ALBERT

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Alex O. Acheampong〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The need to formulate policies to mitigate global warming has necessitated the need to understand the drivers of carbon emissions. The current study utilises the system-generalised method of moments to investigate the direct and indirect effect of financial development on carbon emissions for 46 sub-Saharan Africa countries over the period 2000–2015. Using several indicators of financial development, the empirical results reveal that financial development measured using broad money, domestic credit to the private sector and domestic credit to private sector by banks increase carbon emissions while FDI, liquid liabilities and domestic credit to private sector by financial sector do not affect carbon emissions. The results show that none of the financial development indicators exerts a significant nonlinear effect on carbon emissions. The results further indicate that FDI moderates economic growth to reduce carbon emissions but does not moderate energy consumption to affect carbon emissions. Contrarily, financial development measured using broad money, domestic credit to private sector by banks, domestic credit to private sector by financial sector and domestic credit to private sector moderate energy consumption to increase carbon emissions while the first three indicators of financial development moderate economic growth to increase carbon emissions. The results do not confirm the existence of the EKC hypothesis but confirm that population size, energy consumption, trade openness, urbanisation and economic growth increase carbon emissions. There are some variations in these results across regional and income groupings. These findings do advance not only knowledge but also have several implications for sustainable development policy.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 21 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Christiane Münzel, Patrick Plötz, Frances Sprei, Till Gnann〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Plug-in electric vehicles (PEV), both as battery electric vehicles and plug-in hybrid vehicles have noteworthy potential to reduce global and local emissions. However, several barriers still hinder a fast market diffusion of this new technology. Governments around the world have implemented monetary and non-monetary policies to accelerate PEV market diffusion. Their effectiveness is established in the literature, yet the effect size has been only scarcely estimated empirically and only for the US. Here, we review econometric studies on the effect size of purchase incentives and analyse data on PEV sales from 32 European countries from 2010 to 2017 with respect to the effect of financial incentives. We apply panel data regressions and control for other factors such as income and fuel prices. We find energy prices and financial incentives to influence PEV adoption positively. The range of point estimates for the effect of incentives is 5–7% relative sales share increase in different model specifications. Methodologically, the inclusion of a trend variable proved important to capture overall changes in the diffusion of this new technology. Our findings indicate that financial incentives have an impact on PEV sales and thus can facilitate their diffusion.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Sufang Li, Hu Zhang, Di Yuan〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Using the Google search volume index (GSVI) to measure investor attention, this paper investigates the relationships between investor attention and crude oil prices for the main crude oil markets worldwide. To account for possible structural breaks and nonlinearity in the relation between investor attention and oil returns, Fourier unit root test and nonlinear Granger causality tests are employed. The empirical results suggest that the bidirectional nonlinear Granger causality exists only between investor attention and WTI future crude oil return. However, WTI crude oil return Granger-causes investor attention weakly. For Dubai spot, Daqing spot, WTI spot and Brent future oil markets, unidirectional nonlinear Granger causality runs from investor attention to oil returns, which is relatively weak.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 16 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Panbo Guan, Guohe Huang, Chuanbao Wu, Linrui Wang, Chaoci Li, Yuanyi Wang〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this study, an inexact two-stage chance-constrained programming (ITSCCP) model was provided for multiple electrical power system supply and demand management in Zibo City under uncertainties. Three scenarios about the electric power structure adjustment, renewable power generation, and the emission taxes were designed. Methods of two-stage stochastic programming (TSP) and inexact chance-constrained programming (ICCP) were incorporated into the developed model to tackle uncertainties in terms of various cost coefficients, decision maker's risk attitude which was described by interval values and probability distributions. Moreover, under the objective of cost minimize, the electrical power generation planning for each terms under different feasibility degrees (violating constraints or available resources situations) can be obtained. The results indicated that higher probability of violating system constraints would increase risk of system, but lower the total cost; the proportion of optimized thermal power generation and imported electricity would decrease, which could promote the energy conservation and emissions reduction in some degree. At the same time, the model results are valuable for decision-makers to tackle the uncertainty of the power generation schemes within a complicated energy system and make a desired compromise between the satisfaction degree of the economic benefits and feasibility degree of constraints.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 15 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Niels Govaerts, Kenneth Bruninx, Hélène Le Cadre, Leonardo Meeus, Erik Delarue〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In many countries, distribution grid tariffs are being reformed to adapt to the new realities of an electricity system with distributed energy resources. In Europe, legislative proposals have been made to harmonize these reforms across country borders. Many stakeholders have argued that distribution tariffs are a local affair, while the European institutions argued that there can be spillovers to other countries, which could justify a more harmonized approach. In this paper, we quantify these spillovers in a simplified numerical example to give insight and an order of magnitude. We look at different scenarios, and find that the spillovers can be both negative and positive. To be able to quantify these effects, we developed a long-run market equilibrium model that captures the wholesale market effects of distribution grid tariffs. The problem is formulated as a non-cooperative game involving consumers, generating companies and distribution system operators in a stylized electricity market.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 15 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Xian Xi, Jinsheng Zhou, Xiangyun Gao, Donghui Liu, Huiling Zheng, Qingru Sun〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Crude oil is one of the most important energy sources for the development of the national economy. The regions along the Belt and Road are rich in crude oil resources. As the Belt and Road Initiative (B&R Initiative) progresses and develops further, an increasing numbers of countries are participating, which thus increases trade cooperation and changes the pattern of crude oil trade among countries along the Belt and Road (B&R countries). This change will have various impacts on the economies of different countries. Based on the complex network and econometric theory, we study the impact of crude oil trade pattern changes of the B&R countries on each country's GDP. We obtained the following results: (1) The impact of national trade influence on GDP was significant and positive, particularly after the initiative was proposed. (2) The centrality of the country's role in the trade network had a significant and favorable impact on GDP, but it was weakened after the initiative was introduced. (3) The impact of the country's import risk in the network on GDP was negative. (4) For countries with different economic levels, changes in the role of national trade had various effects on their GDPs.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 13 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Hany Abdel-Latif, Mahmoud El-Gamal〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper aims simultaneously to study the global dynamic relationship of oil prices, financial liquidity, and geopolitical risk, on the one hand, and the economic performance of oil-exports-dependent economies on the other. Global and country-specific dynamics are studied together in a Global Vector Autoregression (〈em〉GVAR〈/em〉) model that allows different lag structures for different variables in different countries. Global impulse response functions from the estimated model suggest that new waves of high oil prices are unlikely, despite the likely continuation of high global financial liquidity and heightened geopolitical risk, which had driven earlier episodes of very high oil prices. With oil remaining at modest to low prices by recent historical standards, we study the prospects for economic growth in oil-export-dependent economies through dramatic increases in domestic investment, as planned under Visions 2030 of some Arab countries, and conclude that, unfortunately, success is unlikely.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 14 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Fan Zhou, Lionel Page, Robert K. Perrons, Zuduo Zheng, Simon Washington〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The ability to forecast energy prices in the long-term is important for a wide range of reasons, from the formulation of countries’ energy and transportation policies to the defensive strategies of nations to investment decisions within the private sector. Despite the importance of these predictions, however, forecasters and market pundits face a difficult challenge when trying to forecast over the long-term. While statistical models can credibly rely on assumptions about the relationship between variables in the short-term, they are frequently less reliable in the long-term as political and technological transformations profoundly change how the economy works over time. Towards improving long-term predictions for energy commodities, this paper uses the elicitation and aggregation of experts’ beliefs to put forward forecasts for crude oil and natural gas prices by incentivizing experts to tell the truth and minimising their own biases through the application of the Bayesian Truth Serum. With this approach, we generated both short-term and long-term forecasts, and used the short-term forecast to validate the quality of the experts’ predictions.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Claudiu Tiberiu Albulescu, Riza Demirer, Ibrahim D. Raheem, Aviral Kumar Tiwari〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We provide novel insight to the emerging literature on the role of U.S. monetary policy as a driver of a global financial cycle by examining the possible causal effect of U.S. economic policy uncertainty on the connectedness of crude oil and currency markets, using a sample of commodity currencies from advanced and emerging nations. A battery of linear and nonlinear Granger-based causality tests indicate the presence of a causal relationship between economic policy uncertainty and the connectedness of oil and currency markets, particularly at low frequencies and more significantly after the outburst of the global financial crisis. While crude oil generally serves as a net transmitter of shocks to currencies across all frequency bands, the spillover effects from oil are largely concentrated towards the G10 currencies of Australian and New Zealand dollar that are often used as investment currencies in global carry trade strategies. Overall, our findings suggest the presence of a significant pass-through effect of economic policy uncertainty via oil prices, spilling over to the currency market, in line with the emerging evidence that the monetary policy by the U.S. Fed serves as a major driver of a global financial cycle that describes patterns in global capital flows, credit activity and asset prices across financial markets.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 9 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Yang Xu, Liyan Han, Li Wan, Libo Yin〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We explore the non-linear relationship between crude oil prices and exchange rates of major currencies from quantitative and structural perspectives, by utilizing bivariate normal mixture model. The correlation coefficients between oil prices and exchange rates demonstrate that their dependences typically start from 2004 then dynamically change over time. Then we investigate whether business cycle and oil price shocks as two possible exogenous factors affect the dependence structure of oil-FX linkage. We find significant structural heterogeneity during economic expansion while little evidence of heterogeneity in recession. This finding provides alternative interpretations for the enhanced dependence between oil prices and exchange rates and generates implications of financialization in commodity market. In terms of oil price shocks (Kilian, 2009), the normal mixture model captures significant heterogeneity, implying that unstable oil-FX dependence structure is frequently associated with oil aggregate demand shocks and oil-specific demand shocks. With an emphasis on the dynamic weights of two underlying states, we interestingly find that structural heterogeneities coincide with a variety of geopolitical and economic events. The application of normal mixture not only provide us knowledge of non-linear relationship between oil prices and exchange rates but also guidance for investors in risk management and portfolio diversification complementary to the traditional portfolio theory based on normal distribution.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 8 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Muhammad A. Cheema, Frank Scrimgeour〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper examines the relationship between oil prices and stock market anomalies in China, the largest oil importer country in the world. Prior literature documents both a positive and negative relationship between oil prices and the stock market. The explanation of a positive relationship is supported by the argument that rising oil prices are interpreted as a positive signal by investors, especially when the rise in oil prices is associated with a higher demand for oil. Consequently, rising oil prices lead stock prices above their fundamental values and that they subsequently correct. Therefore, we hypothesise that stock market anomalies are stronger following rising oil prices when the rise in oil prices is due to the higher demand for oil since returns associated with anomalies reflect mispricing. The results, consistent with the hypothesis, show stronger return predictability for individual anomalies following an increase in oil prices than for a decrease in oil prices. The results are even stronger once we construct a mispricing score based on composite mispricing of all the anomalies.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Zhuang Miao, Tomas Baležentis, Shuai Shao, Dongfeng Chang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The identification of “industrial soot” or “vehicle exhaust” pollution facilitates developing proper measures for the mitigation of regional air pollution. In order to identify the pollution types at a regional level, this paper applies the Luenberger productivity indicator to decompose air pollutant emissions performance. Furthermore, we simultaneously consider pollution rates and the productivity change. Thus, we propose a new modeling framework allowing for the variable-specific decomposition of the environmental performance along time and quantity dimensions to identify the underlying patterns. The panel data for 30 provinces and autonomous regions are then applied to identify regional atmospheric pollution type. The results show that SO〈sub〉2〈/sub〉 emission from industrial soot and NO〈sub〉x〈/sub〉 emissions from vehicle exhaust constitute an important source of regional atmospheric environmental inefficiency, though the former seems to be more decisive. The southeast coastal provinces showed generally lower levels of inefficiency, compared to the northwest inland area. During the period of the 11th Five-Year Plan of China, industrial SO〈sub〉2〈/sub〉 emission performance contributed to the increase in the atmospheric environmental productivity, while traffic NO〈sub〉x〈/sub〉 emissions acted as a negative factor in this regard. Therefore, the government should seek to increase the intensity of environmental regulation in transportation sector. At the country level, technical progress associated with both types of pollutions was positive and thus exceed the negative efficiency change for the same variables. In particular, in Beijing-Tianjin-Hebei region, the productivity changes in industrial SO〈sub〉2〈/sub〉 emissions and traffic NO〈sub〉x〈/sub〉 emissions indicate a “stably advancing” type. The results further indicate that there are 18 provinces of China which have experienced mixed-type pollution. Jilin and Hainan were classified as provinces experiencing vehicle exhaust gas pollution, whereas Guizhou was defined as that subject to industrial soot pollution. The government should formulate and implement diversified support and regulation policies to govern SO〈sub〉2〈/sub〉 and NO〈sub〉x〈/sub〉 pollution at the regional level.