May 30, 2010

Annual Energy Outlook 2010

by the U.S. Energy Information Administration

- The Annual Energy Outlook presents a projection and analysis of US energy supply, demand, and prices through 2035. The projections are based on results from the Energy Information Administration's National Energy Modeling System. The AEO2010 includes Reference case, additional cases examining alternative energy markets.

EIA (2010). "Annual Energy Outlook 2010." The U.S. Energy Information Administration, May 2010.

Complete Report [1.3M]

Executive Summary

Credibility in Carbon Policy

by Steffen Brunner, Christian Flachsland and Robert Marschinski

- Carbon policy faces an intractable trade-off: while credible commitment to future policy improves the dynamic efficiency of incentives it imposes costs in form of reduced flexibility to respond to changing circumstances. This paper surveys commitment devices which help government to rise the level of commitment while also leaving some room for flexible adjustments. In particular, the proposals of legislating a long-term carbon budgeting framework, delegation to an independent carbon central bank, and securitization of investors’ stakes in emission markets seem palliative approaches and are worthy of deeper investigation.

Brunner, S., C. Flachsland and R. Marschinksi (2010). "Credibility in Carbon Policy." Potsdam Institute for Climate Impact Research, Working Paper, May 2010.

The Economic Impact of the Little Ice Age

by Morgan Kelly and Cormac Ó Gráda

- We investigate by how much the Little Ice Age reduced the harvests on which pre-industrial Europeans relied for survival. We find that weather strongly affected crop yields, but can find little evidence that western Europe experienced long swings or structural breaks in climate. Instead, annual summer temperature reconstructions between the fourteenth and twentieth centuries behave as almost independent draws from a distribution with a constant mean but time varying volatility.

Kelly, M. and C.Ó. Gráda (2010). "The Economic Impact of the Little Ice Age." CEPR Discussion Paper DP7816, May 2010.

Population Under a Cap on Greenhouse Gas Emissions.

by Henning Bohn and Charles Stuart

- A cap on greenhouse gas emissions makes total emissions a fixed common-property resource. Population increases under a cap are therefore self-limiting: a population increase raises labor and reduces emissions per unit of labor, which lowers incomes and fertility. Because a marginal birth under a cap lowers all incomes, a cap induces a negative population externality. The externality is substantial in calibrations, about 20 percent of income in steady state and 5 percent of income immediately after imposition, or more, per child. Similarly, the optimal population may be one-quarter of the natural population in steady state.

Bohn, H. and C. Stuart (2010). "Population Under a Cap on Greenhouse Gas Emissions." CESifo Working Paper No. 3046, May 2010.

Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent

by Matthias Kalkuhl and Ottmar Edenhofer

- This paper provides a formal survey of price and quantity instruments for mitigating global warming. We explicitly consider policies’ impact on the incentives of resource owners who maximize their profits intertemporally. We focus on the informational and commitment requirements of the regulator. Furthermore, we study the interplay between (private) resource extraction rent and (public) climate rent and ask how property and management of the climate rent can be assigned between regulator and resource sector.

Kalkuhl, M. and O. Edenhofer (2010). "Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent." CESifo Working Paper No. 3044, May 2010.

Efficient Management of Insecure Fossil Fuel Imports through Taxing (!) Domestic Green Energy?

by Thomas Eichner and Rüdiger Pethig

- A small open economy produces a consumer good, green and black energy, and imports fossil fuel at an uncertain price. Unregulated competitive markets are shown to be inefficient. The implied market failures are due to the agents’ attitudes toward risk, to risk shifting and the uniform price for both types of energy. Under the plausible assumptions that consumers are prudent and at least as risk averse as the producers of black energy, the risk can be efficiently managed by taxing emissions and green energy.

Eichner, T. and R. Pethig (2010). "Efficient Management of Insecure Fossil Fuel Imports through Taxing (!) Domestic Green Energy?" CESifo Working Paper No. 3062, May 2010.

Environmental Policy, Education and Growth with Finite Lifetime: the Role of Abatement Technology

by Xavier Pautrel

- This note shows that the assumptions about the abatement technology modify the impact of the environmental taxation on the long-run growth driven by human capital accumulation à la Lucas (1988), when lifetime is finite. Whereas no impact of the environmental policy on long-run growth is found when pollution originates from final output and abatement is an activity requiring final output to reduce net emissions, this note demonstrates that a tighter environmental tax enhances human capital accumulation when it is assumed that abatement services are produced with physical capital.

