bluuebunny/crossref_metadata_2025 huggingface dataset:
Neoclassical Growth, Environment and Technological Change: the Environmental Kuznets Curve
Authors: Rubio Santiago J. , García José L. , Hueso José L.
Published: May 2011

This paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, environmental quality has a positive effect not only on utility but also on production. Moreover, cleaner technologies can be used in the economy if a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low, then the shadow price of a cleaner technology is low in relation to the cost of developing it, given by the marginal utility of consumption, and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with environmental quality decreasing until there is enough pollution to make investing in R&D profitable. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve.
Soft Fiscal Policies for a Polluting Monopolist
Authors: Antelo Manel , Loureiro Maria L.
Published: May 2011

This paper examines optimal environmental taxation in an incomplete-information two-period model in which a monopolistic firm produces and pollutes. The firm is privately informed about its costs of production and abatement, and the regulator - which can only infer the firm’s technology after observing the output from the period 1 - has the chance to set environmental taxes in period 1 to correct the firm’s opportunistic behavior. The regulator is aware that the polluter may strategically choose a given level of production (and pollution) in period 1 in order to manipulate the regulator’s beliefs concerning its technology and, consequently, adjusts the tax paid in period 2. We show that if the regulator reduces pollution taxes in the first period below the level under symmetric information, then the clean firm will signal its type by further reducing its output. Having gathered information from the firm with respect to its technology and emissions, the regulator raises pollution taxes in the second period. In the light of the present results, soft fiscal policies based on initial low-taxes, which are later increased, may be used in the presence of asymmetric information to provide incentives for a firm to reveal its true level of emissions and mitigate opportunistic behavior.
A Panel Data Analysis of the Demand for Total Energy and Electricity in OECD Countries
Authors: Lee Chien-Chiang , Lee Jun-De
Published: May 2011

This paper applies panel unit root, panel cointegration, and panel causality techniques to re-examine the total energy and electricity demand functions of 25 selected OECD countries during the 1978-2004 period. The panel results indicate that total energy demand is income inelastic and price inelastic, whereas electricity demand is income elastic and price inelastic. Based on the results of the panel causality test, there are reciprocal causal relationships among real income, real energy price, and total energy consumption. Furthermore, a uni-directional causality runs from income and electricity price to electricity consumption. The results for the panel as a whole suggest that the demand for total energy and electricity in the OECD countries is driven largely by strong economic growth, while consumers are largely insensitive to price changes.
Gasoline Demand with Heterogeneity in Household Responses
Authors: Wadud Zia , Graham Daniel J. , Noland Robert B.
Published: May 2011

Fuel demand elasticities to determine consumer responses to tax increases or price shocks are typically based on aggregate data. The literature generally provides one elasticity estimate for each country, assuming similar response for all households. However, it is possible that different households can have different responses to the same stimuli depending on the household characteristics. Assuming a single elasticity for all households may fail to capture the detailed distributional effect on different socio-economic groups, which is often needed to fully understand the impact of fuel tax measures. This paper presents results from a household level gasoline demand model which accommodates variation in price and income elasticity with increasing income as well as for different socio-economic characteristics in the USA. We find substantial heterogeneity in price and income elasticities based on demographic groupings and income groups. Results of a distributional analysis for a gasoline tax are also presented using the heterogeneous responses.
The Global Impacts of Biofuel Mandates
Authors: Hertel Thomas W. , Tyner Wallace E. , Birur Dileep K.
Published: May 2011

The rise in world oil prices, coupled with heightened interest in the abatement of greenhouse gas emissions, led to a sharp increase in biofuels production around the world. Previous authors have devoted considerable attention to the impacts of these policies on a country-by-country basis. However, there are also strong interactions among these programs, as they compete in world markets for feedstocks and ultimately for a limited supply of global land. In this paper, we offer the first global assessment of biofuel programs - focusing particularly on the EU and US. We begin with an historical analysis of the period 2001-2006, which also permits us to validate the model. We then conduct an ex ante analysis of mandates in the year 2015. We find that if these mandates are indeed fulfilled the impact on global land use could be substantial, with potentially significant implications for greenhouse gas emissions.
Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure
Authors: Bye Torstein , Holmϕy Erling
Published: May 2011

Increased transmission capacity and diminishing returns to scale in power production capacities have raised the opportunity cost of electricity in many countries. The resulting market changes have often been counteracted by policy, i.e. subsidized electricity prices to for instance energy intensive industries. Firm data, emphasizing cost heterogeneity, confirm that a large share of Norwegian energy intensive firms would not be profitable in the long run if they lose their present electricity subsidies. However, CGE estimates show that removing the subsidies allows a tax cut that is more than sufficient to bring about the changes in relative prices needed to restore internal and external balances.
Fueling Innovation: The Impact of Oil Prices and CAFE Standards on Energy-Efficient Automotive Technology
Authors: Crabb Joseph M. , Johnson Daniel K.N.
Published: May 2011

