hypothesis on corporate corruption however was not supported instead results indicate that employees apply rationalization strategies to justify corruption with prosocial values being important for organizational performance as well as social welfare in general we thus draw attention to socialization processes in national corporate work contexts

electricity derivatives pricing with forward looking information in order to increase overall transparency on key operational information power transmission system operators publish an increasing amount of fundamental data including forecasts of electricity demand and available capacity we employ a fundamental model for electricity prices which lends itself well to integrating such forecasts while retaining ease of implementation and tractability to allow for analytic derivatives pricing formulae in an extensive futures pricing study the pricing performance of our model is shown to further improve based on the inclusion of electricity demand and capacity forecasts thus confirming the general importance of forward looking information for electricity derivatives pricing however we also find that the usefulness of integrating forecast data into the pricing approach is primarily limited to those periods during which electricity prices are highly sensitive to demand or available capacity whereas the impact is less visible when fuel prices are the primary underlying driver to prices instead

robust estimation and forecasting of the long term seasonal component of electricity spot prices when building stochastic models for electricity spot prices the problem of uttermost importance is the estimation and consequent forecasting of a component to deal with trends and seasonality in the data while the short term seasonal components daily weekly are more regular and less important for valuation of typical power derivatives the l ong term seasonal components ltsc seasonal annual are much more diffi cult to tackle surprisingly in many academic papers dealing with electricity spot price modeling the importance of the seasonal decomposition is neglected and the problem of forecasting it is not considered with this paper we want to fill the gap and present a thorough study on estimation and forecasting of the ltsc of electricity spot prices we consider a battery of models based on fourier or wavelet decomposition combined with linear or exponential decay we find that all considered wavelet base d models are significantly better in terms of forecasting spot prices up to a year ahead than all considered sine based models this result questions the validity and usefulness of stochastic models of spot electricity prices built on sinusoidal long term seasonal components

the potential of decentralized power to heat as a flexibility option for the german electricity system a microeconomic perspective abstract one fundamental challenge of the german energy transition for the electricity market is the growing imbalance between inflexible generation and generally inelastic load against this background we investigate the future potential of decentralized power to heat p2h as an additional demand side flexibility option for the german electricity system precisely we analyze the case of hybrid systems where conventional gas and oil condensing boiler systems are equipped with an electric heating rod in contrast to previous approaches we set our focus on the economic incentives at household level only if the switch to a p2h hybrid system can reduce individual heating expenses significantly a considerable number of these systems will be installed for this purpose we implemented an integrated approach combining three distinct simulation modules first a stochastic simulation of the electricity spot market prices in 2020 was conducted second average heat load profiles were generated based on a standard bottom up analysis both results were then fed into an optimization model calculating the cost minimizing paths of heat generation at household level during the year 2020 the simulated annual savings prove modest as long as household electricity prices are not heavily reduced through political influence

econometric analysis of australian emissions markets and electricity prices emissions trading schemes aim to reduce the emissions in certain pollutants using a market based scheme where participants can buy and sell permits for these emissions this paper analyses the efficiency of the two largest schemes in australia the nsw greenhouse gas abatement scheme and the mandatory renewable energy trading scheme through their effect on the electricity prices from 2004 to 2010 we use a long run structural modelling technique for the first time on this market it provides a practical long run approach to structural relationships which enable the determination of the effectiveness of the theoretical expectations of these schemes the generalised forecast error variance decomposition analysis finds that both schemes emissions prices have little effect on electricity prices generalised impulse response function analysis support this finding indicating that when shocks are applied to electricity by the two schemes it returns to equilibrium very quickly this indicates that these schemes are not having the effect anticipated in their legislation

internal supply chain coordination in the electric utility industry abstract electric utilities have a well established vertical internal and external supply chain theoretically information sharing involving production inventory and other policy variables between chain entities can improve supply chain performance such sharing relies on a systematic determination of the optimal policy variables for the chain this paper presents an analysis of the electric utility s decision problem based on an optimal control model in a competitive market environment optimal production and inventory policies are developed for a centralized supply chain under full information sharing the model and policies are tested with electric utility industry data and performance implications are discussed for electric utility managers and public regulators

factor models in the german electricity market stylized facts seasonality and calibration abstract the class of arithmetic factor models is flexible enough to model all stylized facts occurring in electricity markets including negative prices while still yielding tractable derivative prices in this paper we conduct a thorough review of the requirements and possibilities of factor models we compare different seasonality functions and study their power to deseasonalise day ahead spot prices from the epex germany austria market furthermore we introduce an alternative method to estimate mean reversion speed based on arma time series and a method to evaluate the distributional fit of the model to realised market prices which we apply to two non gaussian estimated models

balancing energy strategies in electricity portfolio management traditional management of electricity portfolios is focused on the day ahead market and futures of longer maturity within limits market participants can however also resort to the balancing energy market to close their positions in this paper we determine strategic positions in the balancing energy market and identify corresponding economic incentives in an analysis of the german balancing energy demand we find that those strategies allow an economically optimal starting point for real time balancing and create a marketplace for flexible capacity that is more open than alternative marketplaces the strategies we proffer in this paper we believe will contribute to an effective functioning of the electricity market