Pautrel, X. (2010). "Environmental Policy, Education and Growth with Finite Lifetime: the Role of Abatement Technology." FEEM Note di lavoro 2010.070, May 2010.

The Linkages between Energy Efficiency and Security of Energy Supply in Europe

by Andrea Bigano, Ramon Arigoni Ortiz, Anil Markandya, Emanuela Menichetti and Roberta Pierfederici

- Energy savings may be considered a policy priority when concerns for energy security are particularly strong. Drawing on an original econometric approach, we check whether policies and measures that affect indicators of energy efficiency performance have an analogous effect on security of supply indicators, both at the whole economy level and within the main sectors of energy use in the EU 15 countries and Norway.

Bigano, A., R. Arigoni Ortiz, A. Markandya, E. Menichetti and R. Pierfederici (2010). The Linkages between Energy Efficiency and Security of Energy Supply in Europe."" FEEM Note di lavoro 2010.064, May 2010.

International Cooperation on Climate Change Adaptation from an Economic Perspective

by Kelly C. de Bruin, Rob B. Dellink and Richard S.J. Tol

- This paper investigates the economic incentives of countries to cooperate on international adaptation financing. Adaptation is generally implicitly incorporated in the climate change damage functions as used in Integrated Assessment Models. We replace the implicit decision on adaptation with explicit adaptation in a multi-regional setting by using an adjusted RICE model. We show that making adaptation explicit will not affect the optimal mitigation path when adaptation is set at its optimal level.

de Bruin, K.C., R.B. Dellink and R.S.J. Tol (2010). "International Cooperation on Climate Change Adaptation from an Economic Perspective." FEEM Note di lavoro 2010.063, May 2010.

Alternative Paths toward a Low Carbon World

by Valentina Bosetti, Carlo Carraro and Massimo Tavoni

- This paper analyzes the economic and investment implications of a series of climate mitigation scenarios, characterized by different levels of ambition in terms of long term stabilization goals and the transition to attain them. Although milder climate objectives can be achieved at moderate costs, our results show that stringent stabilization paths, compatible with the target of the European Union and the G8, might have important economic repercussions.

Bosetti, V., C. Carraro and M. Tavoni (2010). "Alternative Paths toward a Low Carbon World." FEEM Note di lavoro 2010.062, May 2010.

Measuring the Economic Effect of Global Warming on Viticulture Using Auction, Retail, and Wholesale Prices

by Orley C. Ashenfelter and Karl Storchmann

- In this paper we measure the effect of year to year changes in the weather on wine prices and winery revenue in the Mosel Valley in Germany in order to determine the effect that climate change is likely to have on the income of wine growers. A novel aspect of our analysis is that we compare the estimates based on auction, retail, and wholesale prices.

Orley C. Ashenfelter and Karl Storchmann (2010). "Measuring the Economic Effect of Global Warming on Viticulture Using Auction, Retail, and Wholesale Prices." NBER Working Paper No. 16037, May 2010.

Paying for Mitigation: A Multiple Country Study

by Fredrik Carlsson, Mitesh Kataria, Alan J. Krupnick, Elina Lampi, Åsa Lofgren, Ping Qin, Susie Chung and Thomas Sterner

- Unique survey data from a contingent valuation study conducted in three different countries (China, Sweden, and the United States) were used to investigate the ordinary citizen’s willingness to pay (WTP) for reducing CO2 emissions. When WTP is measured as a share of household income, the willingness to pay is the same for Americans and Chinese, while again higher for the Swedes.

Carlsson, F., M. Kataria, A.J. Krupnick, E. Lampi, Å. Lofgren, P. Qin, S. Chung and T. Sterner (2010). "Paying for Mitigation: A Multiple Country Study." RFF Discussion Paper EfD 10-12, May 2010.

Climate Change Uncertainty Quantification: Lessons Learned from the Joint EUUSNRC Project on Uncertainty Analysis of Probabilistic Accident Consequen

by Roger M. Cooke and G.N. Kelly

- Between 1990 and 2000 the U.S. Nuclear Regulatory Commission and the Commission of the European Communities conducted a joint uncertainty analysis of accident consequences for nuclear power plants. This study remains a benchmark for uncertainty analysis of large models involving high risks with high public visibility, and where substantial uncertainty exists. The study set standards with regard to structured expert judgment, performance assessment, dependence elicitation and modeling and uncertainty propagation of high dimensional distributions with complex dependence.