This paper tests the induced innovation hypothesis that higher oil prices will lead to increased innovation in energy-efficient automotive technology. Using a dynamic model of patenting, we find robust empirical support for the hypothesis, concluding that both the acquisition cost and retail markup portion of fuel prices are powerful in generating subsequent innovation. Our results include the effects of CAFE regulations, finding no evidence of their impact on innovation, even within a model that endogenizes them via fuel price expectations.
EU-ETS and Nordic Electricity: A CVAR Analysis
Authors: Fell Harrison
Published: May 2011

A cointegrated vector autoregressive (CVAR) model is estimated to determine the dynamic relationship between Nordic wholesale electricity prices and EU emissions trading scheme (EU-ETS) CO2 allowance prices. An impulse response analysis reveals that electricity prices have large short-term responses to CO2 price shocks, but that this response dampens over time. Using hourly Nordic electricity spot market prices, I find that the value of short-term response of electricity prices to a shock in CO2 prices in off-peak hours is consistent with expected values for near complete pass-through of CO2 emission costs when coal-generated power is at the margin. Likewise, the estimates reveal that peak hour electricity price responses to CO2 price shocks are as expected for a market that has near complete pass-through of CO2 emission costs when natural gas-generated power is at the margin. These results further suggest the Nordic electricity market is pricing as a competitive market.
Modeling Term Structure Dynamics in the Nordic Electricity Swap Market
Authors: Frestad Dennis , Benth Fred Espen , Koekebakker Steen
Published: May 2011

We analyze the daily returns of Nordic electricity swaps and identify significant risk premia in the short end of the market. On average, long positions in this part of the swap market yield negative returns. The daily returns are distinctively non-normal in terms of tail-fatness, but we find little evidence of asymmetry. We investigate if the flexible four-parameter class of normal inverse Gaussian (NIG) distributions can capture the observed stylized facts and find that this class of distributions offers a remarkably improved fit relative to the normal distribution. We also compare the fit with that of the four-parameter class of stable distributions; the NIG law outperforms the stable law in the vast majority of cases. Thus, the NIG family of distributions, which allows for stochastic dynamics in terms of Levy processes that are suitable for pricing derivatives and Value-at-Risk measurements, is a serious candidate for modeling term structure dynamics in the Nordic electricity market.
Valuing Plug-In Hybrid Electric Vehicles’ Battery Capacity Using a Real Options Framework
Authors: Lemoine Derek M.
Published: May 2011

Plug-in hybrid electric vehicles (PHEVs) enable their drivers to choose whether to use electricity or gasoline, but this fuel flexibility benefit requires the purchase of additional battery capacity relative to most other vehicles. We value the fuel flexibility of PHEVs by representing the purchase of the battery as the purchase of a strip of call options on the price of transportation. We use a Kalman filter to obtain maximum likelihood estimates for three gasoline price models applied to a U.S. municipal market. We find that using a real options approach instead of a discounted cash flow analysis does not raise the retail price at which the battery pays for itself by more than $50/kWh (or by more than 15%). A discounted cash flow approach often provides a good approximation for PHEV value in our application, but real options approaches to valuing PHEVs’ battery capacity or role in climate policy may be crucial for other analyses.
Welfare Impacts of Electricity Storage and the Implications of Ownership Structure
Authors: Sioshansi Ramteen
Published: May 2011

Increases in electricity price volatility have raised interest in electricity storage and its potential arbitrage value. Large utility-scale electricity storage can decrease the value of energy arbitrage by smoothing differences in prices on- and off-peak, however this price-smoothing effect can result in significant external welfare gains by reducing consumer energy costs and generator profits. As such, the incentives of merchant storage operators, consumers, and generators may not be properly aligned to ensure socially-optimal storage use. We examine storage use incentives for these different agent types and show that under most reasonable market structures a combination of merchant and consumer ownership of storage maximizes potential welfare gains from storage use.
International Steam Coal Market Integration
Authors: Li Raymond , Joyeux Roselyne , Ripple Ronald D.
Published: May 2011

This paper examines the hypothesis that there is a single economic market for the international steam coal industry and investigates the degree of steam coal market integration over time. A regression test of convergence is employed to test for group convergence within a panel of steam coal exporting countries. The long-run relations between international steam coal prices are tested through cointegration analysis and the Kalman Filter analysis is employed to examine the convergence path of the price series. Monthly Free on Board (F.O.B.) prices for Australia, China, Colombia, Indonesia, Poland and South Africa between January 1995 and July 2007 are used. Considering the outcomes of the three econometric techniques as a whole, we conclude that the international steam coal market is generally integrated.
Structural Change and U.S. Energy Use: Recent Patterns
Authors: Huntington Hillard G.
Published: May 2011

