bluuebunny/crossref_metadata_2025 huggingface dataset:
An Empirical Analysis of Urban Form, Transport, and Global Warming
Authors: Grazi Fabio , van den Bergh Jeroen C.J.M. , van Ommeren Jos N.
Published: May 2011

Does urban form affect travel choices and thus C02 emissions by individuals? If this is the case, then urban form and policies that influence it deserve serious attention in the context of long-term climate policy. To address this issue, we examine the impact of urban density on commuting behavior, and the consequences for C02 emissions. The empirical investigation is based on an instrumental variable approach (IV), so as to take account of endogeneity of residence location. We decompose travel demand into components related to modal split and commuting distance by each mode.
Economies of Scale and Scope in Multi-Utilities
Authors: Farsi Mehdi , Fetz Aurelio , Filippini Massimo
Published: May 2011

This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the integrated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential improvements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model are used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies are compared across different models and the effect of heterogeneity among companies are explored. While indicating considerable scope and scale economies overall, the results suggest a significant variation in scope economies across companies due to unobserved heterogeneity.
Identifying the Rebound: Evidence from a German Household Panel
Authors: Frondel Manuel , Peters Jorg , Vance Colin
Published: May 2011

Using a panel of household travel diary data collected in Germany between 1997 and 2005, this study assesses the effectiveness of fuel efficiency improvements by estimating the rebound effect, which measures the extent to which higher efficiency causes additional travel. Following a theoretical discussion outlining three alternative definitions of the rebound effect, the econometric analysis generates corresponding estimates using panel methods to control for the effects of unobservables that could otherwise produce spurious results. Our results, which range between 57% and 67%, indicate a rebound that is substantially larger than obtained in other studies, calling into question the efficacy of policies targeted at reducing energy consumption via technological efficiency.
Perspectives on Nonparametric and Semiparametric Modeling
Authors: Yatchew Adonis
Published: May 2011

Nonparametric regression techniques hold out the promise of more flexible modeling of data in many areas of physical, biological and social sciences. However, their use is hampered by the “curse of dimensionality” which imposes enormous data requirements as the number of explanatory variables increases. After summarizing two of the most commonly used methods for mitigating the "curse”, this paper outlines a new approach which exploits data on derivatives. In economics, such circumstances arise in the joint estimation of cost and factor demand functions, or when production function data are combined with data on factor prices. The ideas are illustrated using empirical examples from energy economics.
A Resource Whose Time Has Come? The Alberta Oil Sands as an Economic Resource
Authors: Atkins Frank. J. , MacFadyen Alan J.
Published: May 2011

The Alberta oil sands, which comprise over 170 billion barrels of proven recoverable reserves, are a resource of an order of magnitude similar to many estimates of ultimate world conventional oil reserves. Campbell Watkins maintained a long-standing emphasis on the essential economic component of any meaningful definition of the world’s natural resources. The fact is that the Alberta oil sands have had a very shaky economic foundation until only recently. The intention of this paper is to examine this emerging resource from an economic perspective; one, it is hoped, similar to that which Watkins evinced, in order to fully assess the extent to which the Alberta oil sands may be regarded as being no different in any meaningful way from other oil resources.
A Least-Cost Optimisation Model of C02 Capture Applied to Major UK Power Plants Within The EU-ETS Framework
Authors: Kemp A.G. , Kasim A.S.
Published: May 2011

Concerns about the cost of CO2 capture and sequestration, and the effectiveness of carbon abatement policies loom large in discussions on climate change mitigation. Several writers address the issue from various perspectives. This paper attempts to add relative realism to discussions on CO2 capture costs, and, the deployment of carbon capture technology in the UK by using publicly available company data on the long term capacity expansion and CO2 capture investment programmes of selected power plants in the UK. With an estimated £8 billion plan to install a generation capacity of 11 GW and capture capability of 44 MtCO/year, it is imperative to optimise this huge potential investment. A least-cost optimisation model was formulated and solved with the LP algorithm available in GAMS. The model was then applied to address a number of issues, including the choice of an optimal carbon abatement policy within the EU-ETS framework. The major findings of the study include (a) the long term total cost curve of CO2 capture has three phases - rising, plateau, rising; (b) alternative capture technologies do not have permanent relative cost advantages or disadvantages; (c) Government incentives encourage carbon capture and the avoidance of emission penalty charges; and (d) the goals of EU-ETS are more effectively realised with deeper cuts in the EUA ratios than merely hiking the emission penalty, as proposed in EU-ETS Phase II.
Lessons Learned From Electricity Market Liberalization
Authors: Joskow Paul L.
Published: May 2011