carbon pricing and electricity markets the case of the australian clean energy bill abstract we examine the impact of the clean energy bill on the price behavior of electricity futures contracts in the australian national electricity market first we compute ex ante forward risk premiums in the pre tax period until june 2012 then derive market implied expectations about additional costs of the carbon pricing mechanism cpm on generators as well as pass through rates during the carbon tax july 2012 june 2014 and post tax after july 2014 periods our results suggest that the observed carbon premiums became increasingly higher once the carbon tax had been proposed and subsequently legislated in 2011 during periods where market participants could be relatively certain that the tax would be effective we find expected carbon pass through rates between 67 and 150 which seem to be inversely related to emission intensities in the regional markets our results are also a clear indication of strong policy uncertainty with regards to the cpm and suggest that in the future a stable and long term policy framework would be required for a carbon pricing mechanism to have its full effect

heterogeneous price dynamics in u s regional electricity markets abstract the u s electricity wholesale market is organized in several deregulated regional markets this paper compares price dynamics of electricity in the u s wholesale markets and shows that electricity prices from the west and east coasts have different regime dynamics our methodology suggests that electricity prices are better parameterized by four regimes with different levels of volatility additionally west and east coast markets differ in the time spent in each regime the extremely high volatility regime describes west coast prices during the california electricity crisis but east coast prices are also frequent in that regime we find evidence of synchronization of price dynamics in the mean reverting and highest volatility regimes i e prices from the east and west coasts tend to be in the same regimes at the same time

a model for energy pricing with stochastic emission costs we use a supply demand approach to value energy products exposed to emission cost uncertainty we find closed form solutions for a number of popularly traded energy derivatives such as forwards european call options written on spot prices and european call options written on forward contracts our modeling approach is to first construct noisy supply and demand processes and then equate them to find an equilibrium price this approach is very general while still allowing for sensitivity analysis within a valuation setting our assumption is that in the presence of emission costs traditional supply growth will slow down causing output prices of energy products to become more costly over time however emission costs do not immediately cause output price appreciation but instead expose individual projects particularly those with high emission outputs to much more extreme risks through the cost side of their profit stream our results have implications for hedging and pricing for producers operating in areas facing a stochastic emission cost environment

client profitability of diffusion segments across countries for multi generational innovations the influence of firm market and cross national differences there is scant research on the important managerial question of how to maximize returns on investments in either international business or international marketing literature we propose and test a conceptual framework using data from a large technology manufacturer service provider despite early adoption by innovators and early adopters the early majority segment is most profitable however the late majority segment and the early adopters segment are the next most profitable in the developed and emerging countries respectively we propose a decision support framework incorporating cross national distances on single generation and multi generation profitability for mnes offering multi generational products in multinational markets to be more profitable

modelling energy spot prices empirical evidence from nymex this paper investigates the behaviour of spot prices in eight energy markets that trade futures contracts on nymex we consider two types of models a mean reverting model and a spike model with mean reversion that incorporates two different speeds of mean reversion one for the fast mean reverting behaviour of prices after a jump occurs and another for the slower mean reversion rate of the diffusive part of the model we also extend these models to incorporate time varying volatility in their specification modelled as a garch and an egarch process we compare the relative goodness of fit of the different modelling variations both in sample using monte carlo simulations as well as out of sample in a value at risk var setting our results indicate the presence of a leverage effect for wti heating oil and heating oil wti crack spread whereas for the remaining energy markets we find the presence of an inverse leverage effect also the addition of the egarch specification for the volatility process improves both the in sample fit as well as the out of sample var performance for most energy markets that we examine

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

a dynamic network analysis of spot electricity prices in the australian national electricity market abstract this study applies dynamic network analysis to the power sector examining the relationship between regional spot electricity prices in the australian national electricity market nem in particular we employ principal component analysis and generate granger causality networks to examine the degree of interconnectedness of the nem in a time varying setting we find that the derived measures of interdependence can be related to actual market events such as price spikes unexpected high demand for electricity sudden increases in price volatility rebidding of dominant generators the temporary or permanent outage of major power stations and upgrades and limitations in transmission capacity in the analysed network we find that stronger dependence is exhibited by regional markets that are linked through interconnectors while the direction of granger causality can be related to interregional trade we further examine the usefulness of the derived measures for forecasting distributional characteristics of spot prices such as the maximum price volatility price spreads or upcoming periods of price spikes our results suggest that the derived network measures have predictive power albeit limited for the behaviour of spot electricity prices in the nem

a stochastic fuel switching model for electricity prices abstract this paper develops and applies a novel electricity price model we reproduce the merit order of a thermal dominated electricity system by establishing a non linear dependency of wholesale electricity prices on the prices of fuels coal and natural gas and of co 2 emission allowances the coefficients are estimated using a markov switching regression this approach might prove valuable for cross hedging positions in the fuel electricity and emission spot markets it is also of use for studying the degree to which electricity prices in different countries reflect fuel and emission cost applying the model to the electricity markets of the uk and germany we find that british electricity prices are quite well explained by short run cost factors while the german ones are less well explained