The role of structural change in energy use patterns is evaluated using a recently developed data set based upon the NAICS codes for the United States. Shifts between 65 industries in the commercial, industrial and transportation sectors account for almost 40 percent of the reduction in the US economy’s aggregate energy intensity over the 1997-2006 period. Excluding the transportation industries, these shifts account for 54 percent of the total effect. These estimates are more than twice the magnitude of those due to shifts between five major sectors of the economy. Since all these estimates use the preferred Fisher index, the results are more likely due to the most recently available data than to methodological issues like the decomposition approach.
Arbitrage in Energy Markets: Price Discrimination under Congestion
Authors: Willems Bert , Kupper Gerd
Published: May 2011

During the last decades the production of electrical energy has been liberalized. This paper studies the effect of using a market mechanism to allocate scarce transmission capacity when the incumbent producers remain dominant. We show that granting exclusive use to an incumbent producer is preferred to trading access to this essential facility if interregional production-cost differences are significant and transmission capacity is scarce. This result counters the intuition on third degree price-discrimination, that arbitrage will improve the social surplus when there is no output contraction. The reason is that with arbitrage the incumbent can still charge different regional prices as long as it creates congestion on the transmission lines. As a consequence, welfare will be lower, since the incumbent distorts production decisions to congest the lines. We recommend that a market-oriented access to scarce transmission capacity should be accompanied by additional regulatory or structural measures to address market power.
Price Signals in “Energy-only” Wholesale Electricity Markets: An Empirical Analysis of the Price Signal in France
Authors: Vassilopoulos Philippe
Published: May 2011

This paper analyzes the price signals of the French wholesale electricity market. We build a model of electricity prices that takes into account several key features of the French electricity market in order to assess the capacity of the price signal to guide investments. Wholesale prices should reflect the imbalances in the generation mix but the signal can be distorted if monopoly rents and/or “missing money” are present. We simulate over the 2003-2005 period theoretical perfectly competitive prices with the installed capacity and with the optimal mix to estimate the capacity imbalances and scarcity rents. We then compare the investment signal sent by observed electricity prices and the theoretical prices with the installed capacity. Although there are signs of market contestability for the mid-merit load, through market integration with the other continental markets, observed prices are too high for the baseload and too low for the peakload, as a result distorting the signal.
The Effect of Feedback by Text Message (SMS) and Email on Household Electricity Consumption: Experimental Evidence
Authors: Gleerup Maria , Larsen Anders , Sϕren Leth-Petersen , Togeby Mikael
Published: May 2011

This paper analyzes the effect of supplying feedback by text messages (SMS) and email about electricity consumption on the level of total household electricity consumption. An experiment was conducted in which 1,452 households were randomly allocated to three experimental groups and two control groups. Feedback was supplied throughout 2007 to members of the experiment groups who accepted the invitation, and data on consumption of electricity for 2006 and 2007 collected for all participants and control group members. 30% of the households invited to receive feedback accepted the invitation. Results suggest that email and SMS messaging that communicated timely information about a household’s ‘exceptional’ consumption periods (e.g. highest week of electricity use in past quarter) produced average reductions in total annual electricity use of about 3%. The feedback technology is cheap to implement and therefore likely to be cost-effective.
Oil and Petroleum Product Armington Elasticities: A New-Geography-of-Trade Approach to Estimation
Authors: Balistreri Edward J. , Al-Qahtani Ayed , Dahl Carol A.
Published: May 2011

Exploiting the structural developments suggested by the geography-of-trade literature, we estimate the elasticity of substitution across regional varieties for six crude grades and seven refined products using fixed-effects gravity regressions. We use unique data, compiled by Al-Qahtani (2008), that include global coverage of bilateral trade and transport costs for the crude grades and refined products. We find that the point estimates of elasticities of substitution across import varieties exceed those commonly reported in the literature and those adopted in simulation analysis. Our estimates indicate that there may be far less hysteresis in the pattern of petroleum trade than previously forecast.
The Economics of Enhanced Oil Recovery: Estimating Incremental Oil Supply and CO2 Demand in the Powder River Basin
Authors: Veld Klaas van’t , Phillips Owen R.
Published: May 2011

Expanding the use of CO2-enhanced oil recovery (EOR) promises to both significantly increase recovery from existing U.S. oil reserves and possibly form a bridge to large-scale CO2 capture and sequestration. An important input into planning for such expansion are estimates of how both the supply of incremental oil and the derived CO2 demand from EOR are likely to vary with the prices of oil and CO2. We demonstrate how the “analog” method of predicting oil and CO2 flows can be used to readily generate such estimates, and apply the method to Wyoming's Powder River Basin.
Russian Gas Imports in Europe: How Does Gazprom Reliability Change the Game?
Authors: Morbee Joris , Proost Stef
Published: May 2011