This paper discusses the lessons learned from electricity sector liberalization over the last 20 years. The attributes of reform models that have exhibited good performance attributes are identified, drawing on empirical analysis of market structure, behavior and performance in many countries. Wholesale and retail market competition and network regulation performance evidence are discussed. Technical, economic, and political challenges to improving the efficiency of what continue to be partial liberalization programs in many countries are considered.
Some Applied Economics of Utility Regulation A Paper in Honor of David Newbery
Authors: Littlechild Stephen
Published: May 2011

This paper seeks to bring to the attention of regulatory economists and policymakers the existence of some approaches to utility regulation that have hitherto received little or no attention in the economics literature. It begins by noting that regulatory actions have discouraged certain kinds of retail contracts in the UK that are offered in Nordic countries, almost extinguished retail competition in Ohio, and distorted the market for merchant interconnectors in Australia. In contrast, Argentina secured an efficient appraisal and implementation of transmission expansions by empowering users and severely limiting the role for regulation. Some US and Canadian jurisdictions have fostered the emergence of negotiated settlements that exhibit considerable innovation, and greater benefits for all parties than would have been possible with the conventional regulatory approach. These examples of the actual regulatory world can inform the work of theorists and policymakers.
The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World
Authors: Pollitt Michael G.
Published: May 2011

This paper discusses whether a new paradigm is necessary for independent economic regulation of electricity (and closely associated natural gas) systems. We begin by summarizing the nature of the traditional model of electricity reform and the place of economic regulation within it. Next we outline the drivers for changing the current model of electricity regulation, namely, the maturity of the existing model, the reality of changing circumstances, and the coming of age of climate change concern. We go on to discuss the premises on which a new model of regulation should be based. These are: remembering the successes of the current system of regulation; a new focus on processes not just outcomes; a recognition of the economics of climate change; and the appropriate management of uncertainty. We then highlight the key elements of a new model for regulation: new processes of regulation; new models of competition and the issues raised by a focus on climate change. The paper draws heavily on the experience of the UK, but has direct implications for the rest of the European Union countries and for other countries whose regulatory systems mirror them.
Markets vs. Regulation: A Role for Indicative Energy Planning
Authors: Pérez-Arriaga Ignacio J. , Linares Pedro
Published: May 2011

When there is no vision, people perish. (Proverbs, 29:18)

The energy sector worldwide is facing the enormous challenge of finding a path of economic, environmental, and social sustainability. This paper argues that, although markets are adequate instruments to achieve an efficient allocation of resources and to promote private initiative, the resolution of the sustainability challenge cannot be left only to market forces, but requires other complementary instruments, among which we highlight indicative energy planning. We discuss the role of indicative energy planning in the future of liberalized energy markets, and propose a general methodology for its implementation, as well as the identification of the major issues to be addressed.
Learning by Doing with Constrained Growth Rates: An Application to Energy Technology Policy
Authors: Neuhoff Karsten
Published: May 2011

Learning by doing methodology attributes cost reductions of a technology to cumulative investment and experience. This paper argues that in addition market growth rates must also be considered. Historically growth rates have been limited in most sectors, thus allowing for feedback in the learning process. When market growth is below the ‘optimal’ rate, the marginal value of additional investment could be a multiple of the direct learning benefit. Analytic and numeric models quantify this impact - emphasizing the need for tailored technology policy in addition to carbon pricing. Implications for the modeling of endogenous technological change are discussed.

Isoard, S. and A. Soria (1997).“Learning curves and returns to scale dynamics: Evidence from the emerging renewable energy technologies.” IPTS Working Paper Series 97/05.
The Short-Run Residential Demand for Natural Gas
Authors: Barnes Roberta , Gillingham Robert , Hagemann Robert
Published: May 2011

Effective and efficient energy conservation policy requires accurate and comprehensive estimates of residential energy demand pa- rameters. These parameter estimates are among the most important inputs into informed policy decisions. In turn, accurate estimation of energy demand parameters requires realistic modeling of the consumer's demand behavior, detailed information on energy consumption, and careful treatment of any econometric problems created by the model and data base.
Determinants of Energy Use in Institutional Buildings: A Minnesota Example
Authors: Hirst Eric
Published: May 2011

