bluuebunny/crossref_metadata_2025 huggingface dataset:
Energy Policies and Their Consequences After 25 Years
Authors: Joskow Paul L.
Published: May 2011

Hans Landsberg and Sam Schurr each led research teams that produced two important energy futures policy studies that were published in 1979. The conclusions, policy recommendations, and energy demand, supply, and price forecasts contained in these studies are reviewed. Developments in U.S. energy policy over the last 25 years are discussed and compared with the recommendations contained in the two studies. The projections of energy demand, supply, and prices for 2000 contained in the studies are presented and compared to actual realizations. The nature, magnitudes, and reasons for the differences between the studies’ forecasts and what actually emerged 25 years later are discussed. All things considered, the Landsberg and Schurr studies have stood the test of time very well.
The Role of Knowledge: Technological Innovation in the Energy System
Authors: Fri Robert W.
Published: May 2011

Technological innovation will continue to be essential in the energy system for both economic and public policy reasons. The process of innovation is typically incremental, cumulative, and assimilative. Innovation may produce revolutionary outcomes through the accumulation of small steps, or because it introduces new performance characteristics that the market values. In some circumstances, public policy intervention to overcome obstacles to innovation may be justified to secure public benefits. One obstacle is that innovators may be unable to capture all of the available economic benefits of innovation. Another is that economic benefits may not be available and the value of the public good has not been internalized in the market. Experience with energy innovation suggests government intervention works best when it is carefully targeted on specific obstacles. Why some government policies have not been successful and suggestions for new policy approaches that might be useful are also discussed.
Improving Long-Range Energy Modeling: A Plea for Historical Retrospectives
Authors: Koomey Jonathan , Craig Paul , Gadgil Ashok , Lorenzetti David
Published: May 2011

One of the most striking things about forecasters is their lack of historical perspective. They rarely do retrospectives, even though looking back at past work can both illuminate the reasons for its success or failure, and improve the methodologies of current and future forecasts. One of the best and most famous retrospectives is that by Hans Landsberg, which investigates work conducted by Landsberg, Sam Schurr, and others. In this article, written mainly for model users, we highlight Landsberg’s retrospective as a uniquely valuable contribution to improving forecasting methodologies. We also encourage model users to support such retrospectives more frequently. Finally, we give the current generation of analysts the kind of guidance we believe Landsberg and Sam Schurr would have offered about how to do retrospectives well.
Energy and Economic Development: An Assessment of the State of Knowledge
Authors: Toman Michael A. , Jemelkova Barbora
Published: May 2011

In large part, the literature on energy and development focuses on how energy demand is driven by economic development and on how energy services can be improved for developing countries. In this paper we begin with a conceptual discussion to identify the channels through which increased availability of energy services might act as a “key” stimulus of economic development along different stages of the development process. We then examine some empirical work to see what evidence it might provide regarding the importance of the possible channels of influence. We do find some important illustrations of a disproportionate role for energy. However, that evidence also underscores the importance of energy development in concert with other forms of development. Moreover, the amount of relevant literature we found was fairly limited, and in many cases it was difficult to separate out various influences in the study to see how energy might be exerting a disproportionate role relative to other influences. This underscores our conclusion that more work is needed to understand the magnitude of its importance for economic development at an economy-wide level.
The Effects of Information on Residential Demand for Electricity
Authors: Matsukawa Isamu
Published: May 2011

This paper measures the effects of information on residential demand for electricity, using data from a Japanese experiment. In the experiment, households had a continuous-display, electricity use monitoring device installed at their residence. The monitor was designed so that each consumer could easily look at graphs and tables associated with the consumer’s own usage of electricity at any time during the experiment. The panel data were used to estimate a random effects model of electricity and count data models of monitor usage. The results indicate that monitor usage contributed to energy conservation.
Demand-Side Management and Energy Efficiency in the United States
Authors: Loughran David S. , Kulick Jonathan
Published: May 2011

Between 1989 and 1999, U.S. electric utilities spent $14.7 billion on demand-side management (DSM) programs aimed at encouraging their customers to make investments in energy efficiency. This study relies on panel data on 324 utilities spanning 11 years to estimate the effect of DSM expenditures on retail electricity sales. Our estimates imply that DSM had a much smaller effect on retail electricity sales than do estimates reported by utilities themselves over the same study period.
The Impact of OPEC Conference Outcomes on World Oil Prices 1984-2001
Authors: Wirl Franz , Kujundzic Azra
Published: May 2011