Europe’s dependence on Russian gas imports has been the subject of increasing political concern after gas conflicts between Russia and Ukraine in 2006 and 2009. This paper assesses the potential impact of Russian unreliability on the European gas market, and how it affects European gas import strategy. We also study to what extent Europe should invest in strategic gas storage capacity to mitigate the effects of possible Russian unreliability. The European gas import market is described by differentiated competition between Russia and a - more reliable - competitive fringe of other exporters. The results show that Russian contract volumes and prices decline significantly as a function of unreliability, so that not only Europe but also Russia suffers if Russia’s unreliability increases. For Europe, buying gas from more reliable suppliers at a price premium turns out to be generally more attractive than building strategic gas storage capacity.
Stochastic Trends and Technical Change: The Case of Energy Consumption in the British Industrial and Domestic Sectors
Authors: Agnolucci Paolo
Published: May 2011

This paper estimates energy demand in the British domestic and industrial sectors and analyzes the extent to which energy-saving technological change is exogenous, or induced by the energy price. The paper implements models with a linear trend, models making use of the price decomposition of Dargay and Gately (1995a) and the Structural Time Series Models (STSMs) of Harvey (1989). Stochastic trends have been found to be rather important while in neither of the sectors assessed in this study could the hypothesis of symmetric price effects be rejected. Following Hunt and Judge (2005), stochastic trend and asymmetric price effects are found to be substitutes in the industrial sector. In particular we conclude that asymmetric price effects can substitute for the slope in the stochastic trend. Finally, energy consumption in the industrial sector is strongly influenced by price while the effect of price in the domestic sector is markedly smaller.
Supply Function Competition in the Spanish Wholesale Electricity Market
Authors: Ciarreta Aitor , Espinosa Maria Paz
Published: May 2011

We represent the Spanish wholesale market as a supply function competition model. Theoretically, the larger generators’ supply curves for each plant should be to the left of the supply curves of plants owned by smaller generators. We test this prediction for fuel plants using data from the Spanish Market Operator (OMEL) from January 2002 to December 2005. Our empirical results are consistent with the model predictions and suggest that the supply function model better fits data than a discrete-bid auction model since large generators behave as price-makers irrespective whether they are the marginal firms at the auction.
Carbon Charges in Electricity Markets with Strategic Behavior and Transmission
Authors: Downward Anthony
Published: May 2011

We examine the effect of introducing a carbon charge on electricity generation. We model this by way of a two generator Cournot game over a two node electricity network. We find that within the electricity system, emissions of carbon dioxide can increase after a carbon charge is introduced.
EU Gas Industry Reforms and Consumers’ Prices
Authors: Brau Rinaldo , Doronzo Raffaele , Fiorio Carlo V. , Florio Massimo
Published: May 2011

This paper offers an empirical analysis of the impact of reforms in the natural gas industry on consumer prices across the EU-15 area. After briefly reviewing the most recent reforms, we study the relationship between regulatory indicators and price dynamics by means of panel data econometrics. Our findings suggest that so far there is limited evidence of beneficial effects for European consumers from the standard package of gas industry reforms.
Asymmetric Adjustments in Oil and Metals Markets
Authors: Hammoudeh Shawkat , Chen Li-Hsueh , Fattouh Bassam
Published: May 2011

Using the threshold cointegration methods, Enders-Siklos (2001) and Hansen-Seo (2002), this study finds that spot and futures prices in each of the four widely traded commodities, copper, gold, WTI oil and silver are asymmetrically co-integrated. However, the asymmetric adjustment to the long-run equilibrium differs among those commodities, reflecting different profitable opportunities. The adjustment is faster for copper after positive shocks, while it is faster for the safe havens oil, gold and silver after negative shocks. It is more the spot and not the futures price for the four commodities that focuses in its adjustment on long-run factors. In sum, the adjustments imply different trading strategies, depending on whether the faster adjustment happened from above or below the threshold.
The Economics of Low Stabilization: Model Comparison of Mitigation Strategies and Costs
Authors: Edenhofer Ottmar , Knopf Brigitte , Barker Terry , Baumstark Lavinia , Bellevrat Elie , Chateau Bertrand , Criqui Patrick , Isaac Morna , Kitous Alban , Kypreos Socrates , Leimbach Marian , Lessmann Kai , Magné Bertrand , Scrieciu Şerban , Turton Hal , van Vuuren Detlef P.
Published: May 2011

