Structural Transformation Options of the Saudi Economy Under Constraint of Depressed World Oil Prices

We implement the hybrid (energy-economy) recursive-dynamic multisector IMACLIM model with important adaptations to Saudi macroeconomics. We design two scenarios reflecting both the Saudi Vision 2030 economic development program and Nationally Determined Contribution (NDC) to greenhouse gas mitigation: Continuity of previous plans to expand energy-intensive activities under maintained energy-pricing policies, versus Transformation by economic diversification away from hydrocarbon-related activities and fiscal and energypricing reforms. We show that, compared to Continuity, Transformation improves activity, employment and public budget outlooks, while considerably abating the energy intensity ..

Energy Economics

Financing Energy Innovation: Internal Finance and the Direction of Technical Change

Achieving the goals of the Paris Agreement and of climate neutrality by 2050 in the European Union will require mobilizing financial investments towards clean energy innovation. This study examines the role of internal finance (cash flows and cash holdings) and financing constraints for innovation in energy technologies. We construct a dataset for 1,300 European firms combining balance-sheet information and patenting activities in renewable (REN) and fossil-fuel (FF) technologies and estimate the sensitivity of patenting activities to firm’s internal finance. We use count estimation techniques and control for a large set of firm-specific characteristics and market developments in REN and F..

Energy Economics

Heard the News ? Environmental Policy and Clean Investments

We build a novel news-based index of US environmental policy and examine how it relates to clean investments. Extracting text from ten leading US newspapers over the last four decades, we use text-mining techniques to develop a granular index measuring the salience of US environmental policy (EnvP) over the 1981-2019 period. We develop further a set of additional measures, namely an index of sentiment on environmental policy, as well as various topic-specic indices. We validate our index by showing that it correctly captures trends and peaks in the evolution of US environmental policy and that it has a meaningful association with clean investments, in line with environmental regulations supp..

Energy Economics

Real-World Simulations of Life with an Autonomous Vehicle Suggest Increased Mobility and Vehicle Travel

Fully autonomous vehicles are expected to have a profound effect on travel behavior. The technology will provide convenience and better mobility for many, allowing owners to perform other tasks while traveling, summon their vehicles from a distance, and send vehicles off to complete tasks without them. These travel behaviors could lead to increases in vehicle miles traveled that will have major implications for traffic congestion and pollution. To estimate the extent to which travel behavior will change, researchers and planners have typically relied on adjustments to existing travel simulations or on surveys asking people how they would change their behavior in a hypothetical autonomous veh..

Energy Economics

Panel Study of Emerging Transportation Technologies and Trends in California: Phase 2 Findings

Emerging transportation services, whose development and adoption have been enabled by information and communication technology, are largely transforming people’s travel and activity patterns. This study investigates the emerging transportation trends and how they transform travel-related decision-making in the population at large through the application of a unique longitudinal approach. As part of this project, a second wave of data collection in 2018 was built with a rotating panel structure as a continuation of the research efforts that started with the collection of the 2015 California Millennials Dataset. This report focuses on the analyses of the data collected in this project, in pa..

Energy Economics

Cost-effective reduction of fossil energy use in the European transport sector: An assessment of the Fit for 55 Package

This paper surveys climate and energy policy in the EU transport sector covering the road, aviation, and shipping sectors. We summarise current policies, focusing on the Fit for 55 Package, and categorise them according to their targeted decision stage (consumption, investment, or research) and the type of instrument being used (e.g. cap-and-trade, tax, mandate, performance standard, or subsidy). Next, we analyse the cost-efficiency of the different policies and instruments. We find that they address a range of market inefficiencies, but that there are still a number of aspects that can further improve the cost-effectiveness of current EU climate policies in the transport sector. For example..

Energy Economics

"The Employer of Last Resort Scheme and the Energy Transition: A Stock-Flow Consistent Analysis"

The health and economic crises of 2020-21 have revived the debate on fiscal policy as a major tool for stabilization and meeting long-term goals. The massive surge in unemployment, due to the economic disruption of the lockdown measures, has increased the interest in policies that target employment directly instead of trying to achieve it via a general "demand push." One of the proposals currently under debate is the job guarantee. Under such a policy the government would act as an "employer of last resort" by offering a job to everyone that is able and wants to work but cannot find a job in the private sector. This paper argues that a carefully designed scheme of direct employment and publi..