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Yuwan Duan, Bingqian Yan〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Based on a multi-regional input-output model, this study explores the temporal changes and driving forces of China's environmental losses relative to its economic gains from international trade with each of its 45 trading partners from 1995 to 2015. We find that China suffered larger environment losses per $US value-added through exports than almost all of its trading partners. Over time, the environmental losses paid by China declined quicker than that of its bilateral trading partners. The decomposition results of our research further show that the technology effect played a dominant role in this decline. Moreover, the phenomenon that developed economies have outsourced dirty intermediate production stages to emerging economies via trade in intermediate goods, has led to the emerging economies suffering greater environmental losses over time for certain economic gains from international trade.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 31 July 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Luigi Boffino, Antonio J. Conejo, Ramteen Sioshansi, Giorgia Oggioni〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉In 2015, 195 countries signed the Paris Agreement under the United Nations Framework Convention on Climate Change. To achieve the ambitious greenhouse gas-reduction targets therein, the electric power sector must be transformed fundamentally. To this end, we develop a two-stage stochastic optimization model. The proposed model determines the optimal mix of generation and transmission capacity to build to serve future demands at least cost, while respecting technical constraints and climate-related considerations. The model uses a mix of AC and high-voltage DC transmission lines, conventional and renewable generation, and different types of energy-storage units to meet these objectives. Short- and long-term uncertainties are modeled using operating conditions and scenarios, respectively.〈/p〉 〈p〉We demonstrate the model using a case study that is based on the Texas power system, with 2050 as the target year of the analysis. We include explicit carbon-emissions constraints. Doing so allows us to examine the effect of carbon-reduction targets and deep decarbonization of electricity production on investment decisions. As expected, we find that thermal-dominated power systems must transition toward having a renewable-dominated generation mix.〈/p〉 〈/div〉

Description: 〈p〉Publication date: Available online 19 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Christopher F Baum, Paola Zerilli, Liyuan Chen〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we propose a model for futures returns that has the potential to provide both individual investors and firms who have positions in financial and energy commodity futures a valid tail risk management tool. In doing so, we also aim to explore the commonalities between these markets and the degree of financialization of energy commodities. While empirical studies in energy markets embed either leverage or jumps in the futures return dynamics, we show that the introduction of both features improves the ability to forecast volatility as an indicator for risk for both the S&P500 and natural gas futures markets.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 16 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Johanna Bocklet, Martin Hintermayer, Lukas Schmidt, Theresa Wildgrube〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉With the increase of the linear reduction factor, the implementation of the market stability reserve and the introduction of the cancellation mechanism, the EU ETS changed fundamentally. We develop a discrete time model of the intertemporal allowance market that accurately depicts these reforms assuming that prices develop with the Hotelling rule as long as the aggregated bank is non-empty. A sensitivity analysis ensures the robustness of the model results regarding its input parameters. The accurate modelling of the EU ETS allows for a decomposition of the effects of the individual amendments and the evaluation of their cost effectiveness. The market stability reserve shifts emissions to the future but is allowance preserving. A one-time cancellation reduces the overall emission cap, increasing allowance prices in the long run, but does not significantly impact the emission and price path in the short run. The increased linear reduction factor leads with 9 billion cancelled allowances to a stronger reduction than the cancellation mechanism and is therefore the main price driver of the reform.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 15 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): R. Kaj Gittings, Travis Roach〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We analyze the impact of the recent energy boom in the Marcellus and Utica shale formations on local labor markets in Ohio, Pennsylvania and West Virginia. Unique to our analysis is the use of origin-destination files (LODES) from the U.S. Census Bureau which provide employment statistics at the census block level based on where jobs are located and where workers live who hold those jobs. The richness of this data enables us to identify cross border mobility of workers as labor demand increases due to greater resource extraction. We find that increases in the value of new oil and gas production significantly increases local workplace employment and average earnings in the county, but that job gains go mostly to workers who reside outside of the county. Specifically, a one standard deviation increase in the value of new oil and gas production per capita in a county-year increases workplace employment by 283 jobs, decreases the fraction of jobs held locally, and increases the flow of workers from counties 25-200 miles away. Furthermore, we find some positive employment spillovers across industries but these new jobs appear to go to non-local residents as well. We do find evidence that the earnings distribution shifts to the right for both local residents and workers who reside outside the county.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 13 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Hamed Ghoddusi, Mohammad Morovati, Nima Rafizadeh〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In an open economy, the foreign exchange rate (FER) influences incentives for the cross-border shopping of gasoline as well as the opportunity cost of using vehicles and the relative attractiveness of home versus foreign travel. Using monthly regional-level data of gasoline consumption in Iran, we estimate the impact of exchange rate shocks (both in level and volatility) on gasoline demand. We find that positive exchange rate shocks have a negative impact on total gasoline consumption as well as on vehicle users’ demand in both short-run and long-run. Furthermore, we find that in the periods that FER is less volatile, the responsiveness of gasoline demand to a change in FER is more pronounced.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 9 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Thomas Broberg, Alejandro Egüez, Andrius Kažukauskas〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Incomplete information may be one reason why some households do not invest in energy efficiency even though it would benefit them to do so. Energy performance certificates (EPCs) have been promoted to overcome such information shortages. In this paper, we investigate whether EPCs together with mandatory home energy audits make households more likely to invest in energy efficiency. Our study takes advantage of the mandatory nature of the EPCs to avoid the potential selection bias problem that typically applies to studies using voluntary energy audits as the treatment. Our treatment group consists of single-household houses in Sweden sold from 2008, i.e., when EPCs became legally required in connection with sales of residential buildings, to 2015; while the control group consists of houses sold between 2002 and 2008, i.e., without an EPC. The results show that there is no statistically significant treatment effect for most of the measures that a household can take to improve the energy performance of their house. The significant treatment effect that we do find concerns a few heating system-related measures.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Jed Cohen, Valeriya Azarova, Andrea Kollmann, Johannes Reichl〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Photovoltaic (PV) units and electric vehicles (EVs) are two household goods that are the focus of much research, and many policy initiatives attempting to promote a more sustainable, low-carbon energy system. Despite both academic and practical interest in household adoption of PV units and EVs, potential linkages in these household decisions have only just begun to be explored. This paper presents q-complementarity between the goods as one possible form of a linkage between PV and EV purchases that is based on economic utility theory. We posit the goods could be q-complements due to a PV-owning household's ability to offset and shift their electricity load from EV charging to increase the self-consumption of ‘home-made’ electricity, thereby increasing the positive feelings of environmental efficacy and monetary returns from the PV unit. We use data from 2541 internet surveys of Austrian residential electricity customers collected in 2018 to explore these hypotheses. Probit models of household EV and PV adoption choice are estimated, including a recursive bivariate probit model of households who plan to purchase an EV in the future, with PV ownership endogenously determined. Controlling for household income, characteristics, environmental attitudes, and neighborhood characteristics, we find that EV and PV adoption are positively correlated, and that current PV unit owners are 21% more likely to plan an EV purchase in the next 5 years compared to non-PV owners. We interpret these results as evidence in support of our hypothesis of q-complementarity between PV units and EVs, and note the potential for added benefits from incentive policies promoting adoption of one good or the other that this linkage suggests.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 5 August 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Jan Abrell, Sebastian Rausch, Clemens Streitberger〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Mitigating climate change will require integrating large amounts of highly intermittent renewable energy (RE) sources in future electricity markets. Considerable uncertainties exist about the cost and availability of future large-scale storage to alleviate the potential mismatch between demand and supply. This paper examines the suitability of regulatory (public policy) mechanisms for coping with the volatility induced by intermittent RE sources, using a numerical equilibrium model of a future wholesale electricity market. We find that the optimal RE subsidies are technology-specific reflecting the heterogeneous value for system integration. Differentiated RE subsidies reduce the curtailment of excess production, thereby preventing costly investments in energy storage. Using a simple cost-benefit framework, we show that a smart design of RE support policies significantly reduces the level of optimal storage. We further find that the marginal benefits of storage rapidly decrease for short-term (intra-day) storage and are small for long-term (seasonal) storage independent of the storage level. This suggests that storage is not likely to be the limiting factor for decarbonizing the electricity sector.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Quande Qin, Kangqiang Xie, Huangda He, Li Li, Xianghua Chu, Yi-Ming Wei, Teresa Wu〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Energy price time series exhibit nonlinear and nonstationary features, which make accurate forecasting energy prices challenging. In this paper, we propose a novel decomposition-ensemble forecasting paradigm based on ensemble empirical mode decomposition (EEMD) and local linear prediction (LLP). The EEMD is used to decompose energy price time series into components, including several intrinsic mode functions and one residual with a simplified structure. Motivated by the findings of the fully local characteristics of a time series decomposed by the EEMD, we adopt the LLP technique to forecast each component. The forecasting results of all the components are aggregated as a final forecast. For validation, three types of energy price time series, crude oil, electricity and natural gas prices, are studied. The experimental results indicate that the proposed model achieves an improvement in terms of both level forecasting and direction forecasting. The performance of the proposed model is also validated through comparison with several energy price forecasting approaches from the literature. In addition, the robustness and the effects of the parameter settings of LLP are investigated. We conclude the proposed model is easy to implement and efficient for energy price forecasting.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 83〈/p〉 〈p〉Author(s): Zheming Yan, Xiaoling Ouyang, Kerui Du〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The ongoing debate on the magnitude of China's economy-wide energy rebound effect (RE) entails further investigations not only with more details, but also with more credible methods. In this study, a modified two-stage approach, which could avoid methodological issues regarding RE estimation, is applied to estimate macroeconomic RE with a data panel of 30 provinces in China during the period 1997–2015. In particular, in order to comprehensively measure energy efficiency, we construct a dynamic energy efficiency indicator which considers not only the static efficiency of energy use but also the technical change regarding energy usage. Using dynamic panel data models, we estimate the elasticity of energy consumption with respect to energy efficiency which directly links to the measurement of RE. The short-run and long-run estimates of RE are reported, and the 95% confidence interval was computed for each sample based on the nonparametric bootstrap method to further analyze the macroeconomic RE of different regions. Results indicate that the average RE of all provinces is 88.55% in the short run, and the average long-run RE is 77.50%; the RE in the developed eastern region continuously decreased, while RE in the western region increased to be the largest during the research period.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 29 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Grant J. Allan, Andrew G. Ross〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Changes in energy supply in the coming decades will have major economic implications. To understand the possible employment consequences of this transition, many previous studies have considered the level and types of employment in existing energy technologies; these have, however, neglected impacts on skills and occupations. Using the hypothetical extraction approach, we explore these characteristics for employment both in – and supported by – energy activities in the UK. We show that the impact on occupation and skills across the whole economy is more evenly spread than the employment in individual sectors. From the empirical results presented here, it is clear that the system-wide demands for employment can change the pattern of labour market needs, and that this has implications for labour market planning in the low carbon transition.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 28 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Daniel Aromi, Adam Clements〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Crude oil is one of the most important commodities in the real economy and as such the relationship between oil prices and broader equity markets has attracted a lot of research attention. Recent work has considered directional spillovers or links between oil and equity markets. In recent times there has been a growing body of research into the impacts of news and media attention on asset returns, both in the context of oil and equity markets but also within each of these markets. This paper considers how news or information flows about crude oil influence the spillover links between these assets. Using realized volatility estimates based on high frequency data, the empirical analysis reveals a number of novel results in terms of the behavior of these linkages. Increased news flow about oil reduces the impact of the broader equity market on the oil sector, implying that it is driven more by oil specific shocks and less by more general financial market conditions. It also increases the impact of the oil sector on the broader equity market. These results have potential implications for hedging and portfolio allocation.