This study gives a synthesis of a model comparison assessing the technological feasibility and economic consequences of achieving greenhouse gas concentration targets that are sufficiently low to keep the increase in global mean temperature below 2 degrees Celsius above pre-industrial levels. All five global energy-environment-economy models show that achieving low greenhouse gas concentration targets is technically feasible and economically viable. The ranking of the importance of individual technology options is robust across models. For the lowest stabilization target (400 ppm CO2 eq), the use of bio-energy in combination with CCS plays a crucial role, and biomass potential dominates the cost of reaching this target. Without CCS or the considerable extension of renewables the 400 ppm CO2 eq target is not achievable. Across the models, estimated aggregate costs up to 2100 are below 0.8% global GDP for 550 ppm CO2 eq stabilization and below 2.5% for the 400 ppm CO2 eq pathway.
Transformation Patterns of the Worldwide Energy System -Scenarios for the Century with the POLES Model
Authors: Kitous Alban , Criqui Patrick , Bellevrat Elie , Chateau Bertrand
Published: May 2011

This paper presents a long-term assessment of the worldwide energy system in scenarios ranging from a baseline to a very low greenhouse gas stabilization, using the energy model POLES. Despite improved energy efficiency, the baseline scenario would lead to a doubling in energy consumption by 2050 increasing further thereafter. CO2 emissions would continue rising, driven by the coal consumed in the power production which roughly follows the GDP growth; the scarcity of oil resources would trigger the development of alternative vehicles. Conversely, a 400 ppm CO2 eq stabilization case would lead to drastic changes in supply (renewables - biomass), transformation (carbon capture and storage) and demand (low energy technologies). It transpires that the contribution to the reduction effort of low stabilization compared to a baseline scenario would be similar for final consumption (36% efficiency and 10% fuel mix) and for the power sector (25% renewables, 25% CCS, 4% nuclear). In addition this low emission scenario would alleviate the tensions on fossil energy markets.
Modeling Low Climate Stabilization with E3MG:1 Towards a ‘New Economics’ Approach to Simulating Energy-Environment-Economy System Dynamics
Authors: Barker Terry , Scrieciu S. Şerban
Published: May 2011

The literature on climate stabilization modeling largely refers to either energy-system or inter-temporal computable general equilibrium/optimal growth models. We contribute with a different perspective by deploying a large-scale macro-econometric hybrid simulation model of the global energy-environment-economy (E3MG) adopting a “New Economics” approach. We use E3MG to assess the implications of a low-stabilization target of 400ppm CO2 equivalent by 2100, assuming both fiscal instruments and regulation. We assert that if governments adopt more stringent climate targets for rapid and early decarbonization, such actions are likely to induce more investment and increased technological change in favor of low-carbon alternatives. Contrary to the conventional view on the economics of climate change, a transition towards a low-carbon society as modeled with E3MG leads to macroeconomic benefits, especially in conditions of unemployment, with GDP slightly above a reference scenario, depending on use of tax or auction revenues. In addition, more stringent action can lead to higher benefits.
Low Stabilization Scenarios and Implications for Major World Regions from an Integrated Assessment Perspective
Authors: van Vuuren Detlef P. , Isaac Morna , den Elzen Michel G.J. , Stehfest Elke , Vliet Jasper van
Published: May 2011

In order to limit global mean temperature increase to less than 2°C, long-term greenhouse gas concentrations must remain low. This paper discusses how such low concentrations can be reached, based on results from the IMAGE modelling framework (including TIMER and FAIR). We show that the attainability of low greenhouse gas concentration targets, in particular 450 and 400 ppm CO2 equivalent critically depends on model assumptions, such as bio-energy potentials. Under standard model assumptions, these targets can be reached, although the lowest requires the use of bio-energy in combination with carbon-capture-and-storage. Regions are affected differently by ambitious climate policies in terms of energy and land use, although stringent emission reductions will be required in all regions. Resulting co-benefits of climate policy (such as energy security and air pollution) are also different across world regions.
Bio-Energy Use and Low Stabilization Scenarios
Authors: van Vuuren Detlef P. , Bellevrat Elie , Kitous Alban , Isaac Morna
Published: May 2011

This paper explores the potential for bio-energy production, and the implications of different values for the attainability of low stabilization targets. The impact of scenarios of future land use, yield improvements for bio-energy and available land under different sustainability assumptions (protection of biodiversity, risks of water scarcity and land degradation) are explored. Typical values for sustainable potential of bio-energy production are around 50-150 EJ in 2050 and 200-400 EJ in 2100. Higher bio-energy potential requires a development path with high agricultural yields, dietary patterns with low meat consumption, a low population and/or accepting high conversion rates of natural areas. Scenario analysis using four different models shows that low stabilization levels may be achieved with a bio-energy potential of around 200 EJ p.a. In such scenarios, bio-energy is in most models mainly used outside the transport sector.
The Oil Price-Microeconomy Relationship is Alive and Well
Authors: Lescaroux François
Published: May 2011