Cooke, R.M. and G.N. Kelly (2010). "Climate Change Uncertainty Quantification: Lessons Learned from the Joint EUUSNRC Project on Uncertainty Analysis of Probabilistic Accident Consequence Codes." RFF Discussion Paper 10-29, May 2010.

Restructuring the Australian Economy to Emit Less Carbon - A Grattan Report

by John Daley and Tristan Edis

- This report focuses on the impact of carbon pricing on Australian industry and households, understanding how carbon pricing will affect their costs and competitiveness. It does this through adopting a carbon price reflective of what is likely to occur over the next 10 years according to Australian Treasury modelling - $35 per tonne of CO2.

Daley, J. and T. Edis (2010). "Restructuring the Australian Economy to Emit Less Carbon - A Grattan Report." Grattan Institute Report No. 2010-2, Apr 2010.

May 10, 2010

On the Formation of Coalitions to Provide Public Goods - Experimental Evidence from the Lab

by Astrid Dannenberg, Andreas Lange and Bodo Sturm

- The provision of public goods often relies on voluntary contributions and cooperation. While most of the experimental literature focuses on individual contributions, many real-world problems involve the formation of institutions among subgroups (coalitions) of players. International agreements serve as one example. This paper experimentally tests theory on the formation of coalitions in different institutions and compares those to a voluntary contribution mechanism. The experiment confirms the rather pessimistic conclusions from the theory.

Dannenberg, A., A. Lange and B. Sturm (2010). "On the Formation of Coalitions to Provide Public Goods - Experimental Evidence from the Lab." NBER Working Paper No. 15967, May 2010.

Why Has California's Residential Electricity Consumption Been So Flat since the 1980s?: A Microeconometric Approach

by Dora L. Costa and Matthew E. Kahn

- We use detailed microeconomic data to investigate why aggregate residential electricity consumption in California has been flat since 1980. Using unique micro data, we document the role that household demographics and ideology play in determining electricity demand. We show that building codes have been effective for homes built after 1983.

Costa, D.L. and M.E. Kahn (2010). "Why Has California's Residential Electricity Consumption Been So Flat since the 1980s?: A Microeconometric Approach." NBER Working Paper No. 15978, May 2010.

Roadmap Background: Biofuels for Transport

by the International Energy Agency

- The IEA publication Energy Technology Perspectives 2008 projects that advanced global development and uptake of key technologies is required to reach a 50% reduction in energy related CO2 emissions by 2050. In its Blue Map scenario, biofuel demand increases rapidly, reaching approximately 700 Mtoe in 2050, a share of 26% of total transport fuel.

IEA (2010). "Roadmap Background: Biofuels for Transport." International Energy Agency, May 2010.

Soft and Hard Price Collars in a Cap-and-Trade System: A Comparative Analysis

by Harrison Fell, Dallas Burtraw, Richard D. Morgenstern, Karen L. Palmer, Louis Preonas

- We use a stochastic dynamic framework to compare price collars (price ceilings and floors) in a cap-and-trade system. Sources of uncertainty include shocks to baseline emissions, affecting corresponding abatement costs, and shocks to the supply of offsets. We consider a continuum between soft collars, which have a limited volume of additional emission allowances (a reserve) available at the price ceiling, and hard collars, which provide an unlimited supply of additional allowances, thereby preventing allowance prices from exceeding the price ceiling.

Fell, H., D. Burtraw, R.D. Morgenstern, K.L. Palmer and L. Preonas (2010). "Soft and Hard Price Collars in a Cap-and-Trade System: A Comparative Analysis." RFF Discussion Paper 10-27, May 2010.

How Will the Billions of 'Free' Climate Change Allowances under Cap And-Trade Affect U.S. Companies’ Balance Sheets?

by Paul A. Griffin

- This study examines the impact of the "free" climate change allowances under the proposed American Clean Energy and Security Act of 2009 on the balance sheets and income statements of companies in the S&P 500. This study states and tests an economic model that accounts for the relation between greenhouse gas emissions and financial statement variables at the individual company level to assess this contention.

Griffin, P.A. (2010). "How Will the Billions of 'Free' Climate Change Allowances under Cap And-Trade Affect U.S. Companies’ Balance Sheets?" Graduate School of Management University of California, Davis, May 2010.

