supply security and short run capacity markets for electricity the creation of electricity markets has raised the fundamental question as to whether markets create the right incentives for the provision of the reserves needed to maintain supply security in the short run or whether some form of regulation is required in some states in the us electricity distributors have been made responsible for providing such reserves by contracting capacity in excess of their forecasted peak demand the so called installed capacity markets provide one means of contracting reserves and are the subject of this paper under monopoly as well as under perfect competition we identify firms short run opportunity costs of committing resources in the capacity market and the costs of inducing full capacity commitment the long run investment problem is not considered from a welfare viewpoint we also compare the desirability of providing reserves either through capacity markets or through the demand side i e power curtailments at the optimum capacity obligations equal peak demand plus expected outages and the capacity deficiency rate which serves as a price cap is set at firms opportunity costs of providing full capacity commitment

climate change and agriculture in developing countries most analysts agree that the poorest countries agricultures are likely to be the most vulnerable to and least capable of adapting to climate change or other environmental disruptions research has only recently begun to assess what the likely impacts of climate change on developing countries agricultures may be how these agricultures might adapt to climate change and how policies might be designed to facilitate adaptation this paper begins with a discussion of what researchers currently believe the impacts of climate change could be on developing country agriculture principally tropical agriculture climate changes are expected to occur from thirty to more than one hundred years in the future these time horizons mean that predictions of the key factors determining impacts and adaptation population income institutions and technology are probably as uncertain as predictions of climate change itself rates of productivity growth and technological adaptation will be critical to future food supplies with or without climate change continuation of the trend of the past forty years could make so abundant that climate change effects would be inconsequential but lower rates of growth could result in population growth outstripping food supplies the second section of this paper addresses the critical issue of predicting the long term trend inmore productivity by building on the substantial knowledge we have about the economic factors determining agricultural innovation and adaptation considering the time horizons and uncertainties involved in climate change the wise policy strategy is to pursue investments that are economically justified whether or not climate change occurs a better understanding of managed ecosystems would improve our understanding of agricultural sustainability as well as climate change impacts and adaptation the third section of this paper outlines an economic approach to modeling managed ecosystems 21 refs less

generation adequacy and transmission interconnection in regional electricity markets the power system capacity adequacy has public good features that cannot be entirely solved by electricity markets regulatory intervention is then necessary and established methods have been used to assess adequacy and help regulators to fix this market failure in regional electricity markets transmission interconnections play an important role in contributing to adequacy however the adequacy problem and related policy are typically considered at a national level this paper presents a simple model to study how the interconnection capacity interacts with generation adequacy first results indicate that increasing interconnection capacity between systems improves adequacy up to a certain level further increases do not procure additional adequacy improvements furthermore besides adequacy improvement increasing transmission capacity under asymmetric adequacy criteria or national system characteristics could create several concerns about externalities these results imply that regional coordination of national adequacy policies is essential to internalise adequacy of cross border effects

returns synchronization and daily correlation dynamics between international stock markets the use of close to close returns underestimates returns correlation because international stock markets have different trading hours with the availability of 16 00 london time stock market series we find dynamics of daily correlation and covariance estimated using two non synchroneity adjustment procedures to be substantially different from their synchronous counterparts conditional correlation may have different signs depending on the model and data type used other findings include volatility spillover from the us to the uk and france and a reverse spillover which is not documented before also unlike previous findings we found the increase in daily correlation is prominent only under extremely adverse conditions when a large negative return has been registered

social cost benefit analysis of electricity interconnector investment a critical appraisal abstract this paper examines the economic analysis social cost benefit analysis underlying two decisions to build an interconnector norned and the east west interconnector in europe the main conclusion is that current interconnector and transmission investment decisions in europe are unlikely to maximize social welfare the arguments are as follows i it is unclear how much demand for transmission capacity and interconnectors actually exists and thus the benefits of investment are unclear ii both analyses underlying the investments studied are incorrect to the point where in one case even the sign may be wrong iii the main criticism concerns the fact that they do not take the resulting changes in generator investment plans into account and ignore the potential benefits of increased competition iv several smaller issues can be improved such as the discount rate used v decisions at the european level are taken very differently and approval may depend on which authority grants approval vi interconnector decisions receive the most attention although most money goes to transmission investments two research recommendations for future improvements are formulated

news announcements and price discovery in foreign exchange spot and futures markets abstract this paper studies competition in price discovery between spot and futures rates for the eur usd and jpy usd markets around scheduled macroeconomic announcements using both the information shares approach and the common factor component weight approach for futures prices from the chicago mercantile exchange cme as well as deal prices from spot trading on the electronic broking services ebs we gauge how foreign exchange spot and futures markets respond to news surprises the results show that the spot rates provide more price discovery than do the cme futures rates overall however the contribution of the futures rates to price discovery increases in the time surrounding macroeconomic announcement releases