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 27 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Lu-Tao Zhao, Kun Liu, Xin-Lei Duan, Ming-Fang Li〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The volatility of crude oil price has a great influence on the world economy. In order to measure the crude oil price risk (VaR) and explain the dynamic relationship between investment income and risk in the oil market more clearly, this paper uses a variety of fractional GARCH models to describe typical volatility characteristics like long memory, volatility clustering, asymmetry and thick tail. The autoregressive conditional heteroscedasticity in the mean model (ARCH-M) and peaks-over-threshold model of extreme value theory (EVT-POT) are taken into account to develop a hybrid time-varying long memory GARCH-M-EVT model for calculation of static and dynamic VaR. Empirical results show that the WTI crude oil has a significantly long memory feature. All the fractional integration GARCH models can describe the long memory appropriately and the FIAPARCH model is the best in regression and out of sample one-step-ahead VaR forecasting. Back-testing results show that the FIAPARCH-M-EVT model is superior to other GARCH-type models which only consider oil price fluctuation characteristics partially and traditional methods including Variance-Covariance and Monte Carlo in price risk measurement. Our conclusions confirm that considering long memory, asymmetry and fat tails in the behavior of energy commodity return combined with effectively dynamic time-varying risk reflection such as the ARCH-M model and reliable tail extreme filter processes such as EVT can improve the accuracy of crude oil price risk measurement, provide an effective tool for analyzing the extreme risk of the tail of the oil market and facilitate the risk management for oil market investors.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 27 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Dimitrios Bakas, Athanasios Triantafyllou〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we empirically examine the predictive power of macroeconomic uncertainty on the volatility of agricultural, energy and metals commodity markets. We find that the latent macroeconomic uncertainty measure of Jurado et al. (2015) is a common volatility forecasting factor for commodity markets, which provides statistically significant volatility predictions for forecasting horizons up to twelve months ahead. The results indicate that the forecasting power of macroeconomic uncertainty is higher when predicting the volatility of energy commodities. Our findings also show that higher macroeconomic uncertainty is associated with large volatility episodes subsequently observed in all commodity markets. The predictive power of the unobservable macroeconomic uncertainty factor remains robust to the inclusion of observable economic uncertainty measures, historical commodity price volatility, stock-market realized and news implied volatility, oil price shocks and other macroeconomic variables which are closely related to the production process and the mechanics of commodity markets.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 27 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Christian Furtwängler, Christoph Weber〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉There is a broad consensus that the energy transition planned in Europe demands a sufficient number of flexibility providers. This contribution proposes to analyse effects of reserve flexibility from CHP, encompassing both the price effects on spot and secondary reserve markets in an endogenous market equilibrium model. Through the analysis of contrasting cases it highlights how the specific nature of CHP plants, and in particular their heat restrictions, lower the cost at which they contribute to the reserve and spot markets due to implied must-run conditions. A somewhat stylized fundamental market model based on input data for Germany in 2016 is used to analyse the price effects of reserve flexibility from Combined Heat and Power (CHP) entering both markets.〈/p〉 〈p〉Additionally, the impact of changes in the reserve market auction design in Germany are investigated. From June 2018 on, secondary reserve in Germany is auctioned in four-hour tenders, instead of the previous weekly peak/off-peak auction design. We therefore compare the results under such an alternative auction regime with the same demand.〈/p〉 〈p〉Our approach leads to spot prices at a similar mean level compared to historical data, with Mean Average Error (MAE) values in a range from 6.0-6.6 €/MWh for all cases. The reserve price levels in this approach also compare to mean historical price levels, yielding MAE values in the range of 2.6-7.1 €/MW/h for positive, and 0.8-2.2 €/MW/h for negative reserves. The price lowering effect of flexibility provision from CHP is clearly identifiable, underscoring the importance of explicit modelling of heat demand restrictions. A change of the reserve tender regime towards 4-hour tenders further lowers positive reserve prices in all cases. Finally, a short-term future scenario of the German power sector is investigated, in order to estimate the development of reserve markets with current market developments, finding that in the short-term future, price-lowering effects from CHP are likely to be overcompensated by higher spot price volatility due to rising fuel and emission prices.〈/p〉 〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 28 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Monika Gupta, Kaushik Ranjan Bandyopadhyay, Sanjay K. Singh〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The objective of this study is to examine whether carbon tax as a mitigation instrument could be effective in reducing CO〈sub〉2〈/sub〉 emissions from road passenger transport in India. A simulation exercise with system dynamics modelling is used to explore various scenarios pertaining to the carbon tax on fuel. To validate the model, available data from 2000 to 2011 on major variables such as CO〈sub〉2〈/sub〉 emissions, passenger kilometre travelled and GDP growth rate has been used in the paper as a reference case. Findings from scenario analysis using different tax rates indicate a potential reduction in CO〈sub〉2〈/sub〉 emissions in the range of 26 to 40% as compared to a baseline scenario in 2050. The analysis shall assist policymakers in designing an appropriate rate of the carbon tax and optimise its effect through revenue recycling.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 27 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Georg Meran〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Particularly in the context of energy and climate policy models, CES production functions are used as a basis for deriving sustainable development paths. Of crucial importance here is the reduction of the energy intensity of production processes with the help of substitution processes away from energy to other inputs. The modeling of these substitution processes must, of course, comply with the laws of physics. Therefore, the CES function is often used because it is supposed to satisfy thermodynamic laws. This is assumed to be met if the elasticity of substitution between energy inputs and other non-energy inputs is less than 1. The following commentary is meant to show that this specification is only a necessary pre-condition for fulfilling the thermodynamic laws. The permissible values of the other parameters of the CES- production function are subject to additional restrictions. Using an empirical example, the thermodynamic parameter restriction space for an aggregated production function of the English economy are presented. The consideration of thermodynamic limits can also be included directly into the design of production functions. An analysis of the linear-exponential production function derives various characteristics relevant to policy analysis. It is a priori not possible to decide which approach is preferable. Future empirical studies can help to clarify this question.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 26 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Gale Boyd, Jonathan M. Lee〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study analyzes the electric and fuel energy efficiency for five different metal-based durable manufacturing industries in the United States over the time period 1987–2012, at the 3 digit North American Industry Classification System (NAICS) level. Using confidential plant-level data on energy use and production from the quinquennial U.S. Economic Census, a stochastic frontier regression analysis (SFA) is applied in six repeated cross sections for each five year census. The SFA control for energy prices and climate-driven energy demand (heating degree days HDD and cooling degree days CDD) due to differences in plant level locations, as well as 6-digit NAICS industry effects. Own energy price elasticities range from −0.7 to −1.0, with electricity tending to have slightly higher elasticity than fuel. Mean efficiency estimates (100% = best practice level) range from a low of 33% (fuel, NAICS 334 - Computer and Electronic Products) to 86% (electricity, NAICS 332 - Fabricated Metal Products). Electric efficiency is consistently better than fuel efficiency for all NAICS. Assuming that all plants in the least efficient quartile of the efficiency distribution achieve a median level of performance, we compute the change in total energy use to be 21%. A Malmquist index is used to decompose the aggregate change in energy performance into indices of efficiency and frontier (best practice) change. Modest improvements in aggregate energy performance is mostly change in best practice, but failure to keep up with the frontier retards aggregate improvement. Given that the best practice frontier has shifted, we also find that firms entering the industry are statistically more efficient, i.e. closer to the frontier; about 0.6% for electricity and 1.7% for fuels on average.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 26 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Yixiang Chen, Feng Ma, Yaojie Zhang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this article, we investigate the impacts of jumps, cojumps and their signed components on forecasting oil futures price volatility in the framework of the heterogeneous autoregressive realized volatility model. Our empirical results reveal several noteworthy findings. First, the effects of signed jumps and cojumps based on the daily and intraday jump tests on future volatility are asymmetric, and the negative components are much more powerful in forecasting volatility. Moreover, our proposed models, including the signed jump and cojump components, are able to generate higher forecasting accuracy, and we find that disentangling the effects of positive and negative jumps and cojumps can significantly improve forecasts of future volatility. Lastly, our findings are reliable for various robustness checks and our study provides some new insights into forecasting oil price realized volatility, which are useful for researchers, market participants, and policymakers.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 26 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Xu Wang, Xiao-Bing Zhan, Lei Zhu〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉It is widely accepted that the firms included in an emissions trading scheme (ETS) come mostly from oligopolistic industries. The “exclusionary manipulation” of these heterogeneous emitters can distort both output and permit markets and lead to differences in abatement technology adoption. We studied the impacts of asymmetric firms’ market power on the diffusion of abatement technologies. A model for technology adoption among heterogeneous firms has been established, which takes into account diversity in production capacity and the integration of firms’ strategic behaviours in both the carbon permit and the output markets. Our model reveals that, considering the strategic and direct effects in adoption benefits, firms’ production capacity can directly determine their sequence order of adoption, and their market power can accelerate the diffusion of new abatement technology. A case study of an energy-intensive sector in China is illustrated to support the conclusions derived from the model and help policymakers better understand the diffusion of abatement technologies under imperfect market structure.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 25 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Marc Bataille, Olivia Bodnar, Alexander Steinmetz, Susanne Thorwarth〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉While markets have been liberalized all over the world, incumbents often still hold a dominant position, e.g. on energy markets. Thus, wholesale electricity markets are subject to market surveillance. Nevertheless, consolidated findings on abusive practices of market power and their cause and effect in these markets are scarce and non-controversial market monitoring practices fail to exist. Right now, the Residual Supply Index (RSI) is the most important instrument for market monitoring. However, a major drawback of this index is its focus on just one specific aspect of market power in wholesale electricity markets whereas different consequences of market power are possible. Hence, markets could be distorted in several ways and we propose the “Return on Withholding Capacity Index” (RWC) as a complementary index to the RSI. The index is a measure of the firms’ incentive to withhold capacity. The benefits and practicability of the RWC is shown by an application on data for the German-Austrian electricity wholesale market in 2016.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Tiago Oliveira, Celeste Varum, Anabela Botelho〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper presents an empirical analysis of the displacement of CO〈sub〉2〈/sub〉 emissions associated with wind generation in the Irish electricity market between December 2013 and May 2017. We find that the average marginal effect of an additional MWh of wind generation corresponds to a reduction in CO〈sub〉2〈/sub〉 emissions of 0.401 tonnes in Ireland (All-Island system) and 0.459 tonnes when accounting also for the emissions offset in Great Britain. We also find that, for each given demand level, the amount of emissions displaced by wind varies with the wind level. In particular, overall the amount of total (domestic plus external) CO〈sub〉2〈/sub〉 emissions offset by a MWh of wind generation increases as the wind generation level increases, a result which suggests that as wind generation capacity increases the effectiveness of wind in displacing CO〈sub〉2〈/sub〉 may be retained. However, when accounting exclusively for the effects of wind generation on domestic emissions, we observe that the effectiveness of wind in displacing emissions may decrease as the amount of wind generation increases further. As the effects of CO〈sub〉2〈/sub〉 as a GHG are independent of the location where it is emitted, our work also highlights that accounting for reductions in emissions due to a reduction of imports from, or an increase in exports to, interconnected markets is crucial in this type of analysis due to the potential for underestimating the effects of wind on emissions savings when only national emissions are accounted for. The Irish government has a target for 40% of total electricity generation to be produced by renewable energy sources by 2020 which, according to institutional reports, may entail an additional 25% to 35% increase in wind generation capacity from the present levels. Accordingly, our findings are particularly relevant for policy making since they do not support one of the arguments against further investment in wind, namely that the corresponding environmental benefits in the form of emissions savings are reduced.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Jie Wu, Mingjun Li, Qingyuan Zhu, Zhixiang Zhou, Liang Liang〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Environmental problems brought by industry are attracting extensive attention so a comprehensive analysis of industrial environmental performance is increasingly important. However, the comparison of industrial sector efficiencies is complicated by the fact that the natural resources consumed and/or the pollutants discharged by each sector may differ. In this paper, we extend the DEA model to consider two-sided non-homogeneous problems, handling DMU sets that have non-homogeneity in both inputs and outputs. This is different from the previous researches which generally focus on regional data to avoid non-homogeneity. Today environmental reform and energy conservation in various industrial sectors are both parts of the basic state policy of China. The empirical results show that: (1) Sectors' efficiencies are still low and unbalanced. The Recycling and Disposal of Waste department achieves the best energy saving and emission reduction efficiency. (2) 38 sectors can be clustered into four groups and set new benchmark in each group. (3) The overall efficiency of 38 industrial sectors in China maintained a rising trend in five years. With this more realistic analysis of environmental efficiency, the Chinese government can make more informed decisions to realize sustainable industrial development.