value of information in capacitated supply chains we incorporate information flow between a supplier and a retailer in a two echelon model that captures the capacitated setting of a typical supply chain we consider three situations 1 a traditional model where there is no information to the supplier prior to a demand to him except for past data 2 the supplier knows the s s policy used by the retailer as well as the end item demand distribution and 3 the supplier has full information about the state of the retailer order up to policies continue to be optimal for models with information flow for the finite horizon the infinite horizon discounted and the infinite horizon average cost cases study of these three models enables us to understand the relationships between capacity inventory and information at the supplier level as well as how they are affected by the retailer s s s values and end item demand distribution we estimate the savings at the supplier due to information flow and study when information is most beneficial

the impacts of eu co2 emissions trading on electricity markets and electricity consumers in finland abstract in this paper the likely impacts of the eu emission trading system on the nordic electricity market and on the position of various market actors are assessed in its first phase the eu co 2 emission trading system includes power plants with thermal capacity greater than 20 mw metals industry pulp and paper industry mineral industry and oil refineries this paper describes the assessment done for the finnish minister of trade and industry analysing the likely impacts on power plant operators on energy intensive industries on other industries and on other consumer groups the impacts of emissions trading were studied with the vtt electricity market model and with the times energy system model the annual average electricity price was found to rise 0 74 eur mw h 1 for every 1 tonne co 2 1 in the nordic area large windfall profits were estimated to incur to electricity producers in the nordic electricity market in finland metals industry and private consumers were estimated to be most affected by the electricity market price increases expanded nuclear power generation could limit the increases in the prices of electricity to one third compared to those in the base case

the case of negative day ahead electricity prices in recent years germany has significantly increased its share of electricity produced from renewable sources which is mainly due to the renewable energy act eeg the eeg substantially impacts the dynamics of intra day electricity prices by increasing the likelihood of negative prices in this paper we present a non gaussian process to model german intra day electricity prices and propose an estimation procedure for this model most importantly our model is able to generate extreme positive and negative spikes a simulation study demonstrates the ability of our model to capture the characteristics of the data

an empirical comparison of alternate regime switching models for electricity spot prices one of the most profound features of electricity spot prices are the price spikes markov regime switching mrs models seem to be a natural candidate for modeling this spiky behavior however in the studies published so far the goodness of fit of the proposed models has not been a major focus while most of the models were elegant their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored with this paper we want to fill the gap we calibrate and test a range of mrs models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well we find that the most universal and robust structure is that of an independent spike 3 regime model with heteroscedastic diffusion type base regime dynamics and shifted spike regime distributions

comparing smooth transition and markov switching autoregressive models of us unemployment logistic smooth transition and markov switching autoregressive models of a logistic transform of the monthly us unemployment rate are estimated by markov chain monte carlo methods the markov switching model is identified by constraining the first autoregression coefficient to differ across regimes the transition variable in the lstar model is the lagged seasonal difference of the unemployment rate out of sample forecasts are obtained from bayesian predictive densities although both models provide very similar descriptions bayes factors and predictive efficiency tests both bayesian and classical favor the smooth transition model copyright 2008 john wiley sons ltd

modeling co2 emission allowance prices and derivatives evidence from the european trading scheme this paper studies the three main markets for emission allowances within the european union emissions trading scheme eu ets powernext nord pool and european climate exchange ecx the analysis suggests that the prohibition of banking of emission allowances between distinct phases of the eu ets has significant implications in terms of futures pricing motivated by these findings we develop an empirically and theoretically valid framework for the pricing and hedging of intra phase and inter phase futures and options on futures respectively

asymmetric volatility in european day ahead power markets a comparative microeconomic analysis this paper uses high frequency spot price data from fourteen wholesale electricity markets in europe to analyze asymmetric volatility in european day ahead power markets with exponential garch e garch and tarch models our data set ranges from 1992 to 2015 and consists of approximately 926 000 observations as such this paper constitutes the most extensive and comprehensive work conducted so far on european power markets to the best of our knowledge unlike most of the literature that treats price as a continuous variable and attempts to model its trajectory this paper adopts a unique approach and regards each hour in a day a separate market the results show in post 2008 period the most expensive electricity is consumed in turkey ireland and uk while the cheapest power is in russia nordic countries and czech republic russia poland and czech republic have the least volatile markets while france ireland and portugal have the most volatile ones volatility has decreased in many european countries in post 2008 period besides we find magnitude effect is usually larger than the leverage effect meaning that the absolute value of price change is relatively more important than the sign of the change whether it is an increase or a decrease to explain volatility in european day ahead power markets moreover the results imply there is not a uniform inverse leverage effect in electricity prices that is price increases are more destabilizing in some european markets e g poland slovenia ireland netherlands than comparable price decreases but vice versa also holds true in some other countries e g portugal and france leverage or inverse leverage effect in post 2008 period is relatively stronger in portugal france and ireland but its impact is quite limited in turkey and germany furthermore although the impact of seasonality on prices is obvious a specific pattern cannot be identified finally large changes in the volatility will affect future volatilities for a relatively longer period of time in nordic countries ireland and the uk while changes in current volatility will have less effect on future volatilities in czech republic russia and turkey