This paper investigates how far OPEC influences world oil markets. We ask the question: What is the impact of the decisions of the OPEC Conference, the supreme authority of the Organization of Petroleum Exporting Countries, on world oil prices? Extracting the Conference’s decisions from the communiques of fifty meetings from 1984-2001, these decisions were compared with the subsequent market developments. The result is that this impact is weak at best, and if at all then restricted to meetings recommending a price increase. However, the opposite claim (found in the literature) - the Conference is simply following the market - was also not supported either. Another interesting observation is the little autocorrelation between the decisions of the Conference. This suggests that the ministers’ decisions accommodate quickly and efficiently recent events.
The Mechanisms for Autonomous Energy Efficiency Increases: A Cointegration Analysis of the US Energy/GDP Ratio
Authors: Kaufmann Robert K.
Published: May 2011

Many forecasts for energy use and carbon emissions assume that energy intensity will decline over time for reasons unrelated to energy prices, which are termed autonomous energy efficiency increases (AEEI). A cointegration analysis of a vector error correction model indicates that the types of fuels consumed, personal consumption expenditures spent on energy, and energy prices account for changes in the ratio of energy use to economic activity in the US between 1929 and 1999. Cointegration indicates that AEEI is associated with technical and/or structural changes which allow consumers to substitute oil, natural gas, and/or primary electricity for coal, and that shift energy use from final demand to intermediate sectors. Identifying the factors responsible for AEEI allows me to: (1) show that econometric efforts to measure technical change using a deterministic trend are inconsistent with economic theory and cannot be interpreted reliably; (2) show that modeling technical change with a deterministic trend may generate forecasts that overstate reductions in energy use and carbon emissions; and (3) test the observational record for the presence of price-induced technical change and its effect on economic growth. Together, the results indicate that current estimates for AEEI may overstate future reductions in energy use and that the economic impacts of policies to reduce energy use and slow emissions may have a greater effect on economic growth than anticipated currently.
Oil Price Shocks and the Macroeconomy: What Has Been Learned Since 1996
Authors: Jones Donald W. , Leiby Paul N. , Paik Inja K.
Published: May 2011

This paper reports on developments in theoretical and empirical understanding of the macroeconomic consequences of oil price shocks since 1996, when the U.S. Department of Energy sponsored a workshop summarizing the state of understanding of the subject. Four major insights stand out. First, theoretical and empirical analyses point to intra- and intersectoral reallocations in response to shocks, generating asymmetric impacts for oil price increases and decreases. Second, the division of responsibility for post-oil-price shock recessions between monetary policy and oil price shocks, has leaned heavily toward oil price shocks. Third, parametric statistical techniques have identified a stable, nonlinear, relationship between oil price shocks and GDP from the late 1940s through the third quarter of 2001. Fourth, the magnitude of effect of an oil price shock on GDP, derived from impulse response functions of oil price shocks in the GDP equation of a VAR, is around -0.05 and -0.06 as an elasticity, spread over two years, where the shock threshold is a price change exceeding a three-year high.
Is International Emissions Trading Always Beneficial?
Authors: Babiker Mustafa , Reilly John , Viguier Laurent
Published: May 2011

Economic efficiency is a major argument for international emissions trading under the Kyoto Protocol. We show that permit trading can be welfare decreasing for countries, even though private trading parties benefit. The result is a case of “immiserizing” growth in the sense of Bhagwati where the negative terms of trade and tax interaction effects wipe out the gains from trading. Simulation and welfare decomposition results based on a CGE model of the global economy show that under EU-wide trading countries that are net permit sellers generally lose, due primarily to the existence of distortionary energy taxes.
OPEC's Incentives for Faster Output Growth
Authors: Gately Dermot
Published: May 2011

This paper addresses the question of whether OPEC producers are likely to expand their oil output substantially over the next two decades - more than doubling in the Gulf countries by 2020. Such projections, made by the International Energy Agency (IEA) and the U.S. Department of Energy (DOE), are not based on behavioral analysis of Gulf countries’ decisions, but are merely the residual demand for OPEC oil - the difference between projected world oil demand and Non-OPEC supply, given some assumed price-path. I employ a simulation model to compare OPEC’s payoffs from faster or slower output growth, under various parametric assumptions about the responsiveness of world oil demand and Non-OPEC supply to income and price changes. The payoffs to OPEC are relatively insensitive to faster output growth; aggressive output expansion yields slightly lower payoffs than just maintaining current market share. Analysis of intra-OPEC decisions - between the Core countries and the others -suggests a similar conclusion: these two groups are engaged in a constant-sum game. Thus, the significant increases in OPEC output projected by IEA and DOE are implausible.
The Impact of Changes in Crude Oil Prices and Offshore Oil Production on the Economic Performance of U.S. Coastal Gulf States
Authors: Iledare Omowumi , Olatubi Williams O.
Published: May 2011

