Template-Type: ReDIF-Paper 1.0 Number: 2015.01 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-001.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.01 Title: The Effects of Expert Selection, Elicitation Design, and R&D Assumptions on Experts’ Estimates of the Future Costs of Photovoltaics Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici Author-Name: Laura Diaz Anadon Author-X-Name-First: Laura Author-X-Name-Last: Diaz Anadon Author-WorkPlace-Name: John F. Kennedy School of Government, Harvard University Author-Name: Jiaqi Lu Author-X-Name-First: Jiaqi Author-X-Name-Last: Lu Author-WorkPlace-Name: La Follette School of Public Affairs, University of Wisconsin-Madison, USA Author-Name: Gregory F. Nemet Author-X-Name-First: Gregory F. Author-X-Name-Last: Nemet Author-WorkPlace-Name: La Follette School of Public Affairs and Nelson Institute Center for Sustainability and the Global Environment (SAGE), University of Wisconsin-Madison, USA Abstract: Expert elicitations of future energy technology costs can improve energy policy design by explicitly characterizing uncertainty. However, the recent proliferation of expert elicitation studies raises questions about the reliability and comparability of the results. In this paper, we standardize disparate expert elicitation data from five EU and US studies, involving 65 experts, of the future costs of photovoltaics (PV) and evaluate the impact of expert and study characteristics on the elicited metrics. The results for PV suggest that in-person elicitations are associated with more optimistic 2030 PV cost estimates and in some models with a larger range of uncertainty than online elicitations. Unlike in previous results on nuclear power, expert affiliation type and nationality do not affect central estimates. Some specifications suggest that EU experts are more optimistic about breakthroughs, but they are also less confident in that they provide larger ranges of estimates than do US experts. Higher R&D investment is associated with lower future costs. Rather than increasing confidence, high R&D increases uncertainty about future costs, mainly because it improves the base case (low cost) outcomes more than it improves the worst case (high cost) outcomes. Keywords: Photovoltaic Costs, Energy R&D, Expert Elicitation, Survey Design, Heuristics Classification-JEL: O32, Q40, Q55 Creation-Date: 201501 Template-Type: ReDIF-Paper 1.0 Number: 2015.02 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-002.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.02 Title: Capital-embodied Technologies in CGE Models Author-Name: James Lennox Author-X-Name-First: James Author-X-Name-Last: Lennox Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Ramiro Parrado Author-X-Name-First: Ramiro Author-X-Name-Last: Parrado Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici Abstract: Computable general equilibrium (CGE) models are widely used to analyse macroeconomic and sectoral effects of climate policies. Developing new and improving existing carbon-free energy technologies will be crucial to limit the long-term economic costs of mitigation policies. Such technologies are largely embodied in capital goods; yet conventionally structured CGE models cannot capture capital-embodiment of sector-specific technologies. In this paper, we clarify the conceptual nature of the capital embodiment problem in multisector CGE models. Aggregating productive sectors and investment goods eliminates channels whereby specific technological changes are embodied in specific capital stocks. Nevertheless, capital-embodiment of sector-specific Hicks-neutral technical changes can be directly represented as investment-specific technical change (ISTC) Keywords: Climate Change Mitigation, Capital-Embodiment, Technological Change, CGE Models Classification-JEL: O33, O44, Q54, Q55, Q58 Creation-Date: 201501 Template-Type: ReDIF-Paper 1.0 Number: 2015.03 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-003.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.03 Title: Flexibility in the Market for International Carbon Credits and Price. Dynamics Difference with European Allowances Author-Name: Claire Gavard Author-X-Name-First: Claire Author-X-Name-Last: Gavard Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC), Italy Author-Name: Djamel Kirat Author-X-Name-First: Djamel Author-X-Name-Last: Kirat Author-WorkPlace-Name: Laboratoire d’Economie d’Orléans (LEO), Université d’Orléans, France Abstract: We analyze the price dynamics of European allowances and international carbon credits in the second phase of the European carbon market. We develop and use a model combining fundamental drivers associated with the demand for quotas by installations and risk-return considerations related to the financial nature of carbon permits. We estimate it with autoregressive conditional heteroskedasticity models. Although carbon permits present some characteristics of financial assets, we find that an increased volatility is not associated with an increased return. The price of allowances and credits are explained by similar factors. However, whereas the corresponding returns present comparable dynamics, the long-term relationships between the price of these