Energy use data are usually disaggregated by major end-use sector: residential, commercial, industrial, transportation. Generally speak- ing, data are weakest for the commercial sector, perhaps because this sector is often defined as a residual (i.e., that portion of the economy not included in the other sectors). However, energy use in commercial buildings accounts for about 15 percent of total U.S. energy use and is grow- ing more rapidly than energy use in other sectors. For example, commercial energy use amounted to almost 10 QBtu (10 EJ) in 1979; the average growth rate in commercial sector energy use was 1 percent per year between 1973 and 1979, compared with a growth rate of 0.3 percent per year for total U.S. energy use [1; 8].
Coping with Supply Insecurity
Authors: Adelman M. A.
Published: May 2011

Since the end of World War II, there have been six world oil supply disruptions, in 1951, 1956, 1967, 1973, 1979, and 1980-one year in six, and the frequency seems to be increasing. This danger will continue, for there are many sources of disruption. Although the probability of any one type in any one year is low, the chances of escaping them all for several years are also low.
British and American Tax Treatment of U.K. North Sea Oil Fields
Authors: Moose James S.
Published: May 2011

In its quest for additional revenue, the U.K. government has made a major change in the taxation system for North Sea oil fields. A new tax, the Supplementary Petroleum Duty (SPD), has been introduced, and the terms of the Petroleum Revenue Tax (PRT) have been tightened. The new tax system was introduced in March 1981 but was effective as of January 1, 1981. The new system has been criticized on the basis that it would substantially reduce the incentives to develop smaller fields and that it tends to discriminate against U.S. oil companies. This paper examines these criticisms. It analyzes the economics for a U.K. company of developing an oil field by field size. It then shows the changes in these economics created by the new U.K. taxation system. The final section of the paper deals with the interrelationship between the U.S. and U.K. tax treatments of North Sea oil.
Nuclear Power for Developing Countries: Attainable Within This Century?*
Authors: Roth Eli B.
Published: May 2011

To use or not to use nuclear power for generating electricity has, in many parts of the world, become as much an emotional issue as an economic or technical one. Probably this is even more so in developed than in developing countries. The menacing worldwide energy misallocations and shortages have been the subject of a number of conferences, workshops, articles, studies, and - in the United States at least - of pronouncements by advocates ranging in style and substance from Jane Fonda to Barry Commoner to Edward Teller. It is not necessary to take sides here on the narrower question of whether any country in particular should try to use nuclear power for electricity or should try to avoid it. But except perhaps for antinuclear diehards, surely anyone concerned with the plight of developing countries, whose other energy resources are often wholly inadequate, must be interested in finding a satisfactory way to open up for those countries, or to keep open, the nuclear option.
Financing Solar Repowering and the Quantification of External Benefits
Authors: Kamin Jules H. , Ellis J. Clair
Published: May 2011

Encouragement of investment in domestic energy projects capable of displacing imported petroleum is a central objective of U.S. energy policy. Private industry will be the primary vehicle for developing improvements in efficiency of new technologies, reducing costs to levels competitive with conventional technologies, and building the required industrial infrastructure.
Domestic Energy: A Forgotten Factor in Simple Energy-Economy Models
Authors: Peck Stephen C. , Solow John L.
Published: May 2011

This paper focuses on the impacts of changes in world energy prices on an energy-importing economy such as the United States. To this end, we use a simple energy-economy model developed by Sweeney [7] and having affinities to the earlier work of Hogan and Manne [5]. This model takes explicit account of the fact that the U.S. energy sector is linked to the rest of the world and that the United States is a net importer of energy. Comparative static analysis of this model enables us to pinpoint the most important parameters in the determination of relative price effects on the domestic economy. We show that the presence of energy consumption taxes and energy production subsidies does not affect the impacts of changes in world energy prices on national output.
Electricity Demand in Primary Aluminum Smelting
Authors: Alork Knut Anton
Published: May 2011

Primary aluminum smelting is one of the giant energy users among the manufacturing industries. With current technology, the smelting is done by an electrolytic process requiring as much as 13 to 19 megawatt-hours (MWh) of direct-current electricity per metric ton of aluminum metal.
The Need to Modify the Natural Gas Policy Act
Authors: Abbott Catherine Good
Published: May 2011

The current debate over the Natural Gas Policy Act of 1978 (NGPA) has three components: 1. Is the NGPA likely to achieve the goals Congress established for it in 1978? 2. Is the NGPA likely to lead to an extension of controls beyond 1985? If so, what are the consequences of such an extension? 3. What are the costs and benefits of alternatives to the NGPA?
The Tenneco Perspective
Authors: Foster Joe B.
Published: May 2011