This paper investigates the effects of changes in crude oil prices and offshore oil and gas production on the economic performance of U.S. Coastal Gulf States—Texas, Louisiana, Alabama and Mississippi. The empirical results do not provide statistical evidence to reject the hypothesis that positive shocks to oil and gas prices and production variation increase the economic performance of these coastal Gulf States. However, the magnitude of the response to changes in prices varies across the states. In addition, the empirical results show significant differences in the duration of the lingering economic effects of price shocks and changes in production among the states. The duration varies depending upon whether the state is a net petroleum exporter or net importer, and whether the state has a diversified economic base or structure.
Electricity Intensity in the Commercial Sector: Market and Public Program Effects
Authors: Horowitz Marvin J.
Published: May 2011

Publicly-funded energy efficiency programs have grown in number, size, and scope in the past two decades. The focus of many of these programs is the commercial buildings sector, which purchases approximately one-third of all the electricity produced in the United States. Using a fixed effects panel model, this study analyzes commercial sector electricity intensity across 42 states from 1989 to 2001; in aggregate, these states account for between 90 and 95 percent of U.S. commercial sector electricity sales. The analysis separates market effects from public program effects, finding that electric utility demand side management programs were responsible for reducing commercial sector electricity intensity in 2001 by 1.9 percent relative to the 1989 level. Further, rapidly expanding market transformation programs were responsible for reducing electricity intensity in this sector by 5.8 percent relative to the 1989 level. The findings suggest that in 2001 the combined effects of these public programs reduced commercial sector retail electricity sales by 77.1 million MWh, representing about 2.3 percent of total U.S. retail electricity sales.
Political Economy Obstacles to Fuel Taxation
Authors: Hammar Henrik , Åsa Löfgren , Sterner Thomas
Published: May 2011

Many studies have shown that fuel demand is quite elastic and that the best way to reduce fuel use (to tackle climate issues) is by taxing fuel. Yet it seems almost impossible to do so, particularly in those countries with low prices and high demand. The purpose of this paper is to cast light on the difficulties of raising gasoline taxes by analyzing the determinants of gasoline taxation. We believe that one of the reasons for the difficulties is that political pressure influences the political decisions regarding taxation of gasoline consumption. Not only do low taxes and thus low prices encourage high consumption, but high levels of consumption also lead to considerable pressure against raising the taxes. Our findings also point to the significance of other factors such as government debt (a higher debt leads to a higher gasoline tax rate).
Costs of Aggregate Hydrocarbon Additions
Authors: Adelman M.A. , Campbell Watkins G.
Published: May 2011

'Oil Equivalence' is widely used to measure total hydrocarbon activity. Natural gas is converted to oil using a fixed factor, usually based on thermal measurement. In turn, expenditures on oil and gas are divided by such 'oil equivalence' volumes to define unit costs, especially of reserve additions. This approach lacks economic content. We show its implicit assumptions and constraints, and develop an alternative aggregation method using index numbers, with an example.
The Costs of Kyoto for the US Economy
Authors: Barker Terry , Ekins Paul
Published: May 2011

The high costs for the US economy of mitigating climate change have been cited by the Bush administration as one of the reasons for rejecting US ratification of the Kyoto Protocol. A range of cost estimates are assessed in the IPCC’s third report (2001), but they are hedged with so many qualifications that it is not easy to reach useful conclusions. This paper organises some of the quantitative information on costs of greenhouse gas mitigation for the US published before the US rejection of Kyoto. The aim is to put them in a wider context, e.g., allowing for non-climate benefits, and to draw conclusions that are robust in the face of the uncertainties. Important lessons can be drawn for how costs can be reduced in any future international commitment by the US to reduce emissions. Provided policies are expected, gradual and well designed (e.g., through auctioned Annex I tradable permits with revenues used to reduce burdensome tax rates) the net costs for the US of mitigation are likely to be insignificant, that is within the range ±1% of GDP.
Motor Vehicle Fuel Efficiency and Traffic Fatalities
Authors: Noland Robert B.
Published: May 2011

This paper analyzes the impact of changes in average fuel efficiency on traffic-related fatalities while controlling for other confounding effects. These other effects include population, per capita income, per capita alcohol consumption, existence of safety-belt laws (and safety-belt usage), and age cohorts in the population. State-level time-series data over 24 years is used with a fixed effect negative binomial regression model that accounts for both the distributional properties of accident count data and heterogeneity. Other studies of this issue have not used either panel data in this way nor have they used appropriate statistical methods for count data. Results vary with the selection of the time series used. Overall results suggest that while there may have been an association between fleet fuel efficiency improvements and traffic fatalities in the 1970s, this has largely disappeared. There are suggestions that variance in the composition of the vehicle fleet may have adverse safety impacts.
Trends and Breaks in Per-Capita Carbon Dioxide Emissions, 1870-2028
Authors: Lanne Markku , Liski Matti
Published: May 2011