Energy Economics

"A note on the relationship between electricity and natural gas prices across European markets in times of distress".

We study the transmission of natural gas price shocks to electricity prices across different scenarios of electricity generation for thirteen European electricity markets. To this end, we propose a statistic based on the estimation of conditional quantile regression models, which allows us to identify the most vulnerable countries in the region to variations in the global price of natural gas, under scenarios of generation distress. We point out to market integration and different electricity generation mixes as the main factors underlying our results. Our main contribution is the analysis of the proposed static for the case of European markets from a comparative perspective, which helps to ..

Energy Economics

Optimal Unilateral Carbon Policy

We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other region. The optimal policy trades off the costs of these distortions. The optimal policy can be implemented through: (i) a nominal tax on extraction at a rate equal to the global marginal harm from emissions, (ii) a tax on imports of energy and goods, and a rebate of taxes on exports of energy but not goods, both at a lower rate than the extraction tax rate, and (iii) a goods-speciï¬ ..

Energy Economics

The Role of Precautionary and Speculative Demand in the Global Market for Crude Oil

Contemporary structural models of the global market for crude oil jointly specify precautionary and speculative demand as a composite shock, known as storage demand shocks, due to difficulties in identifying these distinct demand components. This difficulty arises because shifts in the underlying expectations are latent and operate through similar transmission mechanisms. In this paper, we resolve this identification problem and for the first time examine the relative effects of these two shocks, in addition to more conventional demand and supply shocks, on the global price of crude oil. Overall, we find that uncertainty driven precautionary demand for crude oil is, on average, the primary d..

Energy Economics

Incentive-Based Electric Vehicle Charging for Managing Bottleneck Congestion

We propose an incentive-based traffic demand management policy to alleviate traffic congestion on a road stretch that creates a bottleneck for the commuters. The incentive targets electric vehicles owners by proposing a discount on the energy price they use to charge their vehicles if they are flexible in their departure time. We show that, with a sufficient monetary budget, it is possible to completely eliminate the traffic congestion and we compute the optimal discount. We analyse also the case of limited budget, when the congestion cannot be completely eliminated. We compute analytically the policy minimising the congestion and estimate the level of inefficiency for different budgets. We ..

Energy Economics

Subjective risk belief function in the field: Evidence from cooking fuel choices and health in India

We investigate the accuracy of the perceptions of health risks in India. The context of our study is the risk of developing physical symptoms related to household air pollution caused by cooking. Using field data collected from 588 respondents in 17 villages in West Bengal, we regress the probability of symptoms on fuel choices to predict respondent-specific health risk changes. The estimated risks, which we treat as objective risks, are then compared with the corresponding subjective probabilistic beliefs, which are elicited by an interactive method with visual aids. Our results show that, on average, the respondents slightly underestimate the change in risk when switching from cooking with..

Energy Economics

The Long-run Gains from the Early Adoption of Electricity

This paper explores the effect of the early adoption of technology on local economic development. While timing and intensity of technology adoption are key drivers of economic divergence across countries, the immediate impact of new technologies within advanced countries has been elusive. Resolving this puzzle, this paper documents that the early adoption of electricity across late 19th century Switzerland was conducive to local economic development not just in the short-run, but also in the long-run. Exploiting exogenous variation in the potential to produce electricity from waterpower combined with rapid changes in power generation and transmission technology the evidence presented can pla..

Energy Economics

Natural-Resource Funds: A Review

Are natural resources a curse or a blessing? The answer may depend on how natural wealth is managed. By transforming a temporary windfall into a permanent stock in the form of a sovereign wealth fund, resource-rich states can avoid volatility and Dutch Disease effects, save for future generations, and invest locally. Herein we review the theory behind these resource funds, and explore the empirical evidence of their success. Our review is complemented by case studies that highlight some of the more nuanced features, behavior, and effects of resource funds. While the theoretical work highlights prescribing funds as remedies is situational, existing empirical work to complement these prescript..

Energy Economics

What drives the accuracy of PV output forecasts?

Due to the stochastic nature of photovoltaic (PV) power generation, there is high demand for forecasting PV output to better integrate PV generation into power grids. Systematic knowledge regarding the factors influencing forecast accuracy is crucially important, but still mostly unknown. In this paper, we review 180 papers on PV forecasts and extract a database of forecast errors for statistical analysis. We show that among the forecast models, hybrid models consistently outperform the others and will most likely be the future of PV output forecasting. The use of data processing techniques is positively correlated with the forecast quality, while the lengths of the forecast horizon and out-..