This paper analyzes the oil price-macroeconomy relationship using a model that aims at taking into account all the sources of instability highlighted by previous studies. Mainly, we adopt a sectoral approach and weight oil prices by sectoral energy intensities. Further, inspired by Alfred Marshall’s treatment of time, we also put forward a new approach to model short-term interactions between economic variables that relies on an error-correcting mechanism depending on cumulative errors. Applied to the U.S. economy, our model enables us to estimate stable relationships between oil prices and sectoral economic indicators. Further, it explains both the long-run weakening of the relationship between oil prices and aggregate economic activity and its short-run instability. We show that the oil price-macroeconomy relationship is fading but the oil price-microeconomy relationship is alive and well.
Efficiency vs. Stability in Climate Coalitions: A Conceptual and Computational Appraisal
Authors: Bréchet Thierry , Gerard François , Tulkens Henry
Published: May 2011

This paper evaluates with numerical computations the respective merits of two competing notions of coalition stability in the standard global public goods model of climate change. To this effect it uses the CWS integrated assessment model. After a reminder of the two game theoretical stability notions involved—core-stability and internal-external stability—and of the CWS model, the former property is shown to hold for the grand coalition if resource transfers of a specific form between countries are introduced. The latter property appears to hold neither for the grand coalition nor for most large coalitions whereas it is verified for most small coalitions in a weak sense that involves transfers. Finally, coalitions, stable in either sense, that perform best in terms of carbon concentration and global welfare are always heterogeneous ones. Therefore, if coalitional stability is taken as an objective, promoting small or homogeneous coalitions is not to be recommended.
Investment Propensities under Carbon Policy Uncertainty
Authors: Kettunen Janne , Bunn Derek W. , Blyth William
Published: May 2011

Whether companies invest in new power facilities at a particular point in time, or delay, depends upon the perceived evolution of uncertainties and the investors’ attitudes to risk and return. With additional risks emerging through climate change mitigation mechanisms, the propensity to invest may increasingly depend upon how each technology and company is exposed to carbon price uncertainty. We approach this by estimating the cumulative probabilities of investment over time in various technologies as a function of behavioral, policy, financial and market assumptions. Using a multistage stochastic optimization model with exogenous uncertainty in carbon price, we demonstrate that detailed financial analysis with real options and risk constraints can make substantial difference to the investment propensities compared to conventional economic analysis. Further, we show that the effects of different carbon policies and market instruments on these decision propensities depend on the characteristics of the companies and may induce market structure evolution.
Gas Storage Valuation: Price Modelling v. Optimization Methods
Authors: Bjerksund Petter , Stensland Gunnar , Vagstad Frank
Published: May 2011

In the literature, one approach is to analyse gas storage within a simple one-factor price dynamics framework that is solved to optimality. We follow an alternative approach, where the market is represented by a forward curve with daily granularity, the price uncertainty is represented by six factors, and where we impose a simple and intuitive storage strategy.

Based on UK natural gas market price data, we obtain the gas storage value using our approach, and compare with results from a one-factor model as well as with perfect foresight. We find that our approach captures much more of the true flexibility value than the one-factor model.
Increasing the Value of Wind with Energy Storage
Authors: Sioshansi Ramteen
Published: May 2011

One economic disincentive to investing in wind generation is that the average market value of wind energy can be lower than that of other generation technologies. This is driven by the exercise of market power by other generators and the fact that the ability of these generators to exercise market power is inversely related to real-time wind availability. We examine the use of energy storage to mitigate this price suppression by shifting wind generation from periods with low prices to periods with higher prices. We show that storage can significantly increase the value of wind generation but the currently high capital cost of storage technologies cannot be justified on the basis of this use. Moreover, we demonstrate that this use of storage can reduce consumer surplus, the profits of other non-wind generators, and social welfare. We also examine the sensitivity of these effects to a number of parameters including storage size, storage efficiency, ownership structure, and market competitiveness—showing that a more-competitive market can make storage significantly more valuable to a wind generator.
Swapping Generators’ Assets: Market Salvation or Wishful Thinking?
Authors: Downward Anthony , Young David , Zakeri Golbon
Published: May 2011

The idea of rearranging generation assets amongst firms to improve competition has once again surfaced in a recent report on improvements to the New Zealand Electricity Market. We present counterexamples to show that rearranging assets, either with asset divestiture to a new firm, or asset swaps between existing firms, may actually reduce competition in electricity markets. Our examples emphasize features that are particular to electricity, such as seasonality and transmission constraints. These results warn that applying economic rules of thumb to electricity markets may lead to erroneous conclusions.
Econometric Estimation of Spatial Patterns in Electricity Prices
Authors: Douglas Stratford M. , Popova Julia N.
Published: May 2011