We consider per-capita carbon dioxide emission trends in 16 early industrialized countries over the period 1870-2028. Using a multiple-break time series method we find more evidence for very early downturns in per-capita trends than for late downturns during the oil price shocks of the 1970s. Only for two countries do downturns in trends imply downward sloping stable trends. We also consider trends in emission composition and find little evidence for in-sample peaks for emissions from liquid and gaseous fuel uses. These results lead us to reject the oil price shocks as events causing permanent breaks in the structure and level of emissions, a conclusion often made in analyses using shorter postwar data.
Climate Policy and the Steel Industry: Achieving Global Emission Reductions by an Incomplete Climate Agreement
Authors: Mathiesen Lars , Mæstad Ottar
Published: May 2011

The steel industry is one of the largest sources of global CO2 emissions and hence a candidate for climate policies. A carbon tax on emissions in industrialized countries, however, will cause relocation of steel production to non-industrialized countries, and because of their relatively high emission intensities the effect on total emissions is ambiguous. Using a partial equilibrium model of the steel industry, this paper finds that global emissions from this industry are likely to decline substantially. This is primarily due to factor substitution within the integrated steel mills in the industrialized countries, and to some extent a shift between steel making technologies. Such effects are not well accounted for in economy wide models, which typically lump individual industries into aggregates. Furthermore, it is shown that border taxes on steel products are potentially useful instruments for achieving a given reduction in global emissions with less restructuring of domestic steel industry in the industrialized countries.
Are Decline Rates Really Exponential? Evidence From The UK Continental Shelf
Authors: Kemp Alex G. , Kasim A.S.
Published: May 2011

Understanding of oil and gas production decline rates is important in order to predict future behaviour and give policy guidelines. Most studies propose exponential and/or hyperbolic decline rates. Econometric techniques are extensively used in the present study to establish that logistic decline rates best fit the UKCS data and that the majority offields have experienced complex logistic decline. Newer fields with relatively smaller reserves were found to have higher annual mean decline and decline decelerating rates - a property that poses both a challenge and an opportunity for the industry.
Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis*
Authors: Smith James L.
Published: May 2011

Although OPEC is commonly viewed as a syndicate of producers engaged in cooperative efforts to restrict production and raise price, to date there is a surprising dearth of supporting statistical evidence to that effect. I show that standard statistical tests of OPEC behavior have very low power across a wide range of alternative hypotheses regarding market structure. Consequently, it is difficult, given the current availability and precision of data on demand and costs, to distinguish collusive from competitive behavior in the world oil market. I apply a new, production-based approach for examining alternative hypotheses and find strong evidence of cooperative behavior among OPEC members. My results also suggest that OPEC’s formal quota mechanism, introduced in 1982 to replace a system based on posted prices, increased transactions costs within the organization. Statistical evidence is mixed on the question of whether Saudi Arabia and other core producers have played a special role within the cartel. (JEL: D43, L11, L13, Q41)
Combining Top-Down and Bottom-Up Approaches To Energy-Economy Modeling Using Discrete Choice Methods
Authors: Rivers Nic , Jaccard Mark
Published: May 2011

Recently, hybrid models of the energy-economy have been developed with the objective of combining the strengths of the traditional top-down and bottom-up approaches by simulating consumer and firm behavior at the technological level. We explore here the application of discrete choice research and modeling to the empirical estimation of key behavioral parameters representing technology choice in hybrid models. We estimate a discrete choice model of the industrial steam generation technology decision from a survey of 259 industrial firms in Canada. The results provide behavioral parameters for the CIMS energy-economy model. We then conduct a policy analysis and show the relative effects of an information program, technology subsidy, and carbon dioxide tax on the uptake of alternative industrial steam generation technologies, including boilers and cogeneration systems. We also show how empirically derived estimates of parameter uncertainty can be propagated through the model to provide uncertainty estimates for major model outputs.
Implementing Kyoto In Canada: The Role Of Nuclear Power
Authors: Bratt Duane
Published: May 2011