the effect of ambiguous risk and coordination on farmers adaptation to climate change a framed field experiment the risk of losses of income and productive means due to adverse weather can differ significantly among farmers sharing a productive landscape and is of course hard to estimate or even guesstimate empirically moreover the costs associated with investments in reduced vulnerability to climatic events are likely to exhibit economies of scope we explore the implications of these characteristics on farmer s decisions to adapt to climate change using a framed field experiment applied to coffee farmers in costa rica as expected we find high levels of risk aversion but even using that as a baseline we further find that farmers behave even more cautiously when the setting is characterized by unknown or ambiguous risk i e poor or non reliable risk information secondly we find that farmers to a large extent coordinated their decisions to secure a lower adaptation cost and that communication among farmers strongly facilitated coordination

the intercountry agricultural production function another view factor productivity in agriculture is estimated from repeated observations on a sample of fifty eight countries under the assumption that all countries have access to the same technology technology is viewed as a collection of techniques each technique is represented by a production function the choice of the implemented techniques is determined by the state variables which represent the physical and economic environment within which the firms operate the statistical model is that of varying coefficients and it is estimated by a method which utilizes principal components and multiple comparisons

a comparison of the effects of exogenous oil supply shocks on output and inflation in the g7 countries a comparison of the effects of exogenous shocks to global crude oil production on seven major industrialized economies suggests a fair degree of similarity in the real growth responses an exogenous oil supply disruption typically causes a temporary reduction in real gdp growth that is concentrated in the second year after the shock inflation responses are more varied the median cpi inflation response peaks after three to four quarters exogenous oil supply disruptions need not generate sustained inflation or stagflation typical responses include a fall in the real wage higher short term interest rates and a depreciating currency with respect to the dollar despite many qualitative similarities there is strong statistical evidence that the responses to exogenous oil supply disruptions differ across g7 countries for suitable subsets of countries homogeneity cannot be ruled out a counterfactual historical exercise suggests that the evolution of cpi inflation in the g7 countries would have been similar overall to the actual path even in the absence of exogenous shocks to oil production consistent with a monetary explanation of the inflation of the 1970s there is no evidence that the 1973 1974 and 2002 2003 oil supply shocks had a substantial impact on real growth in any g7 country whereas the 1978 1979 1980 and 1990 1991 shocks contributed to lower growth in at least some g7 countries jel e31 e32 q43

pricing of reserves valuing system reserve capacity against spot prices in electricity markets this paper models the interdependencies between markets for secondary reserve capacity and spot electricity to derive the pricing of reserves under equilibrium conditions starting with the indifference condition between offering in both markets the reservation price is derived from the opportunity cost consideration and the unit commitment conditions in a fundamental interrelated market framework the reserve market examined compares widely to the german market for secondary reserves but the general approach may also be used to investigate other reserve markets the approach explores and formalizes the influence of reserve capacity on the spot market supply function a numerical solution procedure is provided to this non trivial case of market interaction the model is used to estimate the expected reservation price development over the last years in germany

the impact of global warming on agriculture a ricardian analysis reply we measure the economic impact of climate on land prices using cross sectional data on climate farmland prices and other economic and geophysical data for almost 3 000 counties in the united states we find that higher temperatures in all seasons except autumn reduce average farm values while more precipitation outside of autumn increases farm values applying the model to a global warming scenario shows a significantly lower estimated impact of global warming on u s agriculture than the traditional production function approach and in one case suggests that even without co sub 2 fertilization global warming may have economic benefits for agriculture 16 refs 5 figs 5 tabs

welfare and competition effects of electricity interconnection between ireland and great britain this study analyzes the effects of additional interconnection on welfare and competition in the irish electricity market i simulate the wholesale electricity markets of the island of ireland and great britain for 2005 i find that in order for the two markets to be integrated in 2005 additional interconnection would have to be large the amount of interconnection decreases for high costs of carbon since this causes the markets to become more similar this suggests that in the absence of strategic behavior of firms most of the gains from trade derive not from differences in size between countries but from technology differences and are strongly influenced by fuel and carbon costs social welfare increases with interconnection although at a decreasing rate as the amount of interconnection increases there are also positive effects on competition in ireland the less competitive of the two markets finally it is unlikely that private investors will pay for the optimal amount of interconnection since their returns are significantly smaller than the total social benefit of interconnection

volatility spillovers among oil and stock markets in the us and saudi arabia in this article we use high frequency data and an identification via changes in volatility approach to assess the volatility spillovers among oil and the us and saudi arabian stock markets we doc

the impact of ecb and fed announcements on the euro interest rates abstract we investigate the impact of news in the ecb and fed monetary policy announcements on daily changes in euro interest rates we document significant impacts of ecb announcements throughout the period but only until mid 2004 of fed announcements