a note on using the hodrick prescott filter in electricity markets abstract recently nowotarski et al 2013 have found that wavelet based models for the long term seasonal component ltsc are not only better in extracting the ltsc from a series of spot electricity prices but also significantly more accurate in terms of forecasting these prices up to a year ahead than the commonly used monthly dummies and sine based models however a clear disadvantage of the wavelet based approach is the increased complexity of the technique as compared to the other two classes of ltsc models and the resulting need for dedicated numerical software which may not be readily available to practitioners in their work environments to facilitate this problem we propose here a much simpler yet equally powerful method for identifying the ltsc in electricity spot price series it makes use of the hodrick prescott hp filter a widely recognized tool in macroeconomics

are electricity risk premia affected by emission allowance prices evidence from the eex nord pool and powernext the links between emission and energy markets are of great interest to practitioners academics and policy makers in this paper it is conjectured that a positive relationship exists between emission allowance spot returns and electricity risk premia within the european union emissions trading scheme eu ets we discuss how this can be justified on the basis of the substantial uncertainties in the carbon markets we also argue that this link could be due to trading strategies followed by electricity producers who attempt to exploit their initial allocation of free allowances analysis of data from three major markets the eex nord pool and powernext offers empirical support to our conjecture these findings have significant policy implications since they imply that efforts should be made in order to reduce the uncertainty in the carbon markets by clearly defining the eu ets regulative framework and design over the next years moreover our results suggest that the allocation of free allowances and their unrestricted trading enable electricity producers to accomplish windfall profits in the derivatives market at the expense of other market participants

forecasting the joint distribution of australian electricity prices using dynamic vine copulae abstract we consider the problem of modelling and forecasting the distribution of a vector of prices from interconnected electricity markets using a flexible class of drawable vine copula models where we allow the dependence parameters of the constituting bivariate copulae to be time varying we undertake in sample and out of sample tests using daily electricity prices and evidence that our model provides accurate forecasts of the underlying distribution and outperforms a set of competing models in their abilities to forecast one day ahead conditional quantiles of a portfolio of electricity prices our study is conducted in the australian national electricity market nem which is the most efficient power auction in the world electricity prices exhibit highly stylised features such as extreme price spikes price dependency between regional markets correlation asymmetry and non linear dependency the developed approach can be used as a risk management tool in the electricity retail industry which plays an integral role in the apparatus of modern energy markets electricity retailers are responsible for the efficient distribution of electricity while being exposed to market risk with extreme magnitudes

how does germany s green energy policy affect electricity market volatility an application of conditional autoregressive range models abstract based on a dynamic model for the high low range of electricity prices this article analyses the effects of germany s green energy policy on the volatility of the electricity market using european energy exchange data from 2000 to 2015 we find rather high volatility in the years 2000 2009 but also that the weekly price range has significantly declined in the period following the year 2009 this period is characterised by active regulation under the energy industry law enwg the eu emissions trading directive etd and the renewable energy law eeg in contrast to the preceding period price jumps are smaller and less frequent especially for day time hours implying that current policy measures are effective in promoting renewable energies while simultaneously upholding electricity market stability this is because the regulations strive towards a more and more flexible and market oriented structure which allows better integration of renewable energies and supports an efficient alignment of renewable electricity supply with demand

modelling interregional links in electricity price spikes abnormally high price spikes in spot electricity markets represent a significant risk to market participants as such a literature has developed that focuses on forecasting the probability of such spike events moving beyond simply forecasting the level of price many univariate time series models have been proposed to dealwith spikes within an individual market region this paper is the first to develop a multivariate self exciting point process model for dealing with price spikes across connected regions in the australian national electricity market the importance of the physical infrastructure connecting the regions on the transmission of spikes is examined it is found that spikes are transmitted between the regions and the size of spikes is influenced by the available transmission capacity it is also found that improved risk estimates are obtained when inter regional linkages are taken into account

the emissions trading paradox abstract this article considers the price history of co2 allowances in the eu emission trading scheme since european emissions trading started in 2005 the prices of allowances have varied between less than one and thirty euro per ton of co2 this previously unpredicted volatility and more notably a significant price crash in may 2005 led to the hypothesis that electricity producers might use their market power to influence the prices of allowances besides market power the combination of information asymmetry and price interdependencies between prices of primary goods especially electricity and allowances plays an important role in explaining the emissions trading paradox the model presented will show that banking can lead to such a price crash if market participators act rationally furthermore in such a scenario banking can be profitable for sellers at the cost of buyers