On December 17, 2002, Canada ratified the Kyoto Protocol, committing itself to reducing its greenhouse gas emissions by 6 percent of 1990 levels. This paper argues that nuclear power must be an indispensable component of Canada’s Kyoto implementation strategy. This is because nuclear power, unlike other conventional energy sources of coal, natural gas, and oil, does not contribute to the emission of greenhouse gases. Nuclear power is frequently criticized for its environmental record (radiation, production of waste, reactor safety), but a comparison with the other major energy sources reveals the green advantages of nuclear power. One potential opportunity is using nuclear power in the Alberta oil sands which would contribute to Canada meeting its emission reduction targets while limiting the economic/political dislocation caused by implementing the Kyoto Protocol. The paper concludes by explaining why, despite the above advantages, the federal government has failed to properly utilize nuclear power in its strategy to meet its Kyoto commitments.
Electricity Distribution in the UK and Japan: A Comparative Efficiency Analysis 1985-1998
Authors: Hattori Toru , Jamasb Tooraj , Pollitt Michael
Published: May 2011

This paper examines the relative performance of electricity distribution systems in the UK and Japan between 1985 and 1998 using cost-based benchmarking with data envelopment analysis (DEA) and stochastic frontier analysis (SFA) methods. The results suggest that the productivity gain in the UK electricity distribution has been larger than in the Japanese sector. In particular, productivity growth accelerated during the last years when the UK utilities were operating under tightened revenue caps. It also suggests that efficiency scores are higher for UK utilities. The findings also highlight the advantages of using multiple techniques in comparative analysis and in incentive regulation.
After the Natural Gas Bubble: An Economic Evaluation of the Recent U.S. National Petroleum Council Study
Authors: Costello Ken , Huntington Hillard G. , Wilson James F.
Published: May 2011

This perspective paper reviews and critiques the policy analysis and modeling of future natural gas markets in the National Petroleum Council’s 2003 natural gas study (NPC Study). The NPC Study provided an important and timely review of long-term natural gas supply, demand and potential policies to increase supply or suppress demand. However, its long-term scenarios used assumptions and simplifications that led to understating likely longer-term market reactions to higher natural gas prices, which results in exaggeration of the potential benefits of the policies recommended by the NPC. In addition, the narrow scope of the NPC Study did not address many important considerations in natural gas policy, such as the costs of recommended policies, or their impacts on taxpayers, resource owners, or the environment. Overall, the study does not provide the evidence needed to justify major natural gas policies, especially in view of the current uncertain market environment.
Assessing Emission Regulation in Europe: An Interactive Simulation Approach
Authors: Bohringer Christoph , Hoffmann Tim , Lange Andreas , Loschel Andreas , Moslener Ulf
Published: May 2011

Reimplementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of the European environmental policy agenda. EUMember States must allocate their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for European emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. We show that such hybrid emission regulation may lead to substantial excess costs compared to a comprehensive emissions trading system covering all segments of the economy. Furthermore, the hybrid system associated with the current design of National Allocation Plans is likely to discriminate against sectors that are not part of the emissions trading scheme. The interested reader can make use of a web-based interactive simulation model in order to specify and evaluate alternative settings of the EU emissions trading system.
Petroleum Prospect Valuation: The Option to Drill Again
Authors: Smith James L.
Published: May 2011

We examine the value of an exploration prospect that is to be exploited via a series of possibly dependent trials. Failure on any particular trial is assumed to convey bad news, but also provides an option to try again. The pattern and strength of dependence among trials determines the value of this option, and therefore also influences the value of the underlying prospect. We describe the solution to this valuation problem, examine the behavior of the option premium, and characterize potential errors that are inherent in two ad hoc procedures that are often used to estimate prospect value. We demonstrate that the impact of dependence among trials is monotonic: each increase in the degree of dependence results in a further reduction in expected value of the prospect. We also characterize the particular pattern of dependence that is implied by a plausible model of exploratory risk.
The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling
Authors: Hobbs Benjamin F. , Rijkers Fieke A.M. , Boots Maroeska G.
Published: May 2011

If barriers between two power markets are eliminated, what might happen to competition and prices? And who benefits? In the case of the Belgian and Dutch markets, market coupling would permit more efficient use of transmission by improving access to the Belgian market, by counting only net flows against interface limits, and by eliminating mismatches in timing of interface auctions and energy spot markets. We estimate the benefits associated with the first two of these impacts using a transmission-constrained Cournot model. Social surplus improvements on the order of 108 €/year are projected, unless market coupling encourages the largest producer in the region to switch from price-taking in Belgium to a Cournot strategy due to a perceived diminished threat of regulatory intervention. Whether Dutch consumers would benefit also depends on that company’s behavior. The results illustrate how large-scale oligopoly models can be used to assess changes in market designs.
The Economic Effects of Border Measures in Subglobal Climate Agreements
Authors: Babiker Mustafa H. , Rutherford Thomas F.
Published: May 2011