A brief comment about the title given to this presentation. If you know the gas industry at all, you know that no one dares to speak for anyone else. Even within Tenneco, we look at natural gas deregulation from several points of view: Tenneco Oil is the country's fifteenth largest producer of natural gas, and it is the only one of the top 20 oil companies that derives more revenue from sales of natural gas than from crude oil.
Depletion and the Future Availability of Petroleum Resources
Authors: Aguilera Roberto F. , Eggert Roderick G. , Gustavo Lagos C.C. , Tilton John E.
Published: May 2011

This study assesses the threat that depletion poses to the availability of petroleum resources. It does so by estimating cumulative availability curves for conventional petroleum (oil, gas, and natural gas liquids) and for three unconventional sources of liquids (heavy oil, oil sands, and oil shale). The analysis extends the important study conducted by the U.S. Geological Survey (2000) on this topic by taking account of (1) conventional petroleum resources from provinces not assessed by the Survey or other organizations, (2) future reserve growth, (3) unconventional sources of liquids, and (4) production costs.

The results indicate that large quantities of conventional and unconventional petroleum resources are available and can be produced at costs substantially below current market prices of around US$120 per barrel. These findings suggest that petroleum resources are likely to last far longer than many are now predicting and that depletion need not drive market prices above the relatively high levels prevailing over the past several years.
The Global Natural Gas Market: Will Transport Cost Reductions Lead to Lower Prices?
Authors: Rosendahl Knut Einar , Sagen Eirik Lund
Published: May 2011

Reduced transportation costs are usually associated with lower import prices, increased trade and price convergence. In this paper we show that lower transport costs can actually lead to higher import prices in some regions, and price divergence between import regions. Using both a general theoretical approach and a numerical model of the global natural gas market, we demonstrate that the price effect from transport cost reductions depend on the relative distances between regional markets, the choice of transport technology, and supply and demand responsiveness in the different markets. Our numerical results suggest that European consumers would generally be better off if pipeline costs are reduced, while North American consumers would be better off if LNG costs are reduced.
Powering Progress: Restructuring, Competition, and R&D in the U.S. Electric Utility Industry
Authors: Sanyal Paroma , Cohen Linda R.
Published: May 2011

This paper investigates the R&D behavior of regulated firms when they transition to a competitive environment. Using data from the US electricity market from 1990-2000, we analyze how competition, institutional changes, and political constraints have contributed to the precipitous decline in R&D expenditure by regulated utilities. We find that firms reduce their R&D significantly at the very early stages of restructuring or even when they expect restructuring to occur. Once the emerging institutional structure becomes clear, R&D spending recovers but is later offset by another decline when restructuring legislation is enacted. In addition, greater competition and the nearing of such competition adversely affects research spending. In aggregate, R&D declines by 78.6 percent after electricity markets are restructured. Firm and state characteristics matter, and a majority of the research is conducted by large generation companies located in pro-research states, especially if they are part of a larger holding company. Such characteristics have a different impact on research spending in the pre- and post-restructured periods.
Long Memory in Oil and Refined Products Markets
Authors: Choi Kyongwook , Hammoudeh Shawkat
Published: May 2011

We test for the presence of long memory in daily oil and refined products prices’ absolute return, squared return and conditional volatility, using several parametric and semiparametric methods. This study finds strong evidence of long memory (LM) in the daily absolute and squared spot and futures returns for crude oil, gasoline and heating oil but at different degrees. The FIGARCH model also demonstrates strong evidence of LM for volatility for most of oil and products prices’ returns, with also different resilience levels. Structural breaks have only the partial effects of slightly reducing persistence for just absolute and squared returns. Examining the forecasting behavior of two competing models, the less parsimonious ARFIMA which satisfies the LM property, and the parsimonious ARMA with short-term processes, the ARFIMA model provides significantly better out-of-sample forecasts at all forecasting horizons for all three petroleum types.
Willingness to Pay for Energy Conservation and Free-Ridership on Subsidization: Evidence from Germany
Authors: Grösche Peter , Vance Colin
Published: May 2011

Understanding the determinants of home-efficiency improvements is significant to a range of energy policy issues, including the reduction of fossil fuel use and environmental protection. This paper analyzes retrofit choices by assembling a unique data set merging a nationwide household survey from Germany with regional data on wages and construction costs. To explore the influence of both heterogeneous preferences and correlation among the utility of alternatives, we estimate conditional-, random parameters-, and error components logit models that parameterize the influence of costs, energy savings, and household-level socioeconomic attributes on the likelihood of undertaking one of 16 renovation options. We use the model coefficients to derive household-specific marginal Willingness to Pay estimates, and with these assess the extent to which free-ridership may undermine the effectiveness of recently implemented programs that subsidize the costs of retrofits.
The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis
Authors: Hassett Kevin A. , Mathur Aparna , Metcalf Gilbert E.
Published: May 2011