country of origin effects in developed and emerging markets exploring the contrasting roles of materialism and value consciousness despite growing evidence about differences in the attitudes and behaviors of consumers in emerging and developed markets there is little research on the differences in country of origin coo effects on their evaluation behavioral intentions bis and actual purchase of imported products this paper introduces a new conceptual framework incorporating consumer ethnocentrism cet materialism mat and value consciousness vc to hypothesize several differences in the influence of coo effects on consumers from developed and emerging markets a web based study with 1752 consumers in four countries representing two developed markets the uk and the usa and two emerging markets china and india shows significant differences in the moderating influence of cet mat and vc on the effects of coo on the evaluations and bis for a fictitious passenger car brand and on the actual choice of car brands owned by them the findings highlight the importance of looking beyond cet at other relevant psychographic variables to understand the differences in motivations underlying consumer perceptions and behavior towards imported products

a literature based multi criteria evaluation of the eu ets abstract this article reviews the existing literature on the european union emission trading scheme eu ets focusing on empirical ex post research since the end of the first period 2007 the literature is presented through a multi criteria evaluation concerning environmental effectiveness despite over allocation during the first period abatement is estimated between 2 5 and 5 trade driven carbon leakage was not observed even if long term economic models predict divergent leakage estimates for certain at risk sectors the abatement target was likely to be below an economically efficient level but was reached in a fairly cost effective way even if free allocation gave rise to several distortional effects equity concerns were manifold and constitute a major drawback to the policy finally institutional feasibility can be considered positive in that the eu ets passed the european legislative process unlike the previously proposed eu wide carbon tax

electricity pool prices a case study in nonlinear time series modelling this paper considers modelling the behaviour of prices in the english and welsh wholesale electricity pool since the creation of this spot market in 1990 the process turns out to be nonlinear and a logistic smooth transition autoregressive model is fitted and shown to be superior to a linear alternative the behaviour of the estimated model is discussed and it is seen that nonlinearity is needed to describe the institutional characteristics and historical path of pool prices

modelling price and volatility inter relationships in the australian wholesale spot electricity markets this paper examines the inter relationships of wholesale spot electricity prices among the four regional electricity markets in the australian national electricity market nem namely new south wales queensland south australia and victoria using the constant conditional correlation and tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 and engle s engle r 2002 dynamic conditional correlation a sample class of multivariate generalized autoregressive conditional heteroskedasticity models journal of business and economic statistics 20 3 339 350 dynamic conditional correlation multivariate garch models tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 dynamic conditional correlation multivariate garch model which takes account of the student t specification produces the best results at the univariate garch 1 1 level the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets in the dynamic conditional correlation equation the highest conditional correlations are evident between the well connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well interconnected markets

forecasting electricity spot prices using time series models with a double temporal segmentation the french wholesale market is set to expand in the next few years under european pressure and national decisions in this article we assess the forecasting ability of several classes of time series models for electricity wholesale spot prices at a day ahead horizon in france electricity spot prices display a strong seasonal pattern particularly in france given the high share of electric heating in housing during winter time to deal with this pattern we implement a double temporal segmentation of the data for each trading period and season we use a large number of specifications based on market fundamentals linear regressions markov switching ms models and threshold models with a smooth transition an extensive evaluation on french data shows that modelling each season independently leads to better results among nonlinear models ms models designed to capture the sudden and fast reverting spikes in the price dynamics yield more accurate forecasts finally pooling forecasts give more reliable results

diagnosing measurement equivalence in cross national research many researchers have pointed out that it is necessary to ensure measurement equivalence in cross national comparative research three aspects of measurement equivalence translation metric and calibration equivalence are necessary to establish the cross national reliability and validity of items used to measure theoretical constructs this paper discusses these issues and proposes two recently developed empirical techniques multiple group lisrel and optimal scaling for use in diagnosing cross national measurement equivalence these techniques are illustrated by reanalysis of a pioneering u s and japanese study the two techniques yield convergent results indicating measurement equivalence for some but not all ordinal level items under consideration the findings demonstrate that the proposed methods are useful diagnostic tools for exploring measurement equivalence several suggestions for reducing the likelihood of problems with measurement equivalence and a number of methods for dealing with items where lack of equivalence persists are also discussed

an options pricing approach to ramping rate restrictions at hydro power plants this paper investigates the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems the optimal ramping decision is specified as an optimal control problem which results in a hamilton jacobi bellman hjb equation electricity prices are modelled as a regime switching stochastic process the optimal control is determined by solving the hjb equation numerically using a fully implicit finite difference approach with semi lagrangian time stepping the paper focuses on the effect of ramping restrictions on a hydro plant s value and optimal operations and provides an analysis of which factors cause ramping restrictions to have a greater or lesser impact on profitability it is shown that hydro plant value is negatively affected by ramping restrictions but the extent of the impact depends on key parameters which determine the desirability of frequent changes in water release rates interestingly for the case considered value is not sensitive to ramping restrictions over a large range of restrictions the results point to the importance of accurately modelling electricity prices in gauging the trade offs involved in imposing restrictions on hydro operators which may hinder their ability to respond to volatile electricity prices and meet peak demands