The Kyoto agreementasoriginally draftedsought to mitigateanthropogenic greenhouse gas emissions through policy measures by most industrialized countries. It now seems likely that the agreement will be ratified and implemented without the participation of the United States. Any emissions abatement policies which have a measurable reduction in global emissions will induce changes in the terms of trade and comparative advantage and competitiveness To the extent that aggressive policies are undertaken to reduce CO2 emissions, there are likely to be strong calls in the Kyoto coalition for greenhouse-gas related border adjustment measures. This paper uses a multi-region, multi-commodity static general equilibrium model to quantify and assess the implications of such policies.
Introduction
Authors: Newbery David
Published: May 2011

Europe is liberalising electricity in accordance with the European Commission’s Electricity Directives. Different countries have responded differently, notably in the extent of restructuring, treatment of mergers, market power, and vertical unbundling. While Britain and Norway have achieved effective competition, others like Germany, Spain and France are still struggling to deal with dominant and sometimes vertically integrated companies. The Netherlands offers an interesting intermediate case, where good economic analysis has sometimes been thwarted by legalistic interpretations. Investment under the new Emissions Trading system could further transform the electricity industry but may be hampered by slow progress in liberalising European gas markets.
Electricity Market Reform in the European Union: Review of Progress toward Liberalization &Integration*
Authors: Jamasb Tooraj , Pollitt Michael
Published: May 2011

The energy market liberalisation process in Europe is increasingly focused on electricity market integration and related cross border issues. This signals that the liberalisation of national electricity markets is now closer to the long-term objective of a single European energy market. The interface between the national electricity markets requires physical interconnections and technical arrangements. However, further progress towards this objective also raises important issues regarding the framework within which the integrated market is implemented. This paper reviews the progress towards a single European electricity market. We then discuss the emerging issues of market concentration, investments, and security of supply as well as some aspects of market design and regulation that are crucial for dynamic performance of a single European market.
The Nordic Market: Signs of Stress?
Authors: von der Fehr Nils-Henrik M. , Amundsen Eirik S. , Bergman Lars
Published: May 2011

The supply shock that hit the Nordic electricity market in 2002-2003 put the market to a severe test. A sharp reduction in inflow to hydro reservoirs during the normally wet months of late autumn pushed electricity prices to unprecedented levels. We take this event as the starting point for analysing some potential weaknesses of the Nordic market. We conclude that fears regarding supply security and adequacy are likely to be unfounded. Nevertheless, as inherited over-capacity is eroded, and new market-based environmental regulation takes effect, tighter market conditions are to be expected. It is then crucial that retail markets are fully developed so as to allow consumers to adequately protect themselves from occurrences of price spikes.
Regulation, Competition and Investment in the German Electricity Market: RegTP or REGTP*
Authors: Brunekreeft Gert , Twelemann Sven
Published: May 2011

The German energy industries will be subjected to regulation of network access enforced by a sector-specific regulator. Whereas the gas industry broke the regime of negotiated third party access, in electricity nTPA ‘worked’, although it clearly resulted in a margin squeeze. The government currently discusses whether to use rate-of-return or incentive regulation, to allow ex-ante approval of charges, and the length of the regulatory lag. Close examination suggests that generation capacity still is adequate, but in the longer term there is reason to be alert. The regulatory changes and emission trading system can both contribute to supply security by increasing investment.
The Spanish Electricity Industry: Plus ça change...
Authors: Crampes Claude , Fabra Natalia
Published: May 2011

In this paper we describe the Spanish electricity industry and its current regulatory regime. Special emphasis is given to the description and discussion of market design issues (including stranded cost recovery), the evolution of market structure, investment in generation capacity and network activities. We also provide a critical assessment of the 1997 regulatory reform, which did not succeed in introducing effective competition, but retained an opaque regulation which has been subject to continuous governmental interventionism. Furthermore, the implementation of the Kyoto agreement could show the lack of robustness of the regulatory regime.
A Competitive Fringe in the Shadow of a State Owned Incumbent: The Case of France
Authors: Glachant Jean-Michel , Finon Dominique
Published: May 2011

We examine what kind of competitive fringe has been built in France around the State owned incumbent without destroying it or significantly weakening its dominant position; what impacts has this particular reform process on the market in which the incumbent monopolist is still overly dominant; and what more can be done to strengthen the opening of the market while staying in this typical French policy framework (no industrial restructuring and no forced divestiture by the monopolist). We wonder if a larger window of opportunity will open up at some later date for contesting the position of the monopolist, especially when investment in generation resumes.
Market Integration in the International Coal Industry: A Cointegration Approach
Authors: Warell Linda
Published: May 2011