Energy Economics

Smart Specialisation, Sustainable Development Goals and Environmental Commons: Conceptual framework in the context of EU policy

This report proposes a new transformative narrative to help guide the next phase of Smart Specialisation activities. The narrative helps align Smart Specialisation with the European Green Deal and the UN 2030 Agenda by offering directionality and combining different levels of policy to achieve the needed sustainability transformations. The report highlights the role of policy coherence and coordination for the transformation. It presents approaches to increase policy coherence to harness synergies and alleviate trade-offs across different objectives with a focus on environmental issues. Throughout this report a number of selected cases is used to illustrate the conceptual discussion develope..

Energy Economics

Grid Tariffs Based on Capacity Subscription: Multi Year Analysis on Metered Consumer Data

While volume-based grid tariffs have been the norm for residential consumers, capacity-based tariffs will become more relevant with the increasing electrification of society. A further development is capacity subscription, where consumers are financially penalised for exceeding their subscribed capacity, or alternatively their demand is limited to the subscribed level. The penalty or limitation can either be static (always active) or dynamic, meaning that it is only activated when there are active grid constraints. We investigate the cost impact for static and dynamic capacity subscription tariffs, for 84 consumers based on six years of historical load data. We use several approaches for fin..

Energy Economics

Эконометрическая оценка влияния шоков на рынке нефти на макроэкономические показатели Российской Федерации с помощью GVAR моделирования

In this paper we use a global vector autoregression (GVAR) model to study the response of Russian macroeconomic indicators to external shocks. The model includes individual models for the world's largest economies and a model for the oil market. Our specification takes into account the peculiarities of the Russian economy and the persistence of variables in the oil market. We also obtained the impulse response functions to the oil supply shock in Saudi Arabia.

Energy Economics

Developing consumption-based emissions indicators from Agriculture, Forestry and Land-use (AFOLU) activities

Understanding consumption-based emissions from Agriculture, Forestry and Land-use (AFOLU) activities is important in developing climate policy for the sector. This paper proposes a new methodology to construct indicators – CBAFOLU indicators ‒ to provide estimates of greenhouse gas (GHG) emissions arising from AFOLU activities (including fisheries) in the global supply chain of finished products. The CBAFOLU indicators identify the countries where emissions are generated and the countries where the goods that “embody” these emissions are eventually consumed. CBAFOLU indicators are provided for bilateral flows of emissions for 65 countries over 2005-15. The indicators also break down ..

Energy Economics

Carbon leakage and agriculture: A literature review on emissions mitigation policies

The risks of carbon leakage associated with climate policies in the agricultural sector remains under-researched. Studies to date suggest that carbon pricing policies implemented by a single country, or small group of countries, reduce global emissions but also affect the international competitiveness of these countries’ agricultural sectors and induce carbon leakage. While carbon leakage can be prevented with trade-related measures that adjust emissions prices at the border, such measures applied in developed countries could potentially lead to significant welfare losses for developing countries that heavily rely on agricultural exports. That said, important caveats apply to the reviewed ..

Energy Economics

Global assessment of the carbon leakage implications of carbon taxes on agricultural emissions

Carbon leakage arises when emission reductions in countries applying a carbon tax are offset, partially or completely, by emission increases in countries that do not apply the tax or any other greenhouse gas (GHG) mitigation policies. Analysis using the MAGNET computable general equilibrium model indicates that a carbon tax always lowers global GHG emissions from agriculture, even when it is applied in a small group of countries, provided that producers facing the tax can make use of GHG abatement technologies. This suggests that mitigation policies should be considered in conjunction with investments in research and development on abatement practices and technologies. When a small number of..

Energy Economics

Understanding countries’ net-zero emissions targets

This paper analyses net-zero emissions targets adopted in law, proposed in legislation, or reflected in policy documents in 51 countries and the EU to better understand their characteristics, similarities and differences. It examines countries’ experiences with translating net-zero targets into near-term plans and analyses four case studies to show how countries develop and implement different pathways to net-zero. This paper also explores the potential role and associated risks, both for individual countries and globally, of using international carbon markets to help achieve countries’ net-zero targets. The paper concludes that countries are adopting diverse approaches to their net-zero..