the impact of renewable energies on eex day ahead electricity prices in this paper we analyze the impact of renewable energies wind and photovoltaic on the formation of day ahead electricity prices at eex we give an overview of the policy decisions concerning the promotion of renewable energy sources in germany and discuss their consequences on day ahead prices an analysis of electricity spot prices reveals that the introduction of renewable energies enhances extreme price changes in the frame of a dynamic fundamental model we show that there has been a continuous electricity price adaption process to market fundamentals furthermore the fundamental drivers of prices differ among hours with different load profiles our results imply that renewable energies decrease market spot prices and have implications on the traditional fuel mix for electricity production however the prices for the final consumers increased overall because they must pay in addition the feed in tariffs for the promotion of renewable energy

values schemas and norms in the culture behavior nexus a situated dynamics framework international business ib research has predominantly relied on value constructs to account for the influence of societal culture notably hofstede s cultural dimensions while parsimonious the value approach s assumptions about the consensus of values within nations and the generality and stability of cultural patterns of behavior are increasingly challenged we review two promising alternatives the constructivist approach centering on schemas and the intersubjectivist approach centering on norms and the evidence that demonstrates their usefulness in accounting for international differences in the behavior of managers employees and consumers we propose a situated dynamics framework specifying the role of values schemas and norms in accounting for cultural differences and delineating conditions under which each causal mechanism is operative values play a more important role in accounting for cultural differences in weak situations where fewer constraints are perceived schemas play a more important role when situational cues increase their accessibility and relevance and norms play a more important role when social evaluation is salient directions for future research based on this integrative framework and its implications for the measurement of culture and application in ib are discussed

traversing cultural boundaries in ib the complex relationships between explicit country and implicit cultural group boundaries at multiple levels international business ib scholars continue to struggle to theorize the relationship between country and cultural group boundaries to progress we first consider functional institutional and critical event explanations for cultural characteristics and boundaries second we contrast theories of explicit global structure based on countries with theories based on implicit cultural groups third we consider the implications of explicit country based and implicit culture group based theorizing for the relationship between explicit country boundaries and implicit cultural group boundaries we do so at three levels that are roughly analogous in country based and culture group based theorizing country ethnic group country cluster civilization and within country region subcultural group political science and other fields that help to understand the relationship between countries and cultural groups but that seldom appear in ib discussions of culture are emphasized one main conclusion is that countries remain linked to cultures because of continuing political reasons for cultural groups to seek to be governed by co ethnics political considerations other than cultural identity however also continue to promote important discontinuities between country and cultural group boundaries we suggest that ib scholars and scholarly ib associations should reconsider their traditional way of defining the ib field because of our advancing understanding of the complex mix of correspondence and discontinuity between country and cultural group boundaries

forecasting power prices using a hybrid fundamental econometric model we investigate the performance of two hybrid forecasting models to predict the next day base load electricity prices on the apx power exchange for great britain hybrid models have often been advocated as a synthetic method for forecasting but it is an open question how well they perform at the day ahead stage a conventional hybrid approach combines a fundamental model formulated with supply stack modeling with an econometric model using data on price drivers we extend this model to one based upon logistic smooth transition regression which represents a regime switching for periods of structural change empirical results for out of sample forecasting using both hybrid approaches are discussed and compared to non hybrid time series forecasting methods

transmission of prices and price volatility in australian electricity spot markets a multivariate garch analysis this paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the australian national electricity market namely new south wales queensland south australia the snowy mountains hydroelectric scheme and victoria a multivariate generalised autoregressive conditional heteroskedasticity model is used to identify the source and magnitude of price and price volatility spillovers the results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets this appears to be directly related to the physical transfer limitations of the present system of regional interconnection nevertheless the large number of significant own volatility and cross volatility spillovers in all five markets indicates the presence of strong autoregressive conditional heteroskedasticity and generalised autoregressive conditional heteroskedasticity effects this indicates that shocks in some markets will affect price volatility in others finally and contrary to evidence from studies in north american electricity markets the results also indicate that australian electricity spot prices are stationary

unintentional unavoidable and beneficial knowledge leakage from the multinational enterprise knowledge leakage as an undesirable outcome for mnes is an accepted view in ib literature we challenge this view and argue that knowledge leakage is often unintentional unavoidable and beneficial for the mne in a highly networked and information rich society knowledge leakage from mnes 1 happens naturally due to interfirm relationships interactions and socialization 2 is unavoidable due to employee mobility and 3 facilitates knowledge inflows due to the reciprocity nature of knowledge exchange and hence is beneficial for mnes in addition the costs of protecting knowledge incurred by an mne will often outweigh the benefits

asia s materialists reconciling collectivism and materialism materialism has an ugly face the dominant view of materialism regards materialists as self prioritizing individuals who oppose collective and prosocial goals in favor of a lifestyle led by money possessions and status the present research argues that there is a side of materialism that is concerned with collective oriented interests we examine the nature and consequences of collective oriented materialism the belief system that ascribes importance to possessions for their symbolic and signaling capacities to construct desirable social attributes drawing from cultural and consumer theories we find considerable support that materialists espouse a collective oriented quality to an otherwise self oriented interest towards possessions

first evidence of asymmetric cost pass through of eu emissions allowances examining wholesale electricity prices in germany abstract we test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices asymmetric cost pass through using an autoregressive distributed lag model we confirm this hypothesis for the german market