The purpose of this paper is to test the hypothesis of the existence of a single economic market for the international coal industry, separated for coking and steam coal, and to investigate market integration over time. This has been conducted by applying cointegration and error-correction models on quarterly price series data in Europe and Japan over the time period 1980-2000. Both the coking and the steam coal markets show evidence of global market integration, as demonstrated by the stable long-run cointegrating relationship between the respective price series in different world regions. This supports the hypothesis of a globally integrated market. However, when analyzing market integration over time it is not possible to confirm cointegration in the 1990s for steam coal. Thus, compared to the coking coal market, the steam coal market looks somewhat less global in scope.
Measuring Gains from Regional Dispatch: Coal-Fired Power Plant Utilization and Market Reforms
Authors: Douglas Stratford
Published: May 2011

This paper examines changes in the utilization rates (annual capacity factors) of coal-burning power plants in the eastern United States after 1996, when federal regulators opened the transmission system to wholesale power markets. This and other accompanying market-oriented reforms were intended to improve efficiency by encouraging regional dispatch by independent system operators. If the reforms made dispatch more efficient, then utilization rates of high-cost plants should have fallen relative to those of low-cost plants since 1996. A difference-in-difference model using plant-level panel data indicates that relative utilization rates of high-cost plants did indeed fall after 1996, but only in regions with independent system operators. Simulations indicate cost savings on the order of two to three percent.
Seven Centuries of Energy Services: The Price and Use of Light in the United Kingdom (1300-2000)1
Authors: Fouquet Roger , Pearson Peter J.G.
Published: May 2011

Before the mid-eighteenth century, most people lived in near-complete darkness except in the presence of sunlight and moonlight. Since then, the provision of artificial light has been revolutionised by a series of innovations in appliances, fuels, infrastructures and institutions that have enabled the growing demands of economic development for artificial light to be met at dramatically lower costs: by the year 2000, while United Kingdom GDP per capita was 15 times its 1800 value, lighting services cost less than one three thousandth of their 1800 value, per capita use was 6,500 times greater and total lighting consumption was 25,000 times higher than in 1800. The economic history of light shows how focussing on developments in energy service provision rather than simply on energy use and prices can reveal the ‘true’ declines in costs, enhanced levels of consumption and welfare gains that have been achieved. While emphasising the value of past experience, the paper also warns against the dangers of over-reliance on past trends for the long-runforecasting of energy consumption given the potential for the introduction of new technologies and fuels, and for rebound and saturation effects.
Emissions Trading, CDM, JI, and More: The Climate Strategy of the EU
Authors: Klepper Gernot , Peterson Sonja
Published: May 2011

The objective of this paper is to assess the likely allocation effects of the current climate protection strategy as it is laid out in the National Allocation Plans (NAPs) for the European Emissions Trading Scheme (ETS). The multi-regional, multi-sectoral CGE-model DART is used to simulate the effects of the current policies in the year 2012 when the Kyoto targets need to be met. Different scenarios are simulated in order to highlight the effects of the grandfathering of permits to energy-intensive installations, the use of the project-based mechanisms (CDM and JI), and the restriction imposed by the supplementarity criterion.
The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?
Authors: Asche Frank , Osmundsen Petter , Sandsmark Maria
Published: May 2011

After opening up of the Interconnector, the liberalized UK natural gas market and the regulated Continental gas markets became physically integrated and the Continental gas price became dominant. However, in an interim period - after deregulation of the UK gas market (1995) and the opening up of the Interconnector (1998) - the UK gas market had neither government price regulation nor a physical Continental gas linkage. We use this period - which for natural gas markets displays an unusual combination of deregulation and autarky - as a natural experiment to explore if decoupling of natural gas prices from prices of other energy commodities, such as oil and electricity, took place. Monthly price data in the period 1995-1998 indicates a highly integrated market where wholesale demand seems to be for energy rather than a specific energy source.
Carbon Abatement Costs: Why the Wide Range of Estimates?
Authors: Fischer Carolyn , Morgenstern Richard D.
Published: May 2011

Estimates of marginal abatement costs for reducing carbon emissions derived from major economic-energy models vary widely. Controlling for policy regimes we use meta-analysis to examine the importance of structural modeling choices in explaining differences in estimates. The analysis indicates that particular assumptions about perfectly foresighted consumers and Armington trade elasticities generate lower estimates of marginal abatement costs. Other choices are associated with higher cost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greater disaggregation among regions and sectors. Some features, such as greater technological detail, seem less significant. Understanding the importance of key modeling assumptions, as well as the way the models are used to estimate abatement costs, can help guide the development of consistent modeling practices for policy evaluation.
A Residential Energy Demand System for Spain
Authors: Labandeira Xavier , Labeaga José M. , Rodríguez Miguel
Published: May 2011