Energy Economics

Understanding reporting and review under Articles 6 and 13 of the Paris Agreement

Reporting and review requirements under the Paris Agreement include provisions under Article 13 relating to the implementation and achievement of Parties’ Nationally Determined Contributions (NDCs). Draft texts relating to Article 6.2 relating to Parties’ use of cooperative approaches also include provisions on reporting and review. This document identifies and analyses issues related to the interplay of relevant reporting and review requirements under both Article 13 and Article 6 of the Paris Agreement, as it is important to improve complementarity and ensure consistency between the two sets of reporting and review provisions, as well as to meet the already-agreed principles governing ..

Energy Economics

Enjeux climat : réussir la transition en Afrique

L’Afrique possède de nombreux atouts pour maintenir une empreinte carbone faible tout en assurant son décollage économique. Une trajectoire de transition juste, conciliant les impératifs socio-économiques et climatiques, est possible. Elle nécessitera cependant un engagement fort des parties prenantes, africaines et internationales, en faveur des questions climatiques. Une mobilisation technique et financière accrue des États africains, des bailleurs de fonds et des banques publiques de développement africains et internationaux, et de tous les acteurs financiers du continent, permettra de financer et d’accompagner l’innovation climatique en plein essor sur le continent.

Energy Economics

Carbon Pricing and Power Sector Decarbonisation: Evidence from the UK

Decreasing greenhouse gas emissions from electricity generation is crucial to tackle climate change. Empirically, however, little is known about the effectiveness of existing economic instruments in the power sector. This paper examines the impact of the UK Carbon Price Support (CPS), a carbon tax implemented in the UK power sector in 2013. Relative to a synthetic control unit built from other European countries, I find that emissions from the UK power sector declined by 20 to 26 percent per year on average between 2013 and 2017. The tax operated via three mechanisms: a decrease in emissions at the intensive margin; the closure of some high-emission plants at the extensive margin; and a high..

Energy Economics

Geographic Price Granularity and Investments in Wind Power: Evidence From a Swedish Electricity Market Splitting Reform

I evaluate the effect of the 2011 Swedish electricity market splitting reform on the allocation of wind power, exploiting a unique data set of all Swedish applications for wind power since 2003. By comparing investments in each price zone before and after the reform using a difference-in-differences (DiD) estimator, I find that 18 percent of all projects constructed by large firms after the reform were allocated to the high price zone due to the reform. This effect is not driven by geographic differences in approval rates, suggesting that the estimated effect also reflects investor preferences. Small, sometimes locally owned firms, did not react to the reform. A likely reason is that the loc..

Energy Economics

Energy Transition Metals

The energy transition requires substantial amounts of metals, including copper, nickel, cobalt, and lithium. Are these metals a key bottleneck? We identify metal-specific demand shocks with an ``anchor'' variable, estimate supply elasticities, and pin down the price impact of the energy transition in a structural scenario analysis. Metal prices would reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario. The total production value of these four metals alone would rise more than four-fold to USD 13 trillion for the period 2021 to 2040, rivaling the estimated total value of crude oil production. These metals could potentially become as important to the ..

Energy Economics

Extraction path and sustainability

This paper offers an approach to construct a family of extraction paths for nonrenewables that guarantee long-run sustainability of an imperfect economy. A path from this family leads to a monotonic growth of output with a decreasing rate of growth if a sustainability condition holds. Otherwise, the path leads either to a bounded decline or U-shaped path of output. In this sense, the paper extends neoclassical results and provides a bridge between neoclassical and degrowth theories because neoclassical tools are used to quantify degrowth scenarios. The offered path can be incentive-compatible for climate change problems because it reduces the extraction of polluting minerals consistently wit..

Energy Economics

North Dakota Lignite Energy Industry Workforce

Energy Economics

Greening international aviation post COVID-19: What role for kerosene taxes?

This paper discusses the contribution that kerosene taxes could make to decarbonising international air travel post COVID-19. Reaching climate neutrality by mid-century requires that all sectors, including aviation, cut emissions strongly. The paper argues that clarity on decarbonisation targets, including through carbon price signals in the form of kerosene taxes, will support an orderly transition in aviation. A gradually increasing tax on kerosene can strengthen the incentives for investment and innovation in clean aviation technologies. Taxing kerosene would also provide implementing countries with tax revenues that could be used to support clean investment and innovation, while addressi..

Energy Economics