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Jochen H.F. Güntner〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The classical Hotelling model predicts that the optimal extraction level rises immediately after an unexpected resource discovery, whereas, in reality, there are substantial adjustment costs in petroleum production and an average lag of several years between a discovery and the start of production. Using a large panel of country-level production data and a difference-in-differences identification approach, I show that domestic production levels respond before a newly found oil field comes on line and that this increase is driven by non-OPEC producers, consistent with different responses of OPEC and non-OPEC drilling activity. Offshore fields and exceptionally large “super-” or “mega-giant” fields are also more likely to raise country-level production. Given that domestic petroleum consumption rises by less in response to a discovery, at least part of the increase in production seems to go into (net) oil exports.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Sébastien Debia, Pierre-Olivier Pineau, Afzal S. Siddiqui〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Concerns about climate change have spurred governments to reduce carbon emissions by supporting adoption of renewable energy (RE) technologies. Due to the intermittent and location-specific nature of RE technologies, energy storage has become important because it could be used to smooth out temporal disparities in residual demand. Thus, carbon policy has made storage-enabled RE generation more critical to the power sector, and this enhanced position could be exploited by firms to exert market power. Using an equilibrium model, we examine the implications of policy interventions and technological change on the marginal value of energy storage in a power market with RE and thermal generation. In particular, we specify the market conditions under which RE producers with storage strategically shift deployment of their resource to the off-peak period and outline its implications for the marginal value of RE storage. Moreover, we find that even price-taking RE producers may actually increase off-peak RE production as storage efficiency increases. Consequently, the RE producer's profit decreases with storage efficiency, which conflicts with the social objective of improving storage efficiency. These private and social incentives can be better aligned via a carbon tax, however. Hence, our results may inform the regulatory process governing market design of a power sector with increasing capacities of RE generation and storage.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Jiandong Chen, Chong Xu, Lianbiao Cui, Shuo Huang, Malin Song〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Decomposition analysis has become a popular tool to study CO〈sub〉2〈/sub〉 emissions and, in this study, we developed a combined decomposition approach to emissions analysis by integrating the logarithmic mean Divisia index and production-theoretical decomposition analysis. Based on this novel approach, we investigated the driving factors of CO〈sub〉2〈/sub〉 emissions in China over the latest Five-Year Plan period (2011–2015) and analyzed the inequality characteristics of such emissions. The results showed that 1) the peak value of CO〈sub〉2〈/sub〉 emissions in China declined over the period; 2) the overall inequality presented a decreasing trend, whereas intragroup inequality presented a slightly increasing trend over the period; and 3) generally, the potential energy intensity effect contributed to the decrease in CO〈sub〉2〈/sub〉 emissions in developed provinces, whereas the potential carbon factor effect accounted for the decrease in CO〈sub〉2〈/sub〉 emissions in less-developed provinces. Based on our empirical results, we recommend that policy-makers consider several factors when implementing CO〈sub〉2〈/sub〉 policies.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Robert Elliott, Puyang Sun, Tong Zhu〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Energy is an essential input into a firm's production process. In this paper we investigate how electricity price changes across Chinese provinces affect the decision of firms to switch production from one industry to another. To address potential endogeneity between electricity prices and unobservable province level policies we construct an instrument from the interaction of regional coal production and thermal power generation capacity. Our instrumental variable results show that manufacturing firms are more likely to switch the industry of their main product to a less energy intensive industry as a result of rising electricity costs. More specifically, a 10% increase in the price of electricity leads to an increase in the probability of switching to a less energy intensive industry of around 2.3%. Our findings suggest that a well designed electricity price scheme can encourage firm behaviour than is consistent with reductions in energy use.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Michael D. Noel, Hongjie Qiang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Collecting information on prices is a costly endeavor. The cost depends on the relative ease with which those prices can be collected, and in many retail gasoline markets, there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other. Regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades, except where required by law, are rarely displayed. In this article, the effects of differential-by-grade price information on search and gasoline price dispersion are examined. A rank reversal test is used to test whether the observed grade-specific price dispersion is consistent with search or non-search related causes and, finding the former, a series of tests are presented to test for the effect of price information and other leading hypotheses. A significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis. Detailed socioeconomic data on consumers, spatially matched to the stations they are most likely to patronize, shows that income is a secondary factor. Implications for policy are discussed.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Hayette Gatfaoui〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We build a portfolio encompassing U.S. crude oil, natural gas and stocks to study the diversification power of energy commodities. Such diversification power depends on the joint dependence structure of the three types of assets. According to Gatfaoui (2016a), the dependence structure is time-varying because individual asset returns exhibit several variance regimes. We identify the corresponding regime-specific multivariate copulas, and incorporate them to well-chosen risk measures. Specifically, we minimize the portfolio's variance, semi-variance and tail risk, in the presence and the absence of constraints on the portfolio's expected return and/or stock investment. First, the return constraint reduces the performance of the optimal portfolio. Second, the regime-specific portfolio optimization implements an enhanced active management strategy over the whole sample period. Finally, the tail-risk optimal portfolio offers the most interesting risk-return tradeoff. However, variance and semi-variance optimal portfolios can also be considered in the absence of a return constraint.〈/p〉〈/div〉 〈/div〉 〈div xml:lang="en"〉 〈h5〉Graphical abstract〈/h5〉 〈div〉〈p〉〈figure〉〈img src="https://ars.els-cdn.com/content/image/1-s2.0-S014098831830495X-ga1.jpg" width="500" alt="Unlabelled Image" title="Unlabelled Image"〉〈/figure〉〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Bao H. Nguyen, Tatsuyoshi Okimoto〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper provides new empirical evidence on the asymmetric reactions of the US natural gas market and US economy to its market fundamental shocks. We find that results based on a smooth transition vector autoregressive (STVAR) model provides a plausible and robust explanation to the behavior of the US natural gas market, which asymmetrically reacts in bad times and good times. During times of recession, natural gas production shrinks in response to a positive oil price shock, while the corresponding response is found to be positive in times of expansion. The positive relationship between the price of natural gas and crude oil is found to be more prominent in expansions, especially in the long run. In addition, the results also reveal that US economic activity is much more sensitive to oil and natural gas price shocks occurring in bad times than in good times.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 28 December 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Soojin Jo, Lilia Karnizova, Abeer Reza〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Sectoral responses to oil price shocks help determine how these shocks are transmitted throughout the economy. Textbook treatments of oil price shocks often emphasize negative supply, or cost, effects on oil importing countries. By contrast, the seminal contribution of Lee and Ni (2002) has shown that almost all U.S. industries experience oil price shocks largely through a reduction in their respective demands. Only industries with very high oil intensities face a supply-driven reduction. In this paper, we re-examine this seminal finding using two additional decades of data. Further, we apply updated empirical methods, including structural factor-augmented vector autoregressions that take into account how industries are linked among themselves and with the remainder of the macro-economy. Our results confirm the original finding of Lee and Ni that demand effects of oil price shocks dominate in all but a handful of U.S. industries.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Olivier Joalland, Jean-Christophe Pereau, Tina Rambonilaza〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper analyzes transmission system operator (TSO)-host community negotiations over an efficient and socially-optimal compensation payment for the installation of new electric power transmission lines. We consider that the TSO has an incentive to negotiate over a transfer that will become a function of final demand. We thus develop a bargaining game within a vertical relationship framework to include the distribution system operator (DSO) and the end-users at the downside of the bargaining problem. We determine the equilibrium of the game, for three negotiation protocols (sequential, bilateral, and multilateral) as an alternative to the non-cooperative situation. We show that when the number of municipalities involved in the process is higher than 5, the multilateral bargaining procedure is the most profitable for all agents, including the municipalities. Inversely, when the number of municipalities is lower than 5, different cases can arise. A single municipality will prefer the non-cooperative outcome while municipalities will prefer the sequential case when there are 2 or the bilateral case when there are 3 or 4. However, from the TSO standpoint and for the society, multilateral negotiations are always the best outcome.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Sefa Awaworyi Churchill, John Inekwe, Russell Smyth, Xibin Zhang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We examine the effect of research and development (R&D) intensity on carbon dioxide (CO〈sub〉2〈/sub〉) emissions in the Group of Seven (G7) countries since the nineteenth century using a non-parametric panel data model. Our estimates suggest that the relationship between R&D and CO〈sub〉2〈/sub〉 emissions is time-varying. The estimated time-varying coefficient function of R&D was negative for three quarters of the period studied, but was positive for a 35-year period (1955–1990) during the second half of the twentieth century. Our non-parametric local linear estimates show that the common trend functions gradually increased for the first 110 years (1870–1980), but then flattened out and showed a slight decrease for the next three decades.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Pralhad Burli, Pankaj Lal, Bernabas Wolde, Shibu Jose, Sougata Bardhan〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Switchgrass is considered as one of the important feedstocks that can contribute towards the attainment of bioenergy goals set under the Renewable Fuels Standard. Yet, the commercial viability of switchgrass based bioenergy is a much debated topic owing to supply side challenges emanating from limited raw materials. It is therefore critical to understand the crucial role of the farmer by studying the willingness to cultivate switchgrass dedicated for bioenergy. To our knowledge, this is the first survey undertaken to assess the farmer preferences and participation in bioenergy markets after the new administration has assumed office, and provides some important insights. Our analysis reveals that the risk attitudes of farmers have an important bearing on their willingness to cultivate switchgrass. Having prior awareness of switchgrass makes farmers less likely to adopt whereas a preference to cultivate a crop after seeing them on demonstration plots at university extension meetings positively influences willingness decisions. Landholdings under pasture/grazing use and under forest/woodland use increases farmer willingness to cultivate switchgrass. On the other hand, having land under the Conservation Reserve Program, lands that experienced flooding or water stress in recent years, or lands that confront erosion issues did not have a significant influence on farmer willingness. While the inherent uncertainty of the cellulosic bioenergy industry is well known, policies that provide a safety net to protect farmers from the downside are an important issue for farmers who are willing to cultivate switchgrass.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Fredj Jawadi, Zied Ftiti〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper studies the impact of oil price changes on economic growth in Saudi Arabia to measure its dependency on the crude oil sector. To this end, an On/Off threshold regression is specified to allow the oil/GDP relationship to be asymmetric, nonlinear, and time-varying with regard to the business cycle phases. Further, we empirically test the diversification hypothesis put forward by the National Transformation Program (Saudi Vision 2030) to check whether the equity-energy investment initiative could boost economic growth in Saudi Arabia. First, our findings confirm the contribution of the oil sector to economic growth in the country, but also show that the oil/Saudi economy relationship exhibits nonlinearity and threshold effects, as the impact of oil price varies per regime depending on the state of the market. Second, in line with the Vision 2030 expectations, we are in favor of transforming the economy and opening its equity market. We also quantify a positive and significant impact of equity investment on the Saudi Arabian economy. Further, this diversification route will stimulate a beneficial oil effect on the real economy.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Francesco Grigoli, Alexander Herman, Andrew Swiston〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The sharp, long-lasting decline in oil prices in 2014–16 tested the resilience of oil exporters. We examine the degree to which economic fundamentals entering the oil price decline explain the impact on economic growth across oil exporting economies, and derive policy implications as to what factors help to mitigate the negative effects. We find that pre-existing fundamentals account for about half of the cross-country variation in the impact of the shock. Oil exporters that weathered the shock better tended to have a stronger fiscal position, higher foreign currency liquidity buffers, a more diversified export base, a history of price stability, and a more flexible exchange rate regime. Within this group of countries, the impact of the shock is not found to be related to the size of oil exports, or the share of oil in fiscal revenue or economic activity.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Boqiang Lin, Wei Wu, Mengqi Bai, Chunping Xie, Jonathan Radcliffe〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Liquid air energy storage is a novel proven technology that has the potential to increase the penetration of renewable on the power network and in the meanwhile to obtain revenues through energy price arbitrage. This paper proposes a methodology to evaluate the economic viability of liquid air energy storage based on price arbitrage operations in the GB real-time electricity market. The arbitrage algorithm designed in this article determines price thresholds every half hour under different operation strategies and according to which, decisions are made for the system to charge, discharge or stand by, and the optimal design of the size of different components for the system are also evaluated. Results suggest that the 12 prognostic is the best operating strategy, and under which a 200 MW LAES system is able to achieve a positive net present value of £43.8 M. Without using waste heat, the payback period for a 200 MW system can be as long as 36.9 to 39.4 years, depending on which arbitrage strategy is applied. However, with waste heat of 150 °C adopted, the payback period can be shortened to 8.7–9.8 years.