two types of permits and their drivers differ significantly. While the price of allowances is demand-driven, we suggest the existence of a supply-side effect for credits, and explain it by the flexibility in the related market. The impact of the European economic activity is less visible on credits than on allowances. The price elasticity of allowances with regards to the coal and gas prices is negative in time periods of low economic activity while it is positive in the rest of the time. We suggest an explanation for this dynamics difference. Keywords: European Allowances International Credits, Emissions Trading, Power Sector, Time Series Analysis Classification-JEL: C32, C58, Q48, Q54, Q58 Creation-Date: 201501 Template-Type: ReDIF-Paper 1.0 Number: 2015.04 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-004.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.04 Title: Carbon Price and Wind Power Support in Denmark Author-Name: Claire Gavard Author-X-Name-First: Claire Author-X-Name-Last: Gavard Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC), Italy Abstract: This paper aims at characterizing the conditions of wind power deployment in order to infer a carbon price level that would provide wind power with comparable advantage over fossil fuel technologies as effective wind support policies. The analysis is conducted on Danish data from 2000 to 2010, i.e. after market liberalization took place in 2000. Probit technique is used to analyze the connection of new turbines to the grid each month and tobit analysis is employed on the additional capacity installed monthly. I find that the level and type of the support policy are the dominant drivers of deployment. Electricity price impact is not visible. The investment cost impact is not significant either, but the effect of the interest rate, although not visible in the probit analysis, is significant in the tobit analysis. The number of turbines already installed, that is taken as a proxy for the sites availability, does not have any significant effect either. A feed-in tariff significantly brings more wind power in than a premium policy. The fact that the support policy is a feed-in tariff rather than a premium increases the additional capacity installed monthly by up to several tens MW. The additional capacity installed monthly increases by up to thousand kW for each additional e/MWh of support. If the policy is a premium, I find that 24 e/MWh of support in addition to electricity price is needed to observe the connection of new turbines to the grid with a 0.5 probability. I convert this support level into a carbon price of 28 e/ton if wind power competes with coal, and 50 e/t if it competes with gas. Keywords: Wind Power, Renewable Energy, Subsidy, Carbon Price, Feed-in Tariff, Emissions Trading, Climate Policy Classification-JEL: Q4, Q42, Q48, Q5, Q54, Q58 Creation-Date: 201501 Template-Type: ReDIF-Paper 1.0 Number: 2015.05 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-005.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.05 Title: Implications of Weak Near-term Climate Policies on Long-term Mitigation Pathways Author-Name: Gunnar Luderer Author-X-Name-First: Gunnar Author-X-Name-Last: Luderer Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research, Potsdam, Germany Author-Name: Christoph Bertram Author-X-Name-First: Christoph Author-X-Name-Last: Bertram Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research, Potsdam, Germany Author-Name: Katherine Calvin Author-X-Name-First: Katherine Author-X-Name-Last: Calvin Author-WorkPlace-Name: PNNL, USA Author-Name: Enrica De Cian Author-X-Name-First: Enrica Author-X-Name-Last: De Cian Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Italy Author-Name: Elmar Kriegler Author-X-Name-First: Elmar Author-X-Name-Last: Kriegler Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research, Potsdam, Germany Abstract: While the international community has agreed on the long-term target of limiting global warming to no more than 2°C above pre-industrial levels, only a few concrete climate policies and measures to reduce greenhouse gas (GHG) emissions have been implemented. We use a set of three global integrated assessment models to analyze the implications of current climate policies on long-term mitigation targets. We define a weak-policy baseline scenario, which extrapolates the current policy environment by assuming that the global climate regime remains fragmented and that emission reduction efforts remain unambitious in most of the world’s regions. These scenarios clearly fall short of limiting warming to 2°C. We investigate the cost and achievability of the stabilization of atmospheric GHG concentrations at 450 ppm CO2e by 2100, when countries follow the weak policy pathway until 2020 or 2030 before pursuing the long-term mitigation target with global cooperative action. We find that after a deferral of ambitious action the 450 ppm CO2e is only achievable with a radical up-scaling of efforts after target adoption. This has severe effects on trans-formation pathways and exacerbates the challenges of climate stabilization, in particular for a delay of cooperative action until 2030. Specifically, reaching the target with weak near-term action implies (a) faster and more aggressive transformations of energy systems in the medium term, (b) more stranded investments in fossil-based capacities, (c) higher long-term mitigation costs and carbon prices and (d) stronger transitional economic impacts, rendering the political feasibility of such pathways questionable. Keywords: Climate Change, Mitigation Classification-JEL: Q5, Q58 Creation-Date: 201501 Template-Type: ReDIF-Paper 1.0 Number: 2015.06 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-006.