Carbon Offsets with Endogenous Environmental Policy

by Jon Strand

- In this note, the potential to affect the availability of future Clean Development Mechanism projects is shown to distort environmental and energy policies of Clean Development Mechanism host countries in two ways. Measures to reduce use of fossil energy are weakened. Because this weakens private sector incentives to switch to lower-carbon technology through Clean Development Mechanism projects, host governments then also find it attractive to subsidize this switch, in order to maximize the country’s advantage from the Clean Development Mechanism.

Strand, J. (2010). "Carbon Offsets with Endogenous Environmental Policy." World Bank Policy Research Working Paper, no. WPS 5296, May 2010.

Thirty-Five Years of Long-Run Energy Forecasting: Lessons for Climate Change Policy

by Jean-Charles Hourcade and Franck Nadaud

- This paper sheds light on an implicit dimension of the climate policy debate: the extent to which supply-side response (emission-reducing energy technologies) may substitute for the transformation of consumption behavior and thus help get around the political difficulties surrounding such behavioral transformation. The paper performs a meta-review of long-term energy forecasts since the end of the 1960s in order to put in perspective the controversies around technological optimism about the potential for cheap, large-scale, carbon-free energy production.

Hourcade, J-C and F. Nadaud (2010). "Thirty-Five Years of Long-Run Energy Forecasting: Lessons for Climate Change Policy." World Bank Policy Research Working Paper, no. WPS 5298, May 2010.

Can Pollution Tax Rebates Protect Low-Income Families? The Effects of Relative Wage Rates

by Don Fullerton and Holly Monti

- Pollution taxes are believed to burden low-income households that spend a greater than average share of income on pollution-intensive goods. Some propose to offset that effect by returning revenue to low-income workers via reduced labor tax. We build analytical general equilibrium models with both skilled and unskilled labor, and we solve for expressions that show the change in the real net wage of each group.

Fullerton, D. and H. Monti (2010). "Can Pollution Tax Rebates Protect Low-Income Families? The Effects of Relative Wage Rates." NBER Working Paper No. 15935, Apr 2010.

Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate

by Michael J. Roberts and Wolfram Schlenker

- We present a new framework to identify demand and supply elasticities of agricultural commodities using yield shocks - deviations from a time trend of output per area, which are predominantly caused by weather fluctuations. We use our estimated elasticities to evaluate the impact of ethanol subsidies and mandates on world food commodity prices, quantities, and food consumers' surplus.

Roberts, M.J. and W. Schlenker (2010). "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate." NBER Working Paper No. 15921, Apr 2010.

Phase Out of Incandescent Lamps- Implications for International Supply and Demand for Regulatory Compliant Lamps

by Paul Waide

- Since early 2007 almost all OECD and many non-OECD governments have announced policies aimed at phasing-out incandescent lighting within their jurisdictions. This study considers the implications of these policy developments in terms of demand for regulatory compliant lamps and the capacity and motivation of the lamp industry to produce efficient lighting products in sufficient volume to meet future demand.

Waide, P. (2010). "Phase Out of Incandescent Lamps- Implications for International Supply and Demand for Regulatory Compliant Lamps." International Energy Agency, Information Paper, Apr 2010.

Comparative Study on Rural Electrification Policies in Emerging Economies- Keys to Successful Policies

by Alexandra Niez

- Brazil, China, India and South Africa have each worked to improve access to electricity services. While many of the challenges faced by these countries are similar, the means of addressing them varied in their application and effectiveness. This report analyses the four country profiles, determining the pre-requisites to successful rural electrification policies.

Niez, A. (2010). "Comparative Study on Rural Electrification Policies in Emerging Economies- Keys to Successful Policies." International Energy Agency, Information Paper, Mar 2010.

The Economics of Transition in the Power Sector

by William Blyth

- The power sector carries a considerably great burden of the CO2 emission reductions required to address climate change, a feature common to many scenarios of emissions abatement. These reductions will only be possible if existing plants are replaced with more efficient and less-emitting types of plants over the coming decades. This report identifies the investments needed in the power sector, and their related risk factors.

Blyth, W. (2010). "The Economics of Transition in the Power Sector." International Energy Agency, Information Paper, Jan 2010.