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 10 September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Zhengyu Cai, Karen Maguire, John V. Winters〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper examines local labor market outcomes from an oil and gas boom. We examine two main outcomes; the probability of employment and the log wages of workers employed outside the oil and gas industry for Texas and the rest of the United States across gender, race, and ethnicity. We find that men and women gain employment in the oil and gas industry during booms, but such gains are much larger for men and are largest for black and Hispanic men. We also find positive income spillovers for workers in other industries that are similar in magnitude across demographic groups.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 10 September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Md. Samsul Alam, Syed Jawad Hussain Shahzad, Román Ferrer〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper investigates the causal linkages in volatility between crude oil prices and six major bilateral exchange rates against the U.S. dollar in the time-frequency space using high-frequency intraday data. Special attention is paid to the potential asymmetries in the causal effects between oil and forex markets. The wavelet-based Granger causality method proposed by Olayeni (2016) is applied to quantify the causal relations in the time and frequency domains simultaneously. Moreover, the realized semivariance approach of Barndoff-Nielsen et al. (2010) is used to account for possible asymmetries in the transmission of volatility shocks. The empirical results show that the significant causal links between oil prices and exchange rates are mainly concentrated in the long-run and during periods of increased economic and financial uncertainty such as the global financial crisis and the subsequent European sovereign debt crisis. Further, the causal effects from currency markets to the crude oil market are stronger than in the opposite direction, consistent with the forward-looking nature of exchange rates, the role of the U.S. dollar as the key invoicing currency for global oil trading and the expanding financialization of the oil market since the mid-2000s. In addition, significant asymmetries coming from good and bad volatility are found at longer horizons. Specifically, bad volatility seems to dominate good volatility in terms of the importance of transmission of volatility shocks.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 12 September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Xiaojun Yu, Yao Yao, Huanhuan Zheng, Lin Zhang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper explores the role of political connection on the overinvestment of Chinese energy firms. We argue that political connection can act as a “helping hand” that enables energy firms to obtain more government support to invest and a “grabbing hand” that forces politically connected energy firms to heavily overinvest for the promotion benefit of local politicians. Our analysis shows that overinvestment of an energy firm is positively affected by its political connection. In terms of the “helping hand” effects, we find that politically connected energy firms are more likely overinvest when they receive more government subsidy. In terms of the “grabbing hand” effects, we show that local politician is more likely to force energy firms to overinvest if the politician is approaching the 65-year-old promotion line. Although firms are less likely to overinvest during the economic downturn, local politician shapes the investment decision of energy firms through the “grabbing hand” effects.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 12 September 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Huiqing Wang, Weixian Wei〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉As technological progress and environmental regulation are not only important drivers of but also the double-edged swords in mitigation of CO〈sub〉2〈/sub〉 emissions, it is important to figure out their optimal threshold values for CO〈sub〉2〈/sub〉 emissions’ reduction. This paper employs the panel smooth transition regression technique to explore these optimal values in the case of OECD countries and emerging economies. The results show that: (1) OECD countries are at a level of excessive technological progress, which will have a rebound effect and increase CO〈sub〉2〈/sub〉 emissions. (2) Emerging economies are under a strict level of environmental regulation, which will lead to serious ‘green paradox’ effects and harm the economic development. Moreover, they have great potential to achieve CO〈sub〉2〈/sub〉 emissions reduction targets through technological progress. (3) Due to the rebound effect, the concentration of environment-related technologies should be shifted from improving energy efficiency to reducing carbon emissions directly such as capture, storage, sequestration or disposal of greenhouse gases. (4) OECD countries should provide low-carbon technical support to emerging economies. In addition, because of the existence of heterogeneity, OECD countries ought to determine their levels of technological progress and environmental regulation according to their own actual conditions.〈/p〉〈/div〉

Description: 〈p〉Publication date: January 2020〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 85〈/p〉 〈p〉Author(s): Shahad Alarenan, Anwar A. Gasim, Lester C. Hunt〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉Between 1986 and 2016, industrial energy consumption in Saudi Arabia increased by tenfold, making it one of the largest end-use sectors in the Kingdom. Despite its importance, there appear to be no published econometric studies on aggregate industrial energy demand in Saudi Arabia. We model aggregate industrial energy demand in Saudi Arabia using Harvey’s (1989) Structural Time Series Model, showing that it is both price and income inelastic, with estimated long-run elasticities of −0.34 and 0.60, respectively. The estimated underlying energy demand trend suggests improvements in energy efficiency starting from 2010.〈/p〉 〈p〉Applying decomposition analysis to the estimated econometric equation highlights the prominent roles of the activity effect (the growth in industrial value added) and the structure effect (the shift towards energy-intensive production) in driving industrial energy demand growth. Moreover, the decomposition shows how exogenous factors such as energy efficiency helped mitigate some of that growth, delivering cumulative savings of 6.8 million tonnes of oil equivalent (Mtoe) between 2010 and 2016.〈/p〉 〈p〉Saudi Arabia implemented a broad energy price reform program in 2016, which raised electricity, fuel, and water prices for households and industry. The decomposition results reveal that, holding all else constant, higher industrial energy prices in 2016 reduced the sector’s energy consumption by 6.9 %, a decrease of around 3.0 Mtoe. Saudi policymakers could therefore build on the current policy of energy price reform and energy efficiency standards to mitigate the rate of growth of industrial energy consumption, increase economic efficiency, and maintain industrial sector competitiveness.〈/p〉 〈/div〉

Description: 〈p〉Publication date: Available online 19 October 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Florian Perrotton, Olivier Massol〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In poor developing countries, the discovery of large gas deposits often stimulates the public authorities’ appetite for ambitious development strategies requiring the construction of a large national pipeline system. However, the foreign private investors financing its installation usually prefer smaller infrastructure designs that are solely intended to supply a few creditworthy industrial sites. Focusing on the situation in Mozambique, we examine whether the adoption of rate-of-return (RoR) regulation can reconcile these conflicting objectives. As a first step, we assess the magnitude of the overcapitalization generated 〈em〉ex ante〈/em〉 at the planning stage by the application of RoR regulation (i.e., the Averch-Johnson effect) to the investors. Then, analyzing the 〈em〉ex post〈/em〉 situation when the enlarged domestic demand materializes, we prove that the allowable rate of return can be set by the regulator to obtain 〈em〉ex ante〈/em〉 the degree of overcapitalization needed 〈em〉ex post〈/em〉 to serve the enlarged demand in a cost-efficient manner. We finally discuss whether RoR regulation can still protect society from monopoly prices when it is tuned to prompt an optimal degree of building ahead of proven demand.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 5 October 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Karel Janda, Jakub Kourilek〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper introduces residual shape risk as a new subclass of energy commodity risk. Residual shape risk is caused by insufficient liquidity of energy forward market when retail energy supplier has to hedge his short sales by a non-flexible standard baseload product available on wholesale market. Because of this inflexibility, energy supplier is left with residual unhedged position which has to be closed at spot market. The residual shape risk is defined as the difference between spot and forward prices weighted by residual unhedged position whose size depends on the shape of customers’ portfolio of a given retail energy supplier. We evaluated residual shape risk over the years 2014 - 2018 with a real portfolio of a leading natural gas retail supplier in the Czech Republic. The size of residual shape risk in our example corresponds approximately to 1 percent of the profit margin of the natural gas retail supplier.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 2 November 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Luca Barbaglia, Christophe Croux, Ines Wilms〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Prices of commodities have shown large fluctuations. A high volatility of one commodity today may impact the volatility of another commodity tomorrow. As such, agricultural and energy commodities are closely dependent due to the expansion of the biofuel industry. We study volatility spillovers among a large number of energy, agriculture and biofuel commodities using the vector auto regressive (VAR) model. To account for the possible fat-tailed distribution of the model errors, we propose the 〈em〉t〈/em〉-lasso method for obtaining a large VAR. The 〈em〉t〈/em〉-lasso is shown to have excellent properties, and a forecast analysis shows that the 〈em〉t〈/em〉-lasso attains better forecast accuracy than standard estimators. Our empirical analysis shows the existence of volatility spillovers between energy and biofuel, and between energy and agricultural commodities.〈/p〉〈/div〉

Description: 〈p〉Publication date: January 2020〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 85〈/p〉 〈p〉Author(s): Clémence Bourcet〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉A large share of greenhouse gas emissions can be attributed to the energy sector. Renewable energy (RE) appears to be a mean to decarbonize economies. To fight global warming, which might have substantial impacts on ecosystems and economies, it is essential to understand the empirical determinants of RE deployment for public policy guidance and to foster future research. This paper aims to review the growing, though limited, body of literature that has emerged in the late 2000s to study the quantitative determinants of RE development at a country level. Results show that there is little consensus on the influence of the economic, environmental, and energy-related determinants predominantly studied. The other main determinants considered are regulatory, political, and demographic. Results are often tempered by the fact that authors use diverse measures of RE deployment and have a variety of frameworks. This paper ends with several recommendations to improve the comparability of future papers to enhance their potential to make credible public policy recommendations. More specifically, the recommendations concern the choice of a RE deployment indicator, the determinants considered for further exploration, and the methodologies adopted.〈/p〉〈/div〉

Description: 〈p〉Publication date: January 2020〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 85〈/p〉 〈p〉Author(s): Bo Tranberg, Rasmus Thrane Hansen, Leopoldo Catania〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉A negative dependence between wind power production and electricity spot price exists. This is an important fact to consider for risk management of long-term power purchase agreements (PPAs). In this study we investigate this dependence by constructing a joint model using constant as well as time-varying copulas. We propose to use score-driven models as marginal model for the spot price of electricity as these are more robust to extreme events compared to ARMA–GARCH models. We apply the new model to pricing and risk management of PPAs and benchmark it against the ARMA–GARCH specification. Our comparison shows that the score-driven model results in a statistically significant improvement of predicting the Value-at-Risk (VaR), which is of high importance for risk management of long-term PPAs. Further, comparing constant and time–varying copulas we find that all time-varying copulas are significantly better than their constant counterparts at predicting the VaR, hence time–varying copulas should be used in risk management of PPAs.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 2 November 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Stéphane Bouché, Carlos de Miguel〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we analyze the implications of assuming that the intensity of aspirations is endogenous. In accordance with empirical evidence, consumption aspirations decrease with capital accumulation while environmental ones increase. We show that such a change in the intensity of aspirations gives rise to a U-shaped relationship between capital accumulation and environmental quality. We also study the implications of our assumption concerning the optimal allocation and show that the steady-state capital stock can be larger or smaller than the one corresponding to the modified golden rule. In addition, for realistic parameter values, the decentralization of the optimal allocation requires the implementation of a maintenance investment subsidy and a lump-sum transfer from the old to the young generation.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 2 November 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Roland Kube, Kathrine von Graevenitz, Andreas Löschel, Philipp Massier〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Voluntary environmental management programs for firms are a popular instrument of environmental policy. However, the effectiveness of such programs is ambiguous based on the existing literature. We evaluate the Eco-Management and Audit Scheme (EMAS) introduced in 1995 by the European Union. EMAS is a premium certification of continuous pro-environmental efforts above regulatory minimum standards. It is more demanding than other voluntary programs as it requires publication of annual reports by firms on their environmental performance and targets. We use official firm-level production census data on the German manufacturing sector. Our research design combines the Coarsened Exact Matching approach with a Difference-in-Differences estimation. We find weak evidence of reductions in CO〈sub〉2〈/sub〉 intensity by about 9 percent for firms that were certified in the early years of the program. For firms certified in later years we find no statistically significant evidence of emission reductions. Moreover, we find no statistically significant evidence of higher investments in environmental and climate protection or an increased use of renewable energy sources for certified firms.