risk premiums in the german day ahead electricity market this paper conducts an empirical analysis of risk premiums in the german day ahead electricity wholesale market we compare hourly price data of the european energy exchange eex auction and of the continuous over the counter otc market which takes place prior to the eex auction data provided by the energy exchange austria exaa has been used as a snapshot of the otc market two hours prior to the eex auction ex post analysis found market participants are willing to pay both significant positive and negative premiums for hourly contracts the largest positive premiums were paid for high demand evening peak hours on weekdays during winter months by contrast night hours on weekends featuring lowest demand levels display negative premiums additionally ex ante analysis found a strong positive correlation between the expected tightness of the system and positive premiums for this purpose a tightness factor has been introduced that includes expectations of fundamental factors such as power plant availability wind power production and demand hence findings by longstaff and wang 2004 can be supported that power traders in liberalised markets behave like risk averse rational economic agents

mapping world cultures cluster formation sources and implications this paper extends and builds on ronen and shenkar s synthesized cultural clustering of countries based on similarity and dissimilarity in work related attitudes the new map uses an updated dataset and expands coverage to world areas that were non accessible at the time cluster boundaries are drawn empirically rather than intuitively and the plot obtained is triple nested indicating three levels of similarity across given country pairs also delineated are cluster adjacency and cluster cohesiveness which vary from the highly cohesive arab and anglo clusters to the least cohesive confucian and far eastern clusters exploring predictors of cluster formation we draw on the ecocultural perspective and other inputs and examine the combined role of language religion and geography in generating cluster formation we find that these forces play a prominent yet complex role for instance the religion and language brought by the spanish fail to create a singular cohesive latin american cluster akin to the anglo cluster the role of economic variables is similarly considered finally comparing the current map with that of 1985 we find strong support for the divergence vs convergence argument implications for international business are delineated

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

the impact of renewables on electricity prices in germany an estimation based on historic spot prices in the years 2011 2013 abstract germany s public opinion and media usually attribute increasing electricity prices to the high share of renewables in the german power system but average electricity prices at the european energy exchange dropped during the last years due to an excess of renewable energy this study uses historic market data in order to quantify the effect of renewables on prices historic demand and supply curves from 2011 to 2013 have been used to reconstruct electricity prices under the assumption that no wind and pv would be available the analysis reveals an astonishingly high increase of market prices up to 5 29 ct kwh due to a lack of non renewable power capacities in 2013 the available conventional capacity would not have been able to cover the demand during 269 hours the estimated maximum deficit of 5 6 gw is in good agreement to data published by the german grid operators the discussion of the origin of this deficit leads to the conclusion that the current situation has not been caused by renewables the liberalization of the european energy market established investment risks that hindered required investment a long time before the renewables boomed

time zero efficiency of european power derivatives markets abstract we study time zero efficiency of electricity derivatives markets by time zero efficiency is meant a sequence of prices of derivatives contracts having the same underlying asset but different times to maturity which implies that prices comply with a set of efficiency conditions that prevent profitable time zero arbitrage opportunities we investigate whether statistical tests based on the law of one price and trading rules based on price differentials and no arbitrage violations are useful for assessing time zero efficiency we apply tests and trading rules to daily data of three european power markets germany france and spain in the case of the german market after considering liquidity availability and transaction costs results are not inconsistent with time zero efficiency however in the case of the french and spanish markets limitations in liquidity and representativeness are challenges that prevent definite conclusions liquidity in french and spanish markets should improve by using pricing and marketing incentives these incentives should attract more participants into the electricity derivatives exchanges and should encourage them to settle otc trades in clearinghouses publication of statistics on prices volumes and open interest per type of participant should be promoted

germany s nuclear power plant closures and the integration of electricity markets in europe this paper examines the potential implications of national policies that lead to a sudden increase of wind power in the electricity mix for interconnected european electricity markets more specifically it examines market integration before and after the closures of eight nuclear power plants that occurred within a period of a few months in germany during 2011 the short and long run interrelationships of daily electricity spot prices from november 2009 to october 2012 in apx endex belpex epex de epex fr nordpool omel and swissix and wind power in the german system are analysed two mgarch multivariate generalized autoregressive conditional heteroscedasticity models with dynamic correlations are used to assess spot market behaviour in the short run and a fractional cointegration analysis is conducted to investigate changes in the long run behaviour of electricity spot prices results show positive time varying correlations between spot prices in markets with substantial shared interconnector capacity a negative association between wind power penetration in germany and electricity spot prices in the german and neighbouring markets and for most markets a decreasing speed in mean reversion

conceptualizing and measuring culture in international business and management from challenges to potential solutions understanding the influence of culture on business operations has been one of the most enduring components of international business ib and international management im theorizing and empirical investigation while several critiques and debates questioned the significant progress made in this domain the special issue we introduce here is meant to demonstrate that further advancement on how we conceptualize and measure culture is not only needed but also possible we provide an overview of past and current approaches in the measurement of culture in ib im and the challenges associated with these approaches and emphasize the important yet insufficiently acknowledged link between the theoretical conceptualization of culture and its measurement we then introduce the four articles included in the special issue and highlight how they break away from the addiction to approaches that have been very useful in getting where we are today but that might not always be useful in advancing knowledge beyond what we already know last but not the least we offer our own perspective on promising directions in conceptually and methodologically rethinking the study of culture in ib and im