May 4, 2010

Options for Energy Efficiency in India and Barriers to Their Adoption: A Scoping Study

by Soma Bhattacharya and Maureen L. Cropper

- We review the economics literature on energy efficiency in India, as a guide for further research in the area. The empirical literature has focused on four questions: How does energy efficiency in India compare with energy efficiency in other countries? What would be the energy savings (and cost savings) from adopting certain energy-efficient technologies? Why are these technologies being -or not being- adopted? What policies should be implemented to encourage their adoption? Most of the literature focuses on answers to the first two questions.

Bhattacharya, S. and M.L. Cropper (2010). "Options for Energy Efficiency in India and Barriers to Their Adoption: A Scoping Study." Available on SSRN, Apr 2010.

Tax or No Tax? Preferences for Climate Policy Attributes

by Runar Brännlund and Lars Persson

- In this paper, an Internet-based choice experiment is conducted where respondents are asked to choose between two alternative policy instruments that both reduce the emissions of CO2 by the same amount. The policy instruments are characterized by a number of attributes; a technology-effect, an awareness effect, cost distribution, geographic distribution and private cost (presented in more detail in the paper). By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes.

Brännlund, R. and L. Persson (2010). "Tax or No Tax? Preferences for Climate Policy Attributes." CERE Working Paper No. 2010:4, Apr 2010.

Accommodating Migration to Promote Adaptation to Climate Change

by Jon Barnett and Michael Webber

- This paper explains how climate change may increase future migration, and which risks are associated with such migration. It also examines how some of this migration may enhance the capacity of communities to adapt to climate change. Climate change is likely to result in some increase above baseline rates of migration in the next 40 years. Most of this migration will occur within developing countries. There is little reason to think that such migration will increase the risk of violent conflict.

Barnett, J. and M. Webber (2010). "Accommodating Migration to Promote Adaptation to Climate Change." World Bank Policy Research Working Paper: no. WPS 5270, Apr 2010.

Climate Change Impacts on Global Agriculture

by Alvaro Calzadilla, Katrin Rehdanz, Richard Betts, Pete Falloon, Andy Wiltshire and Richard S.J. Tol

- Based on predicted changes in the magnitude and distribution of global precipitation, temperature and river flow under the IPCC SRES A1B and A2 scenarios, this study assesses the potential impacts of climate change and CO2 fertilization on global agriculture. The analysis uses the new version of the GTAP-W model, which distinguishes between rainfed and irrigated agriculture and implements water as an explicit factor of production for irrigated agriculture.

Calzadilla, A., K. Rehdanz, R. Betts, P. Falloon, A. Wiltshire and R.S.J. Tol (2010). "Climate Change Impacts on Global Agriculture." Working Paper FNU-185, Apr 2010.

Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE Model with Heterogeneous Capital

by Lucas Bretschger, Roger Ramery and Florentine Schwarkz

- The paper develops a new type of CGE model to predict the e ects of carbon policies on consumption, welfare, and sectoral development in the long run.
Growth is fully endogenous, based on increasing specialization in capital varieties, and speci c in each sector of the economy. The benchmark scenario is calculated based on the endogenous gains from specialization which carry over to policy simulation. Applying the model to the Swiss economy we nd that a carbon policy following the Copenhagen Accord entails a moderate but not negligible welfare loss compared to development without any negative e ects of climate change. Energy extensive as well as capital and knowledge intensive sectors pro t in the form of increased growth rates.

Bretschger, L., R. Ramery and F. Schwarkz (2010). "Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE Model with Heterogeneous Capital." ETH, Apr, 2010.

Efficient Emissions Reduction

by Beatrice Roussillon and Paul Schweinzer

- We propose a simple mechanism capable of achieving international agreement on averting the threat of global warming. It employs a contest creating incentives among participating nations to exert both efficient productive efforts and efficient emissions reductive efforts. Participation in the scheme is voluntary and turns out to be individually rational if the alternative is no agreement at all. The scheme requires no principal or enforcing penalties. All rules are mutually agreeable and are unanimously adopted if proposed.

Roussillon, B. and P. Schweinzer (2010). "Efficient Emissions Reduction." University of Manchester, Department of Economics, Apr 2010.

Renewable Energy Investment and the Clean Development Mechanism

by Kirill Zavodov

- This paper uses transaction and index data to empirically examine price formation in, and equilibrium characteristics of, the primary CDM market. Results point to the preemptive behaviour among intermediaries (carbon firms), and inefficiencies in information transmission between secondary and primary markets (potentially due to the limits of arbitrage). Since the primary carbon market is unstable and is prone to rational and irrational oscillations, the CDM, in its current form, is not a reliable policy tool for long-term renewable energy sector development plans.