This paper measures the direct and indirect incidence of a carbon tax using current income and two measures of lifetime income to rank households. Our results suggest that carbon taxes are more regressive when annual income is used as a measure of economic welfare than when lifetime income measures are used. Further, the direct component of the tax, in any given year, is significantly more regressive than the indirect component. We observe a modest shift over time with the direct component of carbon taxes becoming less regressive and the indirect component becoming more regressive. These effects mostly offset each other and the distribution of the total tax burden has not changed much over time. In addition we find that regional variation has fluctuated over the years of our analysis. By 2003 there is little systematic variation in carbon tax burdens across regions of the country.
OPEC Strategies and Oil Rent in a Climate Conscious World
Authors: Johansson Daniel J.A. , Azar Christian , Lindgren Kristian , Persson Tobias A.
Published: May 2011

In the UNFCCC process, energy exporting countries (primarily OPEC) claim compensationfor losses in expected oil rent due to CO2 mitigation measures. However, there are mechanisms that may raise rather than lower the oil rent. If a carbon price is implemented universally, the cost of using oil substitutes such as unconventional oil or synthetic diesel from coal or natural gas will increase even more than the cost of using conventional oil. Here, a dynamic model that takes into account OPEC’s dominant position in the world’s liquid fuel market is developed in order to analyze these mechanisms. In this model, OPEC is assumed to act as strategic leader while all other liquid fuel producers act as price-takers. We find that the net present value of OPEC’s conventional oil rent increases by about 5% due to the carbon prices needed to reach stringent CO2 emission targets. For less ambitious targets, the increase in oil rent could be even higher. An extensive sensitivity analysis is also performed, which corroborates the main result.
European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)
Authors: Alberola Emilie , Chevallier Julien
Published: May 2011

The price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). Previous literature identifies among its main explanations over-allocation concerns, early abatement efforts in 2005, and possibly decreasing abatement costs in 2006. We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008. Based on a Hotelling-CAPM analysis, we provide statistical evidence that the French and Polish decisions to ban banking contribute to the explanation of low EUA Phase I prices. Besides, we provide the first rigorous empirical verification that the cost-of-carry relationship between EUA spot and futures prices for delivery during Phase II does not hold after the enforcement of the inter-period banking restrictions. This situation may be interpreted as a sacrifice of the temporal flexibility offered to industrials in Phase I to correct design inefficiencies, and achieve an efficient price pattern in Phase II.
Modelling and Forecasting Oil Prices: The Role of Asymmetric Cycles
Authors: Cuaresma Jesus Crespo , Jumah Adusei , Karbuz Sohbet
Published: May 2011

Using a simple unobserved components model, we show that explicitly modelling asymmetric cycles on crude oil prices improves the forecast ability of univariate time series models of the oil price.
Fuelling Growth: What Drives Energy Demand in Developing Countries?
Authors: Benthem Arthur van , Romani Mattia
Published: May 2011

This paper investigates the relationship between energy demand, economic growth and prices in 24 non-OECD countries and three sectors from 1978-2003. We estimate linear and non-linear income andprice elasticities, using time fixed effects to control for unobserved dynamic effects such as technological change. We also test for asymmetric responses to price changes. The analysis leads to the following conclusions. First, the income elasticity of energy demand is high and increases with income, both on the country and the sector level. Second, energy demand is more responsive to end-use price than international oil price changes. Third, the price elasticity of energy demand increases with the price level. This result, driven by the residential and agricultural sector, is new to the literature for developing countries, and is consistent with the hypothesis of stronger responsiveness to high energy prices. Finally, we find that after including time fixed effects, allowing for price asymmetry adds little to the results.
The Market Effects of Going Green: Evidence from California’s Wholesale Reformulated Gasoline Market
Authors: Brown Jennifer L.
Published: May 2011

This paper analyzes the market changes that occurred in California’s refining industry following the 1992 implementation of the California Air Resources Board’s Phase II reformulated gasoline regulations. This paper uses monthly panel data to determine the impact that these regulations have had on the disparity between California’s finished gasoline rack prices and that in other regions of the country. The findings suggest that large refiner compliance to Phase II increased the rack price of finished gasoline in California as compared with other regions. This relative price increase, which was likely triggered by the increased production costs associated with Phase II, is consistent with similar results found throughout the literature. However, as small refiners were required to comply with these regulations, this analysis finds that the premium paid for finished gasoline in California increased significantly. This additional increase in the rack price differential, along with trends in industry concentration, suggests that Phase II may have disproportionately disadvantaged California’s small refiners, causing increased profits and market share for larger competitors.
Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions, and Firms
Authors: Traber Thure , Kemfert Claudia
Published: May 2011