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 31 October 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Massimo Filippini, Suchita Srinivasan〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉From both health and environmental policy perspectives, it is advisable to ensure that individuals maximize the nutritional gains from eating meat, without having a significantly adverse environmental impact, i.e. sustainable meat consumption pathways are imperative. This is especially true for developing countries, where rising incomes and growing populations have meant that meat consumption has also risen. India is an example of a country where a large share of the population has been vegetarian due to religious and cultural factors, although this has changed in recent times. In this paper, we mainly focus on Hindu households, who are the religious majority in India, and we hypothesize that social interactions and globalization could be two factors that explain this shift in consumption behavior for them. These hypotheses are based on the theoretical findings of Levy and Razin (2012). The empirical results show that membership in religious groups among Hindu households is likely to lead to a lower likelihood of them eating meat. On the other hand, membership in groups of a non-religious nature for Hindu households implies a greater likelihood of them eating meat. We also find that Hindu households that frequently use sources of media such as newspapers, the radio or television are more likely to consume meat compared to Hindus that do not. This paper provides important policy implications, both in terms of the formulation of Nationally Recommended Diets in developing countries, and in terms of identifying the channel of influence of both social networks and globalization on social and religious norms, consumption behavior, and ultimately, on climate change.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 31 October 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Aviral Kumar Tiwari, Samia Nasreen, Muhammad Shahbaz, Shawkat Hammoudeh〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study analyzes the lead-lag relationship between the price indices of energy fuels and each of food, industrial inputs, agriculture raw materials, metals and beverages in the time-frequency domain. To this end, we first use the wavelet coherency and phase-differences. Next, we use the Diebold and Yilmaz (2012) and Barunik and Krehlik (2017) spillover indices to analyse the connectedness among the set of the price indices under consideration. The period of the study is 1990m1 to 2017m5. The wavelet coherency results reveal that there are important and significant relations between the fuel and food prices, the fuel and industrial prices, and the fuel and metal prices. These results also show that there are phase relationships between those paired prices. The volatility spillover results indicate that the agricultural sector is the most affected by shocks from the other markets. The return series of the industrial input prices at all frequencies appears to be the main source of volatility transmission to the prices of the other commodities over the whole period. This finding underlines the relevance of the industrial inputs to policy makers, particularly when they design policies to provide incentives related to industrial production.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Ge Wang, Qi Zhang, Yan Li, Benjamin C. Mclellan, Xunzhang Pan〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉As a common policy tool for reducing the cost of achieving the Renewable Portfolio Standard (RPS) targets, Renewable Energy Certificate (REC) trade can also exacerbate distributional inequity in provincial renewable electricity consumption. In this study, two types of corrective regulations –taxation and quotas on REC importing were proposed to pursue the equity-efficient trade-off. The energy, economic, and equity impacts of these corrective regulations were analyzed by applying a multi-region multi-market equilibrium model to China as a case study. The results verified that a free trade REC market can increase distributional inequity, while both import taxation and import quotas can reduce inequity. Compared to the electricity price premium for renewable energy and voluntary green certificate prices, the social cost of implementing these corrective regulations are within the public's willingness-to-pay. Moreover, the cost curve of increasing equity using the two corrective regulations on REC trade were obtained. Import taxation is found to be more cost-efficient, and therefore it should be the prior policy choice for China's central government comparing with import quotas in designing REC trade mechanisms.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Omer Faruk Beyca, Beyzanur Cayir Ervural, Ekrem Tatoglu, Pinar Gokcin Ozuyar, Selim Zaim〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Commensurate with unprecedented increases in energy demand, a well-constructed forecasting model is vital to managing energy policies effectively by providing energy diversity and energy requirements that adapt to the dynamic structure of the country. In this study, we employ three alternative popular machine learning tools for rigorous projection of natural gas consumption in the province of Istanbul, Turkey's largest natural gas-consuming mega-city. These tools include multiple linear regression (MLR), an artificial neural network approach (ANN) and support vector regression (SVR). The results indicate that the SVR is much superior to ANN technique, providing more reliable and accurate results in terms of lower prediction errors for time series forecasting of natural gas consumption. This study could well serve a useful benchmarking study for many emerging countries due to the data structure, consumption frequency, and consumption behavior of consumers in various time-periods.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Jiali Zheng, Zhifu Mi, D'Maris Coffman, Stanimira Milcheva, Yuli Shan, Dabo Guan, Shouyang Wang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉China announced at the Paris Climate Change Conference in 2015 that the country would reach peak carbon emissions around 2030. Since then, widespread attention has been devoted to determining when and how this goal will be achieved. This study aims to explore the role of China's changing regional development patterns in the achievement of this goal. This study uses the logarithmic mean Divisia index (LMDI) to estimate seven socioeconomic drivers of the changes in CO〈sub〉2〈/sub〉 emissions in China since 2000. The results show that China's carbon emissions have plateaued since 2012 mainly because of energy efficiency gains and structural upgrades (i.e., industrial structure, energy mix and regional structure). Regional structure, measured by provincial economic growth shares, has drastically reduced CO〈sub〉2〈/sub〉 emissions since 2012. The effects of these drivers on emissions changes varied across regions due to their different regional development patterns. Industrial structure and energy mix resulted in emissions growth in some regions, but these two drivers led to emissions reduction at the national level. For example, industrial structure reduced China's CO〈sub〉2〈/sub〉 emissions by 1.0% from 2013 to 2016; however, it increased CO〈sub〉2〈/sub〉 emissions in the Northeast and Northwest regions by 1.7% and 0.9%, respectively. Studying China's plateauing CO〈sub〉2〈/sub〉 emissions in the new normal stage at the regional level yields a strong recommendation that China's regions cooperate to improve development patterns.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Chaoyi Chen, Michael Polemis, Thanasis Stengos〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study contributes to the literature since it tries to link the Exchange Rate Pass-Through (ERPT) with the “〈em〉rockets and feathers〈/em〉” hypothesis using a panel of EU-28 countries. Allowing for the existence of an endogenous threshold variable our empirical findings indicate that the threshold model is better suited to this analysis than the baseline linear adjustment model. This is the case since the latter restricts the threshold to be centered around zero and the dynamic response to cumulative shocks cannot be properly identified. The empirical findings reveal that the threshold variable expressed by the trade-weighted dollar exchange rate index is statistically significant only in the sample above the threshold (high regime). This means that for the net EU exporting countries, fluctuations in the real effective exchange rate of the US against its major EU trading partners do affect the level of pre-tax retail gasoline prices with the relevant elasticity exceeding unity (complete ERPT). Moreover, all the statistical tests reject the null hypothesis that there is no significant threshold and thus an asymmetric adjustment gasoline mechanism prevails. The impulse response functions confirm our empirical findings that ERPT can explain asymmetric gasoline pricing within the EU periphery.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Meixuan Teng, Paul J. Burke, Hua Liao〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉China's residential sector has experienced rapid electrification and gasification. Among rural households, however, coal still accounts for a large share of energy use, especially in the north. Use of coal for cooking and heating brings large health and pollution risks. From a theoretical viewpoint, economic tools such as taxes and subsidies have the potential to play a crucial role in addressing this issue. In this paper, a provincial-level dataset is used to estimate the price and income elasticities of aggregate coal demand by rural households. We find that coal is a non-Giffen inferior good for the rural household sector. This means that future income growth may help to induce switching from coal. Demand is becoming more price elastic as rural incomes grow. We also find that rural residential coal demand is more price- and income-responsive in the south than the north, perhaps because of fewer substitution options in the north. Our results provide benchmarks and parameters for policy simulation research.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Xunxiao Wang, Yudong Wang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We examine the frequency dynamics of volatility spillovers between crude oil and China's stock markets in a spectral representation framework of generalized forecast error variance decomposition using sectoral stock indices data. We find evidence of total volatility spillover driven mainly by short-term spillovers. The net spillovers of the oil market are almost all positive and dominated by short-ter.m components, although the spillover during China's 2015 financial crisis is negative and attributable to long-term components. In addition, there exists heterogeneity in net pairwise (frequency) spillovers between the oil and sectoral stock markets. Moreover, structural breaks in volatilities appear to be a significant feature of volatility spillovers. Finally, frequency spillovers in our system can predict future stock market volatility. These results have economic implications for investors and policymakers.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 14 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Gen-Fu Feng, Quan-Jing Wang, Yin Chu, Jun Wen, Chun-Ping Chang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study investigates the relationship between natural gas price and production and analyzes whether the recent shale gas boom has changed the nexus between the two. We set up a framework to test the directions of causal links between natural gas price and two measures of natural gas production: (1) gross natural gas production (aggregate of conventional natural gas and shale gas productions) and (2) conventional natural gas production only. Based on monthly data of 16 states in the U.S. between January 2007 and December 2016, we find robust evidence of a reliable relationship between natural gas price and gross production, but no reliable cointegration between gas price and conventional natural gas production. Our results are robust when we account for potential structural breaks and cross-section dependence in the data. Our evidence denotes that the recent shale gas boom has changed the relationship between natural gas price and production in the U.S. Moreover, our study shows that the structure break in the U.S market highly correlates to shale gas and also provides some evidence on that while cross-state factors result in long-term mean reversion, state-specific factors lead to a permanent shock.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 27 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Kira Lancker, Martin F. Quaas〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We study optimal subsidies for renewable energy (RE) generation to internalize external benefits from inter-temporal learning-by-doing spillovers, taking into account increasing marginal costs at the industry level due to limited availability of sites suitable for RE. We find that the optimal RE subsidy is differentiated according to productivity and derive a condition on production and spillovers under which less efficient, i.e. more costly, technologies should receive higher support, as common in actual policy-making. We show that such a support of technological diversification is optimal if (i) productive sites are scarce, which limits future utilization of knowledge and if (ii) technologies mature rapidly with little further scope for learning. 〈em〉Prima facie〈/em〉 evidence for these elasticities for Germany, Denmark and UK suggests that support for technology diversification is the optimal approach for these countries.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 27 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Amir H. Alizadeh, Chih-Yueh Huang, Ian W. Marsh〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper combines the Heterogeneous Autoregressive Realised Volatility (HAR-RV) model and the Markov Regime Switching (MRS) approach to estimate and forecast volatility of energy futures contracts traded at the Tokyo Commodity Exchange (TOCOM). The proposed MRS-HAR-RV model allows the dynamics of the realised volatility to change as market conditions change. The dataset consists of intraday prices for gasoline, kerosene and crude oil futures. Estimation results suggest MRS-HAR-RV model can capture dynamics of price volatility of energy futures better than alternative models. However, out-of-sample forecast evaluation results show that MRS-HAR-RV can only produce better forecasts for more liquid contracts. Moreover, MRS-HAR-RV model seems to less over-predict and more under-predict the volatility compared to HAR-RV, HAR-RV-CJ, GARCH, and MRS-GARCH models.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Abebe Hailemariam, Russell Smyth, Xibin Zhang〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We examine the relationship between oil prices and economic policy uncertainty in G7 countries. To do so, we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time-varying functional forms. We also estimate country-specific and common trend functions allowing them to evolve over time. Using monthly data from G7 countries over the period 1997:01-2018:06, we find that the effect of oil prices on economic policy uncertainty is time-varying. Our results show that the estimated time-varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand. Further, our nonparametric local linear estimates show that the country-specific and common trend functions are increasing over time. Our findings are robust to endogeneity and alternative specifications.〈/p〉〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Jelle Meus, Kenneth Van den Bergh, Erik Delarue, Stef Proost〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The deployment of renewable cooperation mechanisms within the European Union (via statistical transfers, joint support schemes and joint projects) is expected to increase in the near future. Such cooperation mechanisms can significantly reduce the compliance cost for meeting renewable energy targets. Nevertheless, as it is known that ill-designed national support instruments distort renewable investment and production decisions, it can also be expected that these impact the performance of cooperation mechanisms. In this paper, we develop a bi-level two-country competitive equilibrium model that analyzes the impact of national RES-E support instruments on the performance of renewable cooperation mechanisms. Furthermore, we assess the efficiency of two international cooperation mechanisms (statistical transfers and joint support schemes) and compare it to the situation without renewable cooperation. Based on an analytical derivation and a numerical example, we first confirm that fixed feed-in premiums are the globally most efficient instrument, given production-based quotas (in MWh). Other national instruments (feed-in tariffs and capacity-based subsidies) can distort renewable investment decisions, and are sub-optimal. Second, the employment of statistical transfers always outperforms the no-renewable cooperation case, independent of the national support instruments. Third, statistical transfers are preferred over joint support schemes when employing sub-optimal national policy instruments. In fact, it even is possible that sub-optimal joint support schemes (i.e. not based on the fixed feed-in premium) perform worse than no renewable cooperation at all. Finally, we also consider the country-level distributional effects and conclude that country-level incentives for renewable cooperation may not align with the global optimum, i.e. national policy makers might be incentivized to constrain their cooperation levels.