Zavodov, K. (2010). "Renewable Energy Investment and the Clean Development Mechanism." University of Cambridge, Mar 2010.

May 2, 2010

The Impact of Temperature Changes on Residential Energy Consumption

by Sebastian Petrick, Katrin Rehdanz and Richard S. J. Tol

- To investigate the link between rising global temperature and global energy use, we estimate an energy demand model that is driven by temperature changes, prices and income. The estimation is based on an unbalanced panel of 157 countries over three decades. We limit the analysis to the residential sector and distinguish four different fuel types (oil, natural gas, coal and electricity). Compared to previous papers, we have a better geographical coverage and consider non-linearities in the impact of temperature on energy demand as well as temperature-income interactions.

Petrick, S., K. Rehdanz and R.S.J. Tol (2010). "The Impact of Temperature Changes on Residential Energy Consumption." Kiel Working Paper No. 1618, Apr 2010.

Trading for the Future: Signaling in Permit Markets

by Bård Harstad and Gunnar S. Eskeland

- Permits markets are celebrated as a policy instrument since they allow (i) firms to equalize marginal costs through trade and (ii) the regulator to distribute the burden in a politically desirable way. These two concerns, however, may conflict in a dynamic setting. Anticipating the regulator's future desire to give more permits to firms that appear to need them, firms purchase permits to signal their need. This raises the price above marginal costs and the market becomes inefficient. If the social cost of pollution is high and the government intervenes frequently in the market, the distortions are greater than the gains from trade and non-tradable permits are better. The analysis helps to understand permit markets and how they should be designed.

Bård Harstad and Gunnar S. Eskeland (2010). "Trading for the Future: Signaling in Permit Markets." Department of Finance and Management Science, Norwegian School of Economics and Business Administration (NHH), Discussion Paper No 2010/2, Apr 2010.

Electricity Production with Intermittent Sources of Energy

by Stefan Ambec and Claude Crampes

- The paper analyzes the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first
characterize the first-best dispatch and investment in the two types of energy. We put the accent on the availability of the intermittent source as a major
parameter of optimal capacity investment. We then analyze decentralization through competitive market mechanisms.

Ambec, S. and C. Crampes (2010). "Electricity Production with Intermittent Sources of Energy." INRA Working Paper No. 10.07.313, Mar 2010.

Climate Change Mitigation in Advanced Developing Countries: Empirical Analysis of the Low-Hanging Fruit Issue in the Current CDM

by Paula Castro

- Under the Kyoto Protocol, developing countries can voluntarily participate in climate change mitigation through the Clean Development Mechanism (CDM), where emission reduction credits from projects in developing countries are bought by industrialized countries to meet their own commitments. Before its
implementation, developing-country experts opposed the CDM, arguing that it would sell off their countries’ cheapest emission reduction options and force them to invest in more expensive measures to meet their future reduction targets. This paper analyzes this "low-hanging fruit" argument empirically.

Castro, P. (2010). "Climate Change Mitigation in Advanced Developing Countries: Empirical Analysis of the Low-Hanging Fruit Issue in the Current CDM." CIS Working Paper No 54, Mar 2010.

Who Hosts the Clean Development Mechanism? Determinants of CDM Project Distribution

by Florens Flues

- The econometric analysis of CDM project distribution finds that economic development and growth, fossil fuel, and renewable energy generation, as well as links to developed countries and institutional quality positively affect the number of projects hosted. Furthermore, more advanced developing countries pursue a higher share of projects without any direct involvement from developed countries.

Flues, F. (2010). "Who Hosts the Clean Development Mechanism? Determinants of CDM Project Distribution." CIS Working Paper No 53, Mar 2010.

The Economics of Trade, Biofuel, and the Environment

by Gal Hochman, Steven Sexton and David D. Zilberman

- The introduction of renewable biofuels was associated with global food crisis and unintended environmental consequences. This paper incorporates energy environment and agricultural sector to the classic Hecksher-Ohlin model to address these issues. A household production function model was introduced to model consumer energy choices and concern about externalities related to climate change and open space. The conceptual model links energy and food markets and derives guidelines for the development of climate change and land-use policies.

Hochman, G., S. Sexton and D.D. Zilberman (2010). "The Economics of Trade, Biofuel, and the Environment." CUDARE Working Paper No. 1100, UC Berkeley, Mar 2010.