Information about the spatial structure of the transmission grid is relevant to understanding and predicting electricity prices, but this information has not been incorporated into empirical models of electricity prices in the literature. We propose the use of spatial econometric panel methods, discuss their formal characteristics in the context of electricity price data, and provide an application to a panel of PJM price data. Our econometric model includes a simple representation of the transmission system, and provides information about the effect of system constraints on the extent of electricity market integration. Empirical results confirm the existence of spatial patterns in electricity prices and illustrate their impact on estimation, forecasting, and interpolation.
Natural Gas Availability and the Residential Demand for Energy
Authors: Blattenberger, Gail R. , Taylor, Lester D. , Retinhack Robert K.
Published: May 2011

Not all households have access to pipeline-delivered natural gas. This fact affects not only the demand for natural gas but the demand for electricity and fuel oil as well. Since electricity and natural gas are substitutes in cooking, space heating, water heating, and (to a much lesser extent) cooling, the price elasticity of demand for electricity will be larger when gas is available than when it is not. Fuel oil and natural gas are substitutes in cooking, space heating, and water heating, so that one should also expect larger price elasticities for fuel oil when gas is available.
The United States' Role in the International Thermal Coal Market
Authors: Sargent D. Alec
Published: May 2011

Recent studies have projected a huge buildup in international thermal coal trade, including a major role for U.S. exports (World Coal Study, 1980; International Energy Agency, 1978; Department of Energy, 1979). Given high-priced and insecure oil supplies, opposition to nuclear power, and the high cost of domestic coal supplies in Western Europe and the Far East, there is little doubt that international thermal coal trade will increase substantially. However, the role of the United States is highly uncertain.
The Natural Gas Industry in Transition
Authors: Lawrence George H. , German Michael I.
Published: May 2011

After 25 years of field price regulation, the U.S. natural gas industry is moving to a deregulated field market. This transition period has been made more difficult because of the international recession, depressed oil prices, and statutory restraints on gas use that were originally designed under assumptions of declining gas supply.
Utility Diversification
Authors: Kahn Alfred E.
Published: May 2011

Diversification by public utility companies is a topic in which I have had a longstanding interest. The second volume of my Economics of Regulation, for example, contains a 73-page chapter largely devoted to this subject. I have taken the occasion to reread that discussion, and have observed with interest-and some amusement-how similar the issues were as I saw them then to the issues with which the National Association of Regulatory Utility Commissioners is grappling today. The entire chapter consists of the advantages and possible benefits of utility company diversification, on the one side, and the possible drawbacks and dangers, on the other. The first of these could well have been written by the utility companies today; the other, by those regulators and members of the public at large who are resolutely opposed to any such dilutions of the public utility concept. My own not very striking conclusion was that "The balance of social advantage will obviously vary from one industry to another [p. 268].... There is no single optimum pattern or combination for all situations [p. 324]...."
Whatever Happened to the Energy Crisis?
Authors: Houthnkker Hendrik S.
Published: May 2011

The term energy crisis was apparently first used in the later 1960s, by whom I am not sure. Presumably it means a situation where the available energy supplies are so low as to prevent or even reverse economic growth. The underlying idea is that energy is mostly derived from fossil fuels which will be exhausted within relatively few years. Although since the 1960s there have been one or two episodes that are occasionally interpreted as energy crises, it is by now clear that whatever it is that ails the world economy, it is not a shortage of fossil fuels. In fact, popular discussions have recently turned from the oil "shortage" to the oil "glut." In retrospect, it appears that predictions of an energy crisis were just another example of a resource scare, of which there have been many in the past. As long ago as 1865, the great English economist William Stanley Jevons worried about the consequences of Britain running out of coal. As it happens, Britain is still producing large amounts of coal and has also gone into oil and gas in a big way.
Net Effects of Government Intervention in Energy Markets
Authors: Paul F. Dickens III , McNicol David L. , Murphy Frederic H. , Zalkind Julie H.
Published: May 2011

There have been several comprehensive studies of energy policy in the last few years, for example, Shurr (1979), Federal Energy Administration (1976), ERDA (1976), and the Ford Foundation (Landsberg, 1978). Unlike these studies of energy policies, this effort is not prescriptive. Rather, it measures the effects of a large set of policies on energy markets to provide an understanding of how government programs reinforce or offset one another.
Still a Time to Choose ... Ten Years Later
Authors: Freeman S. David
Published: May 2011

I think it is appropriate that we should end this conference on energy economics with a look at the record of the past nine years, the years since the energy world was turned upside down by the 1973 Arab oil embargo. This nation's foremost energy accomplishment of this period has not been in achieving increased production. Despite a tenfold increase in the price of crude oil, U.S. production in 1981 was about the same as in 1973. Natural gas production was down. Production of coal and uranium has gone up some, but overall, neither consumption nor domestic production of energy has increased in the last nine years.
The Valuation of Nuclear Power in The Post-Three Mile Island Era
Authors: Zimmerman Martin B.
Published: May 2011