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 15 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Dohyun Chun, Hoon Cho, Jihun Kim〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉From a practical perspective, it is crucial to hedge the crude oil price risk in periods of dramatic price change. In this study, we directly investigate the performance of crude oil hedge portfolios in the five periods in which the largest oil price shocks in history occurred. We use stochastic volatility (SV), GARCH, and the diagonal BEKK model to estimate the minimum variance hedge ratio of hedge portfolios. Our empirical results provide evidence that hedging strategies based on the SV model are able to outperform the GARCH and BEKK models in terms of variance reduction. Our results are also consistently valid for various hedge horizons. Interestingly, although it is important to estimate variance and covariance accurately when constructing minimum variance portfolios, we find that reducing the mean squared and mean absolute errors does not guarantee superior hedge performance.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Adam Clements, Cody Shield, Stephen Thiele〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper examines the relationship between structural oil shocks and US equity markets. The recent oil shock decomposition of Ready (2018) is reconsidered and refined, providing a clearer delineation between shocks to equity market discount rates and aggregate demand, leading to an oil shock specification which attributes substantially more explanatory power to the latter in explaining equity market variation. Providing links with the literature dating back to Kilian and Park (2009), an explicit role is given to precautionary demand shocks using an independent measure constructed from oil futures data, reducing the role of the supply shocks obtained as the final residual in the recursive identification scheme. In an extended sample that allows an analysis of the oil/equity market relationship since the global financial crisis, the modified aggregate demand shocks have approximately twice as much explanatory power for stock return variation than the demand shocks of Ready (2018). The importance of these shocks in driving oil price changes and equity market volatility has only increased since the financial crisis, with the role of supply shocks diminishing. Once these demand effects are accounted for, there is little relationship between precautionary demand shocks and equity returns, in contrast to the existing literature.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Anke Jacksohn, Peter Grösche, Katrin Rehdanz, Carsten Schröder〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Using data from the German Socio-Economic Panel, we undertake a simultaneous assessment of the importance of factors that are individually found to be significant for the adoption of renewable energy systems by households but are not yet tested jointly. These are sociodemographic and housing characteristics, environmental concern, personality traits, and economic factors; i.e. the expected costs of and revenues from the investment. Our results suggest that household decisions to invest in photovoltaic systems and solar thermal facilities are mainly driven by economic factors. Taking account of sociodemographic and housing characteristics, environmental concern, or personality traits has comparatively little relevance, while the quantitative nexus between the decision to invest and returns on the investment is robust to their inclusion.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 27 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Lianbiao Cui, Rongjing Li, Malin Song, Lei Zhu〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉China has proposed carbon intensity targets and energy development targets for 2030. This study investigates the linkages between these targets and assesses if China can achieve its energy development targets by fulfilling its carbon reduction commitments. To this end, it quantitatively evaluates the impact of carbon emission controls on the Chinese economy using a dynamic computable general equilibrium model. The results show that China’s carbon abatement pledge cannot guarantee achievement of all energy objectives. China is likely to reach the upper limit of its carbon intensity target in 2020 and the lower limit in 2030 if current abatement efforts are maintained. To achieve the upper limit in 2030, the carbon price will be CNY 83/tCO〈sub〉2〈/sub〉. The energy consumption target for 2020 is likely to be realized but the 2030 target is not. A more stringent price constraint on carbon emissions would be helpful to the achievement of the non-fossil energy target in 2030, but would have a limited promoting effect on natural gas development. Our results reveal the linkages between China’s energy targets and carbon emission targets, which is valuable to the cost-effective dual control of energy consumption and carbon emission.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 25 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Boqiang Lin, Mengmeng Xu〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Since the metallurgical industry has become the main source of China's carbon dioxide emissions and energy consumption in recent years, low-carbon transition in that industry is of great significance for achieving China's carbon reduction targets. It is generally believed that phasing out fossil fuel subsidies is an effective way to reduce energy-related CO〈sub〉2〈/sub〉 emissions since it can increase the energy prices and lower its consumption. This paper aims to investigate whether the energy subsidy removal can promote the low-carbon transition of China's metallurgical industry. Taking inter-fuel and inter-factor substitution effects as the link, we calculate the CO〈sub〉2〈/sub〉 mitigation potential on the assumption that the subsidies for each category of fossil energy were eliminated. We find that the metallurgical industry has a sluggish reaction to the changes in energy price. Supposing eliminating the energy subsidies in the period of 2003–2015, the amount of reduced CO〈sub〉2〈/sub〉 would be 487.286 million tons, accounting for a slight proportion of the total emissions in the industry. But it is meaningful for the global CO〈sub〉2〈/sub〉 mitigation since it approximates the whole CO〈sub〉2〈/sub〉 emissions in Norway during the same period. These findings can provide some new insights for the energy subsidy issue and suggest that the additional measures are required to promote the low-carbon transition in China's metallurgical industry rather than just relying on the removal of fossil fuel subsidies.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Mingshan Li, XiaoHua Sun, Yun Wang, Helen Song-Turner〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study investigates the impact of political connections on firm efficiency as well as its mechanisms in Chinese renewable energy firms. The empirical results reveal a direct negative association between political connections and firm efficiency and an indirect correlation through political resources. The results indicate that the higher the level of political connections, the stronger the relationship between political connections and firm efficiency. Our findings also indicate that the impact of political connections is different between state-owned and non-state-owned firms. For state-owned firms, political connections are negatively correlated with firm efficiency and government subsidies are not beneficial for state-owned firms in promoting productivity. As for non-state-owned firms, there is a ‘double-edged sword’ effect of political connections on firm efficiency. On the one hand, political connections are associated with lower firm efficiency, but on the other hand, political connections can alleviate the adverse effects of financing constraints on non-state-owned firms.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 18 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Tom Ndebele, Dan Marsh, Riccardo Scarpa〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We model consumer switching in retail electricity markets in New Zealand to identify important determinants of switching and estimate willingness to pay (WTP) for six non-price attributes of electricity services, namely, call waiting time, length of fixed rate contract, renewable energy, loyalty rewards, supplier ownership, and supplier type. The results provide important insights into residential consumer switching, which inform policy and enable suppliers to differentiate their products. The analysis is based on 2688 choice responses generated using an online choice experiment administered to a sample of 224 residential bill-payers. A latent class model is used to distinguish important determinants of switching and preference heterogeneity. We find that non-price attributes of electricity services are significant determinants of consumer switching. Three latent classes with distinct preferences for the attributes are identified. The first class (40%) is mainly concerned about power bills and would switch supplier to save at least NZ$125 per year in power bills, ceteris paribus. This value mainly captures the status quo effect or preference for incumbent traditional suppliers. The second class (46%) exhibits no status quo preference, values all attributes, and particularly dislikes entrants from other sectors. These suppliers must charge NZ$135 per year less than traditional suppliers for a 50% chance of attracting customers. The third class (14%) consists of captive and loyal customers who are unlikely to switch supplier for any realistic power bill savings.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Zhenni Chen, Huibin Du, Jianglong Li, Frank Southworth, Shoufeng Ma〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The rapid increase in energy consumption and carbon emissions in China's passenger transportation sector threatens both the environment and the nation's energy security. Energy efficiency improvements, leading to lower fuel consumption, are therefore of considerable interest to policymakers trying to achieve low-carbon travel. However, it is well established that higher miles per gallon efficiencies can, by reducing the costs of travel, lead to some level of increased personal travel: the so-called ‘rebound effect’. This paper describes an empirical study to measure the size and also the variability in this effect at the provincial level and what this variability implies for a carbon tax policy. This rebound effect is quantified using a two-stage Almost Ideal Demand System (AIDS) model. A backfire effect (i.e. the rebound is ≫100%) is observed in urban passenger transport, with disparities in the size of the rebound effect ranging from 114% to 153% among China's provinces. The differences in economic development as well as related differences in consumers' behavior, especially in the behavior of “marginal consumers”, have contributed to this heterogeneity, with a larger carbon tax (more than 110Yuan/tonne) needed in richer provinces such as Jiangsu, Zhejiang, Guangdong and Fujian in order to bring about similar levels of carbon reductions nationwide.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 18 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Jonathan A. Batten, Harald Kinateder, Peter G. Szilagyi, Niklas F. Wagner〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We study the feasibility of hedging stocks with oil. The Dynamic Conditional Correlation (DCC) approach allows for the calculation of optimal hedge ratios and corresponding hedge portfolio returns. Our results show that there are distinct economic benefits from hedging stocks with oil, although the effectiveness of hedging is both time-varying and market-state-dependent. The event of the Global Financial Crisis (GFC) is shown to affect the effectiveness of hedging. During the GFC, a positive jump in the hedge ratios occurs and hedge effectiveness increases. Among a set of common financial and macroeconomic drivers, we identify the implied volatility index VIX as being the most important. During times of global financial uncertainty, investors reduce stock positions more than commodity positions, thus VIX shocks negatively affect the portfolio returns of stock-oil hedges. The results also show that an appreciation of the U.S. dollar against the euro is associated with reduced hedge portfolio returns. From the GFC onwards, we document an increased significance of the gold price and the term spread in explaining hedge portfolio returns.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Aviral Kumar Tiwari, Nader Trabelsi, Faisal Alqahtani, Lance Bachmeier〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this study, we examine the dependence structure and systemic risk between return series of the prices of crude oil and the BRICS exchange rates to US using the quantile coherency methods of Baruník and Kley (2015) and the nonparametric conditional value-at-risk granger causality test (hereafter NGCoVaR) of Diks and Wolski (2018) over the period 2005–2017. Further, we use the Hiemstra and Jones (1994, hereafter HJ) and Diks and Panchenko (2005, hereafter DP) tests for comparison purposes. Our findings indicate that all countries reveal significant negative dependence in the long-run dynamics between Oil prices and Brazilian, Indian, and South African currencies. HJ and DP tests suggest that lagged crude oil prices have predictive power for the Brazilian and Russian exchange rates. Furthermore, a robust unidirectional lagged dependence exists from the Brazilian exchange rate to crude oil prices. Concerning the Chinese, Indian, and South African currencies, we find no contagion effects from/to those countries to the oil market. For Russia, there is limited evidence of contagion effects. These findings provide insights for regulators and international investors.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 4 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Paul Simshauser, Alexandr Akimov〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉From 2004 to 2018 the Regulatory Asset Base (RAB) of electricity networks across Australia's National Electricity Market tripled in value, from $32 billion to $93 billion. The run-up in the capital stock was driven by forecast demand growth and a tightening of reliability standards. But demand contracted from 2010 to 2015. With a rising RAB, contracting demand and a regulated revenue constraint, an adverse cycle of falling demand and sharply rising tariffs appeared to be emerging. Some networks were characterised by significant investment mistakes in retrospect, and perhaps unsurprisingly, various consumer groups and regulatory bodies argued assets should be stranded or written-off with network tariffs reduced. From 2015 to 2018, energy demand increased once again. In this article we present a method for dealing with stranded assets under uncertainty; rather than permanently stranding assets that fail a used and useful test, we reorganise the financial and economic affairs of a template network utility and “Park” excess capacity, issue credit-wrapped bonds to temporarily finance the stranded capital stock, then re-test the Parked Assets at the end of each five-year regulatory determination. Parked Assets can then be “Un-Parked” and returned-to-service in line with connections growth, load growth, or both. This produces an immediate reduction in network tariffs under our generalised assumptions, but scarce government balance sheet capacity is necessarily utilised and recovery risk is transferred from shareholders to taxpayers. Accordingly, a Park and Loan policy is not a costless exercise.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): B.W. Ang, Tian Goh〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉As global action on climate change gathers momentum, an area of interest is what the world's greenhouse gas emission trajectory will be in the future and whether it can meet the emission targets set forth. To address these questions, emission scenarios which range from business-as-usual to deep decarbonization scenarios have been developed by researchers using different assessment models. An understanding of the sources of variations across the range of these emission trajectories is of interest for discussions, debates and policy planning. However, since these models often have different structures and input variables, comparisons of the results are not straightforward. In this regard, index decomposition analysis (IDA) has emerged as a tool to facilitate comparisons in a harmonized way. It allows differences in emissions over time or between models to be broken down based on a set of accepted driving factors. This paper reviews the literature and summarizes the features and challenges. A multi-level scenario decomposition framework is proposed to address the challenges which include how to quantify differences arising from the energy transformation sector, the adoption of renewable energy, carbon capture and storage, and bio-energy carbon capture and storage technologies. A case study and guidelines for implementing the framework are presented.