The Effect of Biofuel on the International Oil Market

by Gal Hochman, Deepak Rajagopal and David D. Zilberman

- This paper derives a method to quantify the impact of biofuel on fuel markets, assuming that these markets are dominated by cartel of oil-rich countries, and that prices in these countries are set to maximize the sum of domestic consumer and producer surplus, leading to a wedge between domestic and international fuel prices. We model this behavior by applying the optimal export tax model (henceforth, the cartel-of-nations model) to the fuel markets.

Hochman, G., D. Rajagopal and D.D. Zilberman (2010). "The Effect of Biofuel on the International Oil Market." CUDARE Working Paper No. 1099, Mar 2010.

Self-Insurance and Self-Protection as Public Goods

by Ulrich Schmidt

- Most pure public goods like lighthouses, dams, or national defense provide utility mainly by insuring against hazardous events. Our paper focuses on this insurance character of public goods. As for private actions against hazardous events, one can distinguish between self-insurance (SI) and self-protection (SP) also in the context of public goods. For both cases of SI and SP we analyze efficient public provision levels as well as provision levels resulting from Nash behavior in a private provision game.

Schmidt, U. (2010). "Self-Insurance and Self-Protection as Public Goods." Kiel Working Paper No. 1613, Mar 2010.

Promoting Renewables and Discouraging Fossil Energy Consumption in the European Union

by Cathrine Hagem

- The European Union (EU) identified some positive and negative externalities related to energy production and consumption when adopting its Renewable Energy and Climate Change Package. Given these externalities, we derive the optimal combination of policy instruments. Thereafter, we explore the second-best outcome, given constraints on the use of some policy instruments, due to political considerations and international regulations.

Hagem, C. (2010). "Promoting Renewables and Discouraging Fossil Energy Consumption in the European Union"Discussion Papers 610 - Statistics Norway, Mar 2010.

A Nuclear Future? UK Government Policy and the Role of the Market

by David M. Newbery

- Meeting carbon targets requires decarbonising electricity. The least cost strategy involves nuclear power. In a liberalised electricity market, the price of electricity is set by fossil generation whose input costs are volatile but correlated with electricity prices. Nuclear power lacks that hedged and its finance is threatened by low and uncertain EUA prices. The increasing share of intermittent renewables exacerbates price risk. I propose changes to market design and the transmission access regime, while in the absence of an EU-wide reform to the ETS, a carbon tax seems the cheapest and fiscally most responsible way to deliver decarbonised electricity.

Newbery, D.M. (2010). "A Nuclear Future? UK Government Policy and the Role of the Market." EPRG Working Paper: EPRG1011, 2010.

Kyoto and the Carbon Content of Trade

by Rahel Aichele, and Gabriel Felbermayrz

- A unilateral tax on CO2 emissions may drive up indirect carbon imports from non-committed countries, leading to carbon leakage. Using a gravity model of carbon trade, we analyze the effect of the Kyoto Protocol on the carbon content of bilateral trade. We construct a novel data set of CO2 emissions embodied in bilateral trade flows. Its panel structure allows dealing with endogenous selection of countries into the Protocol. We find strong statistical evidence for Kyoto commitments to affect carbon trade. On average, the Kyoto protocol led to substantial carbon leakage but its total e ect on carbon trade was only minor.

Aichele, R. and G. Felbermayrz (2010). "Kyoto and the Carbon Content of Trade." Hohenheim University, CC Economics Discussion Paper 10-2010, Jan 2010.

Climate Change Impacts in Europe - Final Report of the PESETA Research Project

by PESETA project

- The PESETA research project integrates a set of high-resolution climate change projections and physical models into an economic modelling framework to quantify the impacts of climate change on vulnerable aspects of Europe. Four market impact categories are considered (agriculture, river floods, coastal systems, and tourism) and one non-market category (human health).

Ciscar, J.C., Iglesias, A., Feyen, L., Goodess, C.M., Szabó, L., Christensen, O.B., Nicholls, R., Amelung, B., Watkiss, P., Bosello, F., Dankers, R., Garrote, L., Hunt, A., Horrocks, L., Moneo, M., Moreno, A., Pye, S., Quiroga, S., van Regemorter, D., Richards, J., Roson, R., Soria, A. (2009). "Climate Change Impacts in Europe - Final Report of the PESETA Research Project." Nov 2009.