Most models that are used to analyze support policies for renewable electricity neglect important market features like oligopolistic behavior, emission trading, and restricted cross-border transmission capacities. We use a quantitative electricity market model that accounts for these aspects and decompose the impact of the German Feed-in tariff (FIT) into two frequently counteracting effects: a substitution effect and a permit price effect. We find that the total effect of the policy increases the German consumer price slightly by three percent, while the producer price decreases by eight percent. In addition, emissions from electricity generation in Germany are reduced by eleven percent but are hardly altered on the European scale. Finally, it turns out that price-cost margins of almost all firms are increased by the FIT, while nonetheless, the profits of firms are significantly lowered unless the firms combine relatively carbon-intensive production with a weak connection to the German grid.
Issues in Designing U.S. Climate Change Policy
Authors: Aldy Joseph E. , Pizer William A.
Published: May 2011

Over the coming decades, the cost of U.S. climate change policy likely will be comparable to the total cost of all existing environmental regulation—perhaps 1-2 percent of national income. In order to avoid higher costs, policy efforts should create incentives for firms and individuals to pursue the cheapest climate change mitigation options over time, among all sectors, across national borders, and in the face of significant uncertainty. Well-designed national greenhouse gas mitigation policies can serve as the foundation for global efforts and as an example for emerging and developing countries. We present six key policy design issues that will determine the costs, cost-effectiveness, and distributional impacts of domestic climate policy: program scope, cost containment, offsets, revenues and allowance allocation, competitiveness, and R&D policy. We synthesize the literature on these design features, review the implications for the ongoing policy debate, and identify outstanding research questions that can inform policy development.
Willingness-to-Pay for Quality of Service: An Application to Efficiency Analysis of the UK Electricity Distribution Utilities
Authors: Yu William , Jamasb Tooraj , Pollitt Michael
Published: May 2011

Efficiency analysis of electricity distribution networks is often limited to technical or cost efficiency measures. However, some important non-tradable aspects of their service such as quality of service and network energy losses are often not part of the analysis. Moreover, technical or cost efficiency should not be achieved at the expense of allocative and economic efficiency. Valuation of service quality for regulatory models is particularly difficult. This paper presents an empirical approach to measure and incorporate service quality and energy losses into the analysis of technical and allocative efficiency of the utilities. We apply our method to the case of the distribution networks in the UK between 1990/91 and 2003/04 using the data envelopment analysis technique. We find that the efficiency of the utilities improved during the first and second five-year distribution price control reviews but exhibited a slight decline during the third review period. We find relatively low allocative efficiency - i.e. a mismatch in allocating resources among expenditures, service quality, and network energy losses. The results suggest that currently the utilities may not be correctly incentivised to achieve socially optimal trade-offs between these.
Demand Subsidies Versus R&D: Comparing the Uncertain Impacts of Policy on a Pre-commercial Low-carbon Energy Technology
Authors: Nemet Gregory F. , Baker Erin
Published: May 2011

We combine an expert elicitation and a bottom-up manufacturing cost model to compare the effects of R&D and demand subsidies. We model their effects on the future costs of a low-carbon energy technology that is not currently commercially available, purely organic photovoltaics (PV). We find that: (1) successful R&D enables PV to achieve a cost target of 4c/kWh, (2) the cost of PV does not reach the target when only subsidies, and not R&D, are implemented, and (3) production-related effects on technological advance—learning-by-doing and economies of scale—are not as critical to the long-term potential for cost reduction in organic PV than is the investment in and success of R&D. These results are insensitive to two levels of policy intensity, the level of a carbon price, the availability of storage technology, and uncertainty in the main parameters used in the model. However, a case can still be made for subsidies: comparisons of stochastic dominance show that subsidies provide a hedge against failure in the R&D program.
Revisiting the Inflationary Effects of Oil Prices
Authors: Chen Shiu-Sheng
Published: May 2011