On March 28, 1979, an event at the Three Mile Island (TMI) nuclear plant of the General Public Utilities Corporation placed the future of nuclear power in the United States in doubt. The "transient" that led to the partial melting of the cladding around the fuel rods was to create concern in the nuclear industry and in the public at large about the safety, costs, and acceptability of nuclear power. While the impressionistic evidence is that TMI has caused great problems for the industry, there is little systematic evidence that this is the case. What real damage did the accident do to the prospects for nuclear power in the United States? The potential damages to the nuclear industry were of several varieties. First the accident might have caused people to reevaluate the safety of nuclear reactors.
World Oil Prices and Economic Growth In the 1980s
Authors: Jacoby Henry D. , Paddock James L.
Published: May 2011

The world oil market is a forecaster's nightmare: seldom have so many knowledgeable observers been so wrong so often. Prior to 1973, few foresaw the magnitude of the price jump that was possible under disrupted conditions, or predicted the years of relative stability that followed. The Iranian revolution brought a similar surprise. On the other hand, in the fall of 1980 came the Iran-Iraq war; again a major price shock seemed at hand. Experts are still arguing about why it did not occur.
The Demand for Electricity Services and the Quality of Supply
Authors: Dias-Bandaranaike Romesh , Munasinghe Mohan
Published: May 2011

The spiraling costs of energy within the last decade have stimulated renewed interest in the increased efficiency of energy production and consumption.' Electricity is a relatively mature sector where considerable theoretical work on the economic aspects has been carried out since the 1950s.2 While the microeconomic principles underlying optimal investment planning and pricing policy have received much attention in the recent literature, less effort has been devoted to the effects of quality of supply and output reliability.
Optimal System Planning with Fuel Shortages and Emissions Constraints
Authors: Einhorn Michael
Published: May 2011

Electric utility system planners must design system capacity ex- pansion paths that satisfy generation requirements at least cost. Historically, doing this required information regarding the system load duration curve and alternative fuel and capital costs. By putting fuel and capital costs into a linear program, system designers could then calculate the amount of electricity that base, intermediate, and peaking plants should generate and how much capacity each plant type should have.
Evaluating Alternative Energy Policies: An Example Comparing Transportation Energy Investments
Authors: Binkley James K. , Tyner Wallace E. , Matthews Marie E.
Published: May 2011

Designing appropriate programs to deal with present and future energy problems faced by the United States has created a need for the evaluation and comparison of different policies. An important component of this is the generation of accurate information concerning the benefits and costs of alternative courses of action. Energy analysis is enormously complex, however, due to the pervasive influence of energy throughout the economy and the manifold factors that must be considered. Schmalensee has written that "discussions of energy policy, especially as regards new technologies, tend rapidly to become unwieldy because of the large number of serious complicating factors whose relevance is arguable" (1980, pp. 2-3). As a result of these complications, any information available to evaluate alternative energy policies Will almost of necessity be incomplete.
The Role of Renewables in Hawaii's Energy Future
Authors: Sathaye Jayant , Ruderman Henry
Published: May 2011

Hawaii is extremely vulnerable to disruptions in the world oil market. Over 90 percent of the state's energy comes from imported petroleum, most of which comes from foreign sources. Petroleum also has an indirect impact because of the large role tourism plays in the Hawaiian economy.
Oil Stockpiling: Help Thy Neighbor
Authors: William W. Hogan
Published: May 2011

Saudi benevolence apart, a large inventory of oil is the most effective emergency tool that oil-importing nations could fashion. Long ago, Joseph advised the Pharaoh to prepare for famine by storing during times of plenty. Today virtually every study of policy options for oil supply emergencies emphasizes the value of building and using a large stock of oil to cushion the effects of a sudden loss in supply. And among the array of official pronouncements and promises, oil stockpiling stands out as the most visible and substantial arena of government activity in energy policy, where new institutions and resources have been deployed in the halting beginnings of a coordinated international stockpiling program. The Strategic Petroleum Reserve (SPR) and similar efforts have achieved primacy in the analysis and implementation of oil emergency policy.
Optimal Oil Producer Behavior Considering Macrofeedbacks
Authors: Harry D. Saunders
Published: May 2011

Oil producer decisions on oil pricing and production can affect consumer countries' economies in ways directly affecting producers' interests. The short- and long-term evolution of oil demand in consumer economies is, of course, strongly affected by producer actions. But so also may be returns on assets that producers hold in these economies.
The Rate of Return Earned by Lessees under Cash Bonus Bidding for OCS Oil and Gas Leases
Authors: Mead Walter J. , Moseidjord Asbjorn , Sorensen Philip E.
Published: May 2011

The remaining oil and gas reserves and resources of the Outer Continental Shelf (OCS) represent one of America's largest publicly owned assets. Through 1980, OCS oil and gas leases had produced $62.8 billion in gross revenue and $41.3 billion in bonus, royalty, and rental payments to the federal government (U.S. Geological Survey, 1981).