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

team personal life inclusion in socially versus task oriented countries a cross cultural study of chinese versus german teams team personal life inclusion team pli refers to socialization with fellow team members in the private domain while pli is an expected behavior in the socially oriented chinese work context it is generally seen as unfavorable in task oriented contexts like germany we investigate the relative impact of team pli on the performance of chinese and german teams based on data from 130 chinese and 124 german teams we show that team pli has opposing consequences in china and germany while it increases german teams performance the reverse relationship was observed for chinese teams

how relevant is volatility forecasting for financial risk management it depends if volatility fluctuates in a forecastable way volatility forecasts are useful for risk management hence the interest in volatility forecastability in the risk management literature volatility forecastability however varies with horizon and different horizons are relevant in different applications moreover existing assessments of volatility forecastability are plagued by the fact that they are joint assessments of volatility forecastability and an assumed model and the results can vary not only with the horizon but also with the assumed model to address this problem we develop a model free procedure for assessing volatility forecastability across horizons perhaps surprisingly we find that volatility forecastability decays quickly with horizon volatility forecastability although clearly of relevance for risk management at the short horizons relevant for say trading desk management may be much less important at longer horizons

integration scenarios of demand response into electricity markets load shifting financial savings and policy implications abstract demand response allows for the management of demand side resources in real time i e shifting electricity demand according to fluctuating supply when integrated into electricity markets demand response can be used for load shifting and as a replacement for both control reserve and balancing energy these three usage scenarios are compared based on historic german data from 2011 to determine that load shifting provides the highest benefit its annual financial savings accumulate to 3 110 m for both households and the service sector this equals to relative savings of 2 83 compared to a scenario without load shifting to improve demand response integration the proposed model suggests policy implications reducing bid sizes delivery periods and the time lag between market transactions and delivery dates in electricity markets

how much carbon offsetting and where implications of efficiency effectiveness and ethicality considerations for public opinion formation a fundamental policy design choice in government led climate change mitigation is what role should flexibility mechanisms like carbon offsetting play in reducing greenhouse gas ghg emissions since public opinion affects the policy choices of government we investigate how arguments regarding carbon offsetting s economic efficiency effectiveness and ethicality which have been key points in the public debate impact the public s preferences we fielded an online framing experiment in the united states n 995 to empirically identify how arguments for and against carbon offsetting influence public preferences for the inclusion of offsetting in national ghg mitigation policy we find that the public s support for international offsetting increases and support for reductions at their source i e within firms own operations diminishes when considerations of economic efficiency gains are at the forefront support for offsetting declines when individuals are confronted with arguments concerning its effectiveness and ethicality which suggests that future policies will require clear standards of additionality in order to address these concerns moreover we find that how carbon offsetting is framed matters even amongst climate skeptics and support could potentially be enhanced via improved communication on efficiency gains

data equivalence in cross cultural international business research assessment and guidelines data equivalence refers to the extent to which the elements of a research design have the same meaning and can be applied in the same way in different cultural contexts failure to establish data equivalence in cross cultural studies may bias empirical results and theoretical inferences although several authors have encouraged researchers to ensure high levels of data equivalence no study has assessed the status of the field in relation to compliance with data equivalence standards accordingly this study examines three aspects of data equivalence construct equivalence measurement equivalence and data collection equivalence within 167 studies that involve cross cultural data published in the journal of international business studies management international review journal of world business strategic management journal and the academy of management journal from 1995 to 2005 the findings indicate that international business researchers report insufficient information in relation to data equivalence issues thus limiting confidence in the findings of many cross cultural studies to enhance future research a guideline for procedures for researchers to follow and report in establishing data equivalence is offered

the impacts of carbon pricing on coastal megacities a cge analysis of singapore abstract pricing carbon is a widely used policy instrument for climate change mitigation quantitative analysis of carbon pricing are mainly conducted at the regional and national level rarely at the city level due to data availability as a representative of coastal megacities that are vulnerable to both climate change and climate policies singapore has announced to impose carbon tax on large direct emitters as a complementary mitigation option to technical measures a city level computable general equilibrium cge model is developed to simulate potential impacts of carbon pricing on the city including paying border carbon adjustment bca on exports or introducing a domestic carbon tax different sector coverages and carbon tax revenue recycling schemes are investigated for domestic carbon tax the simulation results show that a domestic carbon tax is a more cost effective option than paying bca given an identical carbon price at s 10 t co 2 gdp total exports and household consumption would decline less and average abatement cost is much smaller in the carbon tax scenarios compared to the bca scenario in terms of absolute emissions reduction a carbon tax that covers energy manufacturing and land transport sectors would be preferred making emissions around 2 7 lower than 2010 baseline level