This paper uses a structural vector autoregression model to investigate the inflationary effects of oil prices. Rather than simply infer the oil price changes as oil supply shocks, we identify three different shocks in the crude oil market: the oil supply shock, the global aggregate demand shock, and the oil-market specific demand shock. We then use impulse response functions to compute the conditional oil price pass-through ratios. It is found that the largest oil price pass-through is caused by oil supply shocks. However, evidence from historical decompositions suggests that the oil price movements have been driven by shocks from strong global aggregate demand and oil demand while only minor contributions come from oil supply shocks. Disentangling demand and supply shocks in the crude oil market helps to uncover the fact that a recent decline in unconditional oil price pass-through may come from the low conditional passthrough caused by global demand shocks.
Modeling Optimal Economic Dispatch and System Effects in Natural Gas Networks
Authors: Midthun Kjetil T. , Bjørndal Mette , Tomasgard Asgeir
Published: May 2011

In this paper we present a modeling framework for analyzing natural gas markets, taking into account the specific technological issues of gas transportation. We model the optimal dispatch of supply and demand in natural gas networks, with different objective functions, i.e., maximization of flow, and different economic surpluses. The models take into account the physical structure of the transportation networks, and examine the implications it has for economic analysis. More specifically, pressure constraints create system effects, and thus, changes in one part of the system may require significant changes elsewhere. The proposed network flow model for natural gas takes into account pressure drops and system effects when representing network flows. Pressure drops and pipeline flows are modeled by the Weymouth equation. A linearization of the Weymouth equation makes economic analyses computationally feasible even for large networks. However, in this paper, the importance of combining economics with a model for pressure drops and system effects is illustrated by small numerical examples.
Market Arbitrage: European and North American Natural Gas Prices
Authors: Brown Stephen P.A. , Yücel Mine K.
Published: May 2011

The development of an international market for liquefied natural gas (LNG) and the resulting opportunities for intercontinental arbitrage are seen as creating a world in which movements in natural gas prices are linked between continents. Increased flows of LNG into the United States and the potential sensitivity of these shipments to price differentials between Europe and North America suggests the possibility of a strengthening relationship between natural gas prices on these two continents. At the same time, there is considerable evidence linking natural gas price movements in Europe and North America to those for crude oil. Accordingly, we use a series of econometric tests to determine whether the co-movement between natural gas prices in Europe and North America is mediated through crude oil prices or is being shaped directly by gas-to-gas arbitrage.
Linking Natural Gas Markets - Is LNG Doing its Job?
Authors: Neumann Anne
Published: May 2011

The increase in liquefied natural gas trade has accelerated the integration of previously segmented markets in North America, Europe, and Asia. This paper provides evidence on the integration of the transatlantic natural gas market; it thus complements other papers in the EMF 23 study that focus on prices and international natural gas trade. We test the theoretical proposition that in integrating markets commodity prices should move closer than before. Using 2,059 pairs of daily spot prices for natural gas in North America and Europe we investigate price dynamics covering the period from 1999 until 2008. We apply the Kalman Filter technique which measures convergence by allowing for dynamic structural change to gain detailed information on trends inherent in prices over time. Results suggest an increasing convergence of spot prices on either side of the Atlantic Basin.
A Practitioner’s Perspective on Modeling Prices and Trade in a Globalizing Natural Gas Market
Authors: Stibolt Robert D.
Published: May 2011

This paper advances some principles for practical application of natural gas models that were used during the EMF 23 study. These principles emphasize a decision-focused perspective, embrace uncertainty, demand consistency of model results with observable facts, are capable of navigating the complexity of systems, and distinguish insight from unattainable precision. The principles are designed to foster the assistance of better decision making by models and modelers.
Spatial Price and Quantity Relationships in World and Continental Commodity Markets
Authors: Nesbitt Dale M. , Scotcher Jill N.
Published: May 2011

Modeling world or continental natural gas, oil, coal, or electricity requires a representation of the spatial nature of such commodity markets—multiple interconnected and/or independent source points, intermediate points, and consumption points. Spatial commodity models, properly constructed, expose the underlying economic fundamentals—prices, basis differentials, flowing quantities, and why prices and quantities embrace certain relationships but not others. This paper examines spatial market equilibrium from a methodological perspective and puts forth results that explain interrelationships of prices and quantities of commodity throughout a market of competing/complementary supply chains. The objective is to allay common “myths” by counterexample and at the same time posit some realities both methodologically and by example.
Globalisation of Natural Gas Markets -Effects on Prices and Trade Patterns
Authors: Aune Finn Roar , Rosendahl Knut Einar , Sagen Eirik Lund
Published: May 2011