Sharp pricefluctuations and increasing environmental and distributional concerns, among other issues, have led to a renewed academic interest in energy demand. In this paper we estimate, for the first time in Spain, an energy demand system with household microdata. In doing so, we tackle several econometric and data problems that are generally recognized to bias parameter estimates. This is obviously relevant, as obtaining correct price and income responses is essential if they may be used for assessing the economic consequences of hypothetical or real changes. With this objective, we combine data sources for a long time period and choose a demand system with flexible income and price responses. We also estimate the model in different sub-samples to capture varying responses to energy price changes by households living in rural, intermediate and urban areas. This constitutes a first attempt in the literature and it proved to be a very successful choice.
Searching for Triple Dividends in South Africa: Fighting CO2 pollution and poverty while promoting growth
Authors: Heerden Jan van , Gerlagh Reyer , Blignaut James , Horridge Mark , Hess Sebastiaan , Mabugu Ramos , Mabugu Margaret
Published: May 2011

A CGE model of South Africa is used to find the potential for a double or triple dividend if the revenues raised from an energy-related environmental tax are recycled to households and industry through lowering existing taxes. Four environmental taxes and three revenue-recycling schemes are compared. The environmental taxes are (i) a tax on greenhouse gas emissions, (ii) a fuel tax, (iii) a tax on electricity use, and (iv) an energy tax. The four taxes are constructed such that they have a comparable effect on emissions. The revenue is recycled through either (i) a direct tax break on both labour and capital, (ii) an indirect tax break to all households, or (iii) a reduction in the price of food. A triple dividend is found - decreasing emissions, increasing GDP, and decreasing poverty - when any one of the environmental taxes is recycled through a reduction in food prices.
Allocating the Added Value of Energy Policies
Authors: Murphy Frederic H. , Rosenthal Edward C.
Published: May 2011

Developing an energy policy from a collection of programs is made more complicated because there is no single value that can be used as a best estimate of the contribution of a single policy, despite the ability to estimate the impact of the complete suite. In this paper we illustrate the problem and use cooperative game theory to show one way to estimate individual effects of a policy goal in the context of collective estimates. Using an economic equilibrium model, we illustrate the behavior of four policies, namely, a gasoline tax, CAFE standards, a carbon tax, and drilling the Arctic National Wildlife Reserve, through their Shapley value contributions in measuring the impact of each in the context of a suite of policies. We apply the Shapley value to measure the average marginal reduction in imports for each policy, and present a number of scenarios that illustrate how the Shapley value behaves as a measure of policy contribution.
Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices
Authors: Ewing Bradley T. , Hammoudeh Shawkat M. , Thompson Mark A.
Published: May 2011

This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy markets. We further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis.
Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?
Authors: Gerlagh Reyer , Zwaan Bob van der
Published: May 2011

This paper compares both the main physical options and the principal policy instruments to realize a deep cut in carbon dioxide emissions necessary to control global climate change. A top-down energy-economy model is used that has three emission reduction options: energy savings, a transition towards less-carbon-intensive or non-carbon energy resources, and the use of carbon dioxide capture and storage technology. Five policy instruments - carbon taxes, fossil fuel taxes, non-carbon (renewable) energy subsidies, a portfolio standard for the carbon intensity of energy production, and a portfolio standard for the use of non-carbon (renewable) energy resources - are compared in terms of costs, efficiency and their impact on the composition of the energy supply system. One of our main conclusions is that a carbon intensity portfolio standard, involving the recycling of carbon taxes to support renewables deployment, is the most cost-efficient way to address the problem of global climate change. A comprehensive introduction of the capture and storage of carbon dioxide would contribute to reducing the costs of climate change control, but would not obviate the large-scale need for renewables.
Valuation of International Oil Companies
Authors: Osmundsen Petter , Asche Frank , Misund Bård , Mohn Klaus
Published: May 2011

According to economic theory, exploration and development of new oil and gas fields should respond positively to increasing petroleum prices. But since the late 1990s, stock market analysts have focused strongly on short-term accounting return measures, like RoACE1, for benchmarking and valuation of international oil and gas companies. Consequently, exaggerated capital discipline among oil and gas companies may have reduced their willingness to invest for future reserves and production growth. Based on panel data for 14 international oil and gas companies for the period 1990-2003, we seek to establish econometric relations between market valuation on one hand, and simple financial and operational indicators on the other. Our findings do not support the general perception of RoACE as an important valuation metric in the oil and gas industry. We find that the variation in company valuations is mainly explained by the oil price, oil and gas production, and to some extent reserve replacement.