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Marcin Wa̧torek, Stanisław Drożdż, Paweł Oświȩcimka, Marek Stanuszek〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Statistical and multiscaling characteristics of WTI Crude Oil futures prices expressed in US dollar in relation to the most traded currencies as well as to gold futures and to the E-mini S&P500 futures prices on 5 min intra-day recordings in the period January 2012–December 2017 are studied. It is shown that in most of the cases the tails of return distributions of the considered financial instruments follow the inverse cubic power law. The only exception is the Russian ruble for which the distribution tail is heavier and scales with the exponent close to 2. From the perspective of multiscaling the analysed time series reveal the multifractal organization with the left-sided asymmetry of the corresponding singularity spectra. Even more, all the considered financial instruments appear to be multifractally cross-correlated with oil, especially on the level of medium-size fluctuations, as the multifractal cross-correlation analysis carried out by means of the multifractal cross-correlation analysis (MFCCA) and detrended cross-correlation coefficient 〈em〉ρ〈/em〉〈sub〉〈em〉q〈/em〉〈/sub〉 show. The degree of such cross-correlations is however varying among the financial instruments. The strongest ties to the oil characterize currencies of the oil extracting countries. Strength of this multifractal coupling appears to depend also on the oil market trend. In the analysed time period the level of cross-correlations systematically increases during the bear phase on the oil market and it saturates after the trend reversal in 1st half of 2016. The same methodology is also applied to identify possible causal relations between considered observables. Searching for some related asymmetry in the information flow mediating cross-correlations indicates that it was the oil price that led the Russian ruble over the time period here considered rather than vice versa.〈/p〉〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Hongxun Liu, Kerui Du, Jianglong Li〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The rebound effect, or the response to energy efficiency improvement, has drawn considerable attention from economists and policymakers. However, the magnitude remains quite controversial because of the differences in the definitions and methods being used. Originating from the definition of direct rebound effect, we develop an improved approach incorporating energy efficiency. The main advantages of the proposed approach are twofold. First, it enables us to estimate the demand elasticity of useful energy service with respect to energy service price. The estimates are more consistent with the definition of rebound effect and are more effective. Second, it decomposes direct rebound effect into substitution and output channels, enabling us to further understand the microeconomic mechanisms. Applying this method, we assess the direct energy rebound effect in China's industrial sectors. We find that the direct rebound effect for the industry is 37.0%, and the substitution and output channels contribute to 13.1% and 23.9%, respectively. Substantial variations in the magnitudes and mechanisms occur by sector. For heavy industry, most energy rebound is induced by output expansion because of its sizeable cost decrease from efficiency improvements. Unlike heavy industry, most energy rebound in light industry comes from substituting energy service for other inputs because firms in light industry are more flexible in adjusting production inputs. Our results provide evidences for the importance of energy efficiency measures, and highlight the necessity of differentiated measures according to the sectoral characteristics.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Zhaohua Wang, Yefei Sun, Bo Wang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The development of traditional urbanisation has generated environmental problems, so the Chinese Government has proposed a new-type of urbanisation path with uniquely Chinese characteristics. How does this new-type of urbanisation affect CO〈sub〉2〈/sub〉 emissions? Based on panel data from 29 provinces in China (2005 to 2016), we apply an exploratory spatial data analysis model, a spatial econometric model, and a threshold model to analyse the spatial autocorrelation of CO〈sub〉2〈/sub〉 emissions, the direct and indirect effects of new-type urbanisation on CO〈sub〉2〈/sub〉 emissions, and the threshold characteristics produced by technological progress, respectively. The key results are: (1) CO〈sub〉2〈/sub〉 emissions show significant positive autocorrelation in China, and the spatial distribution of CO〈sub〉2〈/sub〉 emissions is HH (High-High) or LL (Low-Low) clustered in most provinces; (2) new-type urbanisation has a paradoxical effect on CO〈sub〉2〈/sub〉 emissions. Energy-saving technology has a rebound effect on CO〈sub〉2〈/sub〉 emissions, but environmental technology inhibits CO〈sub〉2〈/sub〉 emissions; (3) by eliminating the rebound effect of energy-saving technology on CO〈sub〉2〈/sub〉 emissions and promoting environmental technology, new-type urbanisation indirectly inhibits CO〈sub〉2〈/sub〉 emissions; (4) new-type urbanisation exhibits a threshold effect on CO〈sub〉2〈/sub〉 emissions due to the different levels of energy-saving technology and environmental technology. Finally, policy recommendations for CO〈sub〉2〈/sub〉 emissions reduction are proposed from the perspective of new-type urbanisation, energy-saving technology, and environmental technology.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: May 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 80〈/p〉 〈p〉Author(s): Richard G. Newell, William A. Pizer, Daniel Raimi〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Subsidies for clean energy deployment have become a major component of U.S. federal energy and climate policy. After a surge in spending under the American Recovery and Reinvestment Act of 2009, they are an even larger component but now face increased scrutiny. Given their lasting presence, how does one design these subsidies to be as cost-effective as possible? Surprisingly, the conceptual framework and empirical evidence available to help policymakers identify which subsidies generate the most “bang for the buck” are limited. To help answer this question, we begin with an overview of the justifications for, and the arguments against, subsidizing clean energy technologies. Next, we briefly describe major subsidies. Finally, we summarize key design choices, suggesting an increased focus on upfront cash payments for physical outcomes such as capacity. This contrasts with the considerable focus on tax credits, loan guarantees, production, and cost-based subsidies which have been more prominent to date.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 17 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Vo Phuong Mai Le, David Meenagh, Patrick Minford〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper explores the world business cycle using unfiltered data from 1870 and looks for a theory that could account for the long wave commodity cycle in the world economy. We build a simple DSGE model that includes a long time-to-build constraint in the commodity sector. We find that this model can produce long cycles in output and commodity prices as introduced by Kontradieff (1925) and Schumpeter (1935). Our findings show that these long business cycles are produced by the long gestation of commodity capacity which causes very large swings in commodity prices.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 27 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Nicolas Koch, Houdou Basse Mama〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study exploits the incomplete participation requirements of the European Union Emissions Trading System (EU ETS) to investigate the policy’s causal effect on outward foreign direct investment (FDI) decisions of German multinational firms. Using a combination of difference-in-differences with bias-corrected matching, our baseline specification indicates that the sample average treatment effect is very small and levels out at -0.2%, but its standard error is large (0.16). Looking at a sub-sample of firms which can be considered as geographically more mobile because they are supposedly less capital-intensive, we find that a small number of EU ETS regulated firms have increased their FDI outside the EU by 52%±47% compared to a counterfactual scenario. Paradoxically, relocating firms neither operate in the targeted energy-intensive sectors, nor are they emission-intensive. The small emissions share of these footloose firms indeed indicates a limited potential for policy-induced leakage of emissions. On the extensive margin, we find that all EU ETS firms on average have increased the number of their affiliates outside the EU by 28%±24% relative to control firms. This causal change in network structures of multinational firms outside the EU is suggestive of endeavors undertaken by regulated firms to facilitate relocations in the future.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 27 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Lena Hörnlein〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉Using a real options model, this paper quantifies a gas-fired power plant’s operating value and the value of a new investment against the background of a market transition to renewable electricity. The model is run with recent data for Germany’s power sector and for different types of gas-fired power plants.〈/p〉 〈p〉The result is twofold. First, the paper achieves a more realistic value by improving on existing models: it models electricity and gas prices as a two-dimensional stochastic process, each component consisting of the sum of a seasonal pattern and a mean-reverting process; it uses high granularity by modelling hourly time-steps; and it incorporates power plant ramping times and costs. Second, it compares two types of power plant models, one with daily and one with hourly operating decisions, and thereby quantifies the value of a plant’s intraday flexibility. The hourly model replicates operators’ and investors’ decision making accurately. This is evidenced by the fact that the results trace current major developments like the recent decline and come-back of gas-fired generation in Germany.〈/p〉 〈p〉The paper contributes to a better understanding of the choices operators and investors face in current electricity markets. In the absence of large scale storage solutions flexible supply of electricity, as provided by gas, is important in the transition to renewable energies in Germany and across Europe.〈/p〉 〈/div〉

Description: 〈p〉Publication date: Available online 25 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Claude Crampes, Jérôme Renault〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The development of non-dispatchable renewable sources of energy requires more flexible reliable thermal equipment to match residual demand. We analyze the advantages of delaying production decisions to benefit from more precise information on states of the world, at the expense of higher production costs in a two-period framework where two technologies with different flexibility characteristics are available. We determine first-best production levels ex ante and ex post, that is, when demand is still random and is known with certainty respectively. We then show that, under perfect competition, first best can be implemented indifferently either by means of ex post state-contingent markets or by means of a day-ahead market followed by adjustment markets. By contrast, when the industry is imperfectly competitive, the two market designs are not equivalent.〈/p〉〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Andreas Knaut, Martin Paschmann〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In commodity markets, price volatility may rise significantly if the product granularity increases. To gain insights into the underlying drivers, we analyze price volatility based on the example of German electricity markets. We develop a theoretical model to reproduce the price formation in the day-ahead and intraday auction which are sequential short-term electricity markets with 60-minute and 15-minute products. As cross-border trade is allowed in the day-ahead but not in the intraday auction, the model accounts for the impact of restricted market participation. The theoretical model is then transferred into an empirical analysis to first validate the modeling approach and second to comparatively assess the impact of increasing product granularity and restricted market participation. The empirical results indicate that the disproportional rise in quarter-hourly price volatility is mainly triggered by limited market participation and not only by the high volatility of renewable supply and demand. Since restricted market participation refers to a lack of market coupling, we derive a proxy for efficiency losses ranging from EUR 55 million to EUR 108 million that may be reduced if markets are coupled.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 16 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Robinson Kruse, Christoph Wegener〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We provide empirical evidence for pronounced time-variation in the persistence of real oil prices. In particular, we find episodes of mild explosiveness next to periods with random walk and also mean-reverting behavior. We address the question whether dynamic persistence can be directly related to macro-financial variables, spot-futures spreads, spill-over effects from commodities and global real economic activity. Alongside these variables, we use a large data set of more than one-hundred fifty potential determinants featuring, for example, further oil-related variables (production and inventories) and key macroeconomic series for the G7 countries. By using model averaging techniques, we robustly account for the inherent model uncertainty when dealing with such many potential explanatory variables. As it turns out, the one and only significant measure to explain time-varying oil price persistence is the index of global real economic activity by Kilian (2009). Other variables related to e.g. supply shocks or speculation are, however, insignificant. In line with recent findings, we argue that fundamentals rather than speculation were the drivers of the explosive oil price in the 2000s.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 16 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Daniel Lingohr, Gernot Müller〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Renewable energies play an increasing role in power generation worldwide. Electricity generated by photovoltaic power plants is an important factor here. The fact that no solar power is generated at night makes modeling for high resolution difficult. Previous work has therefore been limited to daily variation. However, this obviously leads to a lack in description of the data, a gap which we will fill in this work. To do this, first we filter a cloud cover component from the infeed data by using physical relationships. This variable incorporates the complete stochastic and can be modeled as a non-linear continuous-time autoregression as defined by Brockwell and Hyndman (1992). We fit our model to infeed data in Germany and show that it describes the data better than other comparable approaches. The model enables pricing of derivatives, which is illustrated by a new future contract. This product allows the volume risk of photovolatic power plants to be hedged.〈/p〉〈/div〉

Description: 〈p〉Publication date: June 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 81〈/p〉 〈p〉Author(s): Rebeca Jiménez-Rodríguez〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The stock market may reflect the economic conditions of an economy and a positive economic situation is expected to improve the companies' profits, which makes company shares more attractive since the expected dividends to shareholders will be larger. Theoretically, higher economic activity leads to higher energy demand and, consequently, higher carbon emissions, which give rise to higher EU allowances (EUA) prices. Therefore, the stock market and EUA prices seem to be connected, with causality going from the stock markets to EUA prices. This paper formally tests for it, showing that the causality effectively runs from the stock market to the European Climate Exchange market. Furthermore, the paper studies the effects of the evolution of European stock markets on the EUA spot prices.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 16 July 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Richard S.J. Tol〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper uses imputed national climate change impact functions to estimate national social costs of carbon, which are largest in poor countries with large populations. The national social costs of carbon of faster growing economies are less sensitive to the pure rate of time preference and more sensitive to the rate of risk aversion. The pattern of national social costs of carbon is not sensitive to the assumed impact function, climate sensitivity, and scenario, although the global social cost of carbon is. Income convergence raises the national social costs of carbon of poorer countries, and lowers them for richer countries. Both global and national social costs of carbon are most sensitive to the income elasticity of climate change impacts, a parameter about which we know little.〈/p〉〈/div〉