The regional natural gas markets are expected to gradually become more integrated. The major driving forces are lower LNG costs, more spot trade, and increased need for imports into the US and other key markets. In this paper we examine various scenarios for a future global gas market, particularly focusing on natural gas prices and trade patterns. We use a numerical model of the international energy markets, with detailed modelling of regional gas production and international gas transport. Scenarios with different assumptions about future demand and supply conditions are simulated. Our results suggest that trade between continents will grow considerably over the next couple of decades, and that prices in the main import regions will remain around current levels. However, significant constraints on exports from the Middle East may alter this picture.
Representing GASPEC with the World Gas Model
Authors: Egging Ruud , Holzf Franziska , Hirschhausen Christian von , Gabriel Steven A.
Published: May 2011

This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately hold back production. The results show that compared to our Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America.
A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market
Authors: Lise Wietze , Hobbs Benjamin F.
Published: May 2011

Recent increases in the world price of oil have led to higher gas prices in Europe, possibly leading to greater opportunities for exercising market power. The effect of different gas producer strategies upon price levels in the liberalised European gas market over the period 2005-2030 is analysed using a dynamic gas market model that accounts for demand, supply, and investments in pipeline transport, LNG, and storage. The multi-period model formulation allows exploration of the dynamics of market power as transportation and storage capacities are augmented and interact with demand growth. The combined effects of spatial configuration of the supply network and supplier location upon intensity of competition in ten different regions in Europe are considered. Differences in prices are due to the interaction of (1) inherent ability of producers to exercise market power (determined by production capacity and costs) with the (2) accessibility of the market (determined by gas transport infrastructure).
Perspectives of the European Natural Gas Markets Until 2025
Authors: Holz Franziska , Hirschhausen Christian von , Kemfert Claudia
Published: May 2011

We apply the EMF 23 study design to simulate the effects of the reference case and the scenarios to European natural gas supplies to 2025. We use GASMOD, a strategic several-layer model of European natural gas supply, consisting of upstream natural gas producers, traders in each consuming European country (or region), and final demand. Our model results suggest rather modest changes in the overall supply situation of natural gas to Europe, indicating that current worries about energy supply security issues may be overrated. LNG will likely increase its share of European natural gas imports in the future, Russia will not dominate the European imports (share of ∼1/3), the Middle East will continue to be a rather modest supplier, the UK is successfully converting from being a natural gas exporter to become a transit node for LNG towards continental Europe, and congested pipeline infrastructure, and in some cases LNG terminals, will remain a feature of the European natural gas markets, but less than in the current situation.
How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model
Authors: Carraro Carlo , Massetti Emanuele , Nicita Lea
Published: May 2011

This paper analyses whether and how a climate policy designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pace of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy. In this version, a non-energy R&D sector, which enhances the productivity of the capital-labor aggregate, has been added to the energy R&D sector included in the original WITCH model. We find that, as a consequence of climate policy, R&D is re-directed towards energy knowledge. Nonetheless, total R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the economic activity associated with a climate policy induces a decline in total R&D investments. However, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investments in nonenergy R&D.
The Role of Emission Trading in Domestic Climate Policy
Authors: Hanemann Michael
Published: May 2011

This paper focuses on two specific issues in the design of a domestic cap and trade program for GHGs - whether the cap should be located upstream or downstream, and whether trading alone will suffice to achieve the desired reduction in GHGs or will need to be supplemented with additional regulatory measures. The paper argues for a downstream cap accompanied by measures such as a renewable portfolio standard, efficiency standards for vehicles, appliances and buildings, and a low carbon fuel standard. For this argument, it is necessary to address both the theory and the empirical evidence of emission trading. After reviewing the theory, the paper examines the actual experience in the U.S. with emission trading for SO2, to see whether the assumptions used in the theory actually applied in practice. What actually happened deviated in several important respects from what was supposed to happen according to the conventional theorizing. The design of a cap and trade program for GHG is then discussed, first considering the similarities between the past regulation of air pollutants and the challenge posed by GHGs, and then making the case for a downstream cap and complementary policies.
Market Power in Pollution Permit Markets
Authors: Montero Juan-Pablo
Published: May 2011

As with other commodity markets, markets for trading pollution permits have not been immune to market power concerns. In this paper, I survey the existing literature on market power in permit trading but also contribute with some new results and ideas. I start the survey with Hahn’s (1984) dominant-firm (static) model that I then extend to the case in which there are two or more strategic firms that may also strategically interact in the output market, to the case in which current permits can be stored for future use (as in most existing and proposed market designs), to the possibility of collusive behavior, and to the case in which permits are auctioned off instead of allocated for free to firms. I finish the paper with a review of empirical evidence on market power, if any, with particular attention to the U.S. sulfur market and the Southern California NOx market.