assessing long term energy security the case of electricity in the united kingdom there is a growing body of research into the potential security risks and trade offs which may emerge over the long term development of energy systems as part of this body of research this paper aims to develop and demonstrate a set of indicators for assessing the security of long term national electricity scenarios this paper extends the empirical work of existing frameworks by including reliability and cost parameters alongside a range of other important aspects of energy security such as diversity trade and acceptability and by using both qualitative and quantitative indicators without aggregation in order to identify trade offs this paper uses the indicators to assess the energy security implications of three plausible long term scenarios for the uk electricity system the results indicate that a major risk may be experienced by a lack of flexible responsive supply capacity in low carbon electricity pathways reducing overall energy demand is found to be the most beneficial policy for improving energy security in terms of generating benefits in multiple dimensions the paper finds that energy security is often conceptualised as the avoidance of causes of insecurity such as insecure fuel imports but that an equally important aspect of security lies in maximising responses to insecurity for example by increasing the flexibility and responsiveness of both supply and demand

asymmetric causality between australian inbound and outbound tourism flows abstractwe employ the asymmetric version of the granger causality test to assess how australian inbound and outbound tourism flows across 49 markets countries are driven by the sign dependent variations in departure series or vice versa a multivariate generalized autoregressive conditional heteroscedasticity mgarch model is also estimated to study the time varying co volatility between inbound and outbound tourism growth rates we find that rising co volatility spillovers between inbound and outbound tourism are statistically significant for a number of markets the six markets that are most susceptible to global shocks are china hong kong papua new guinea singapore south africa and the united kingdom china is by far the largest of these markets and except for the united kingdom both arrivals and departures for each of these countries represent growing markets for australia we present recommendations for policymakers and destination management organizations dmos to assist in developing cust

volatility spillovers and macroeconomic announcements evidence from crude oil markets the paper applies an event study methodologyaims to investigate the macroeconomic announcements effects on standard poor s500 and oil prices our results provide evidence for a significant impact of the us macroeconomic news on oil prices this impact is split into two components namely the direct effect common response and indirect effect volatility transmission altogether our results show that the volatility transmission is bidirectional not only a significant volatility transmission from the oil market to the us stock market is revealed but also a high volatility transmission is recorded from the oil market to the stock market especially after the release of consumption indicators

counting on the neighbours challenges and practical approaches for cross border participation in capacity mechanisms capacity mechanisms have been implemented in an uncoordinated way by many countries in europe in recent years to ensure security of supply the european commission has defined via the state aid guidelines principles to minimize their impact on trade and competition in european electricity markets the paper identifies the different drivers of these national reforms maps the key issues associated with the coordination of capacity mechanisms across countries and explores alternative approaches to allow for explicit cross border participation in capacity mechanisms

a primer on capacity mechanisms abstract a simple model is built up to capture the key drivers of investment and pricing incentives in electricity markets the focus is put on the interaction between market power and investment incentives and the trade off it introduces when designing the optimal regulatory instruments in contrast to the energy only market paradigm that assumes perfect competition our model demonstrates that in the presence of market power scarcity prices do not promote efficient investments even among risk neutral investors combining price caps and capacity payments allows to disentangle the two fold objective of inducing the right investment incentives while mitigating market power bundling capacity payments with financial obligations further mitigates market power as long as strike prices are set sufficiently close to marginal costs

conceptualizing energy security abstract energy security 1 is one of the main targets of energy policy however the term has not been clearly defined which makes it hard to measure and difficult to balance against other policy objectives we review the multitude of definitions of energy security they can be characterized according to the sources of risk the scope of the impacts and the severity filters in the form of the speed size sustention spread singularity and sureness of impacts using a stylized case study for three european countries we illustrate how the selection of conceptual boundaries along these dimensions determines the outcome this can be avoided by more clearly separating between security of supply and other policy objectives this leads us to the definition of energy security as the continuity of energy supplies relative to demand

interactions between agricultural and environmental policies a conceptual framework agricultural policy has a well documented impact on farmers production decisions and those decisions land water and agricultural chemical use may in turn affect the environment there is a public perception that existing agricultural policies are linked to agricultural pollution as exemplified by the conclusions of the recent national research council report alternative agriculture 1989 there is only limited theoretical or empirical research addressing these linkages however this paper develops a conceptual framework that can be used to analyze the interactions between agricultural and environmental policies and pollution this framework integrates physical and economic models at a disaggregate level necessary to capture the heterogeneity of the physical environment and the economic behavior of farmers following e hochman and d zilberman 1978 the disaggregate units can be statistically aggregated to a level useful for policy analysis agricultural and environmental policies can be categorized according to their effects on the intensive and extensive margins combining the different policy instruments with the microeconomic heterogeneity we find that existing agricultural and environmental policies can have either positive or negative effects of nonpoint source pollution to infer an aggregate effect requires data that do not currently exist our framework provides a basis for empirical investigations of these effects given adequate data moreover we find that agricultural policy instruments can be used to mitigate pollution if used appropriately