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.06 Title: Incentives for Price Manipulation in Emission Permit Markets with Stackelberg Competition Author-Name: Francisco J. André Author-X-Name-First: Francisco J. Author-X-Name-Last: André Author-WorkPlace-Name: Universidad Complutense de Madrid, Spain Author-Name: Luis M. de Castro Author-X-Name-First: Luis M. Author-X-Name-Last: de Castro Author-WorkPlace-Name: Universidad Complutense de Madrid, Spain Abstract: It has been shown in prior research that cost effectiveness in the competitive emissions permit market could be affected by tacit collusion or price manipulation when the corresponding polluting product market is oligopolistic. We analyze these cross market links using a Stackelberg model to show that under reasonable assumptions, there are no incentives to collude for lobbying prices up. However, incentives for manipulating the price of permits up appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. Moreover, the changes for price manipulation increase with those changes that tend to undermine the leader's advantage in output production or to reduce the leader’s abatement cost. Keywords: Emissions Permits, Collusion, Market Power, Duopoly, Stackelberg Model Classification-JEL: D43, L13, Q58 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.07 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-007.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.07 Title: Water Flows in the Economy. An Input-output Framework to Assess Water Productivity in the Castile and León Region (Spain) Author-Name: C. Dionisio Pérez Blanco Author-X-Name-First: C. Dionisio Author-X-Name-Last: Pérez Blanco Author-WorkPlace-Name: University of Alcalá (UAH) and Madrid Institute for Advanced Studies in Water Technologies (IMDEA-Water), Madrid (Spain) Author-Name: Thomas Thaler Author-X-Name-First: Thomas Author-X-Name-Last: Thaler Author-WorkPlace-Name: Flood Hazard Research Center (FHRC), Middlesex University, London (United Kingdom) Abstract: Traditionally, water policy has focused on coordinating the public effort required to fuel economic growth by supplying water services demanded as a result of the progress in the many areas of the economy. Under this supply-oriented paradigm, population growth and the improvement of living standards brought about by development have driven water demand up and the pressures over water resources have escalated. The failure to acknowledge the limited availability of water and to decouple economic development from water demand has resulted in a water dependent growth model that in many areas is currently threatened by increasing scarcity and more frequent and intense droughts. Consequently, there is an urgent need to use sparse water resources in a sustainable and efficient way. This demands a comprehensive assessment of water productivity dynamics as well as of the linkages among economic sectors in order to calculate the actual costs of eventual water reallocations to the environment and establish priorities in the design of strategic actions such as river basin or drought management plans. However, available studies only offer static analyses that are insufficient to attain the dual objective of reverting current water scarcity trends without impairing economic growth. This paper develops a methodology based on the Hypothetical Extraction Method to estimate inter-temporal indirect (i.e., including intersectoral linkages) water productivity values. The method is applied in the Spanish region of Castile and León for the period 2000-2006. The intensive use and the low water productivity found for agriculture confirms the intuition that this sector has to play a fundamental role in any water saving policy. However, the relevant linkages between agriculture and the rest of the economy, which acts as an indirect consumer of water for irrigation, may complicate the finding of a Pareto improvement in water allocation. Results also show increasing returns to scale in the manufacturing industry and the service sector, which may be regarded as an evidence of the existence of a Verdoorn’s Law for water. Keywords: Environmental Input-output Modeling, Verdoorn’s Law, Water Management, Productivity Classification-JEL: Q25, Q28 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.08 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-008.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.08 Title: Simple Myths and Basic Maths about Greening Irrigation Author-Name: Carlos M. Gómez Author-X-Name-First: Carlos M. Author-X-Name-Last: Gómez Author-WorkPlace-Name: University of Alcalá (UAH) and Madrid Institute for Advanced Studies in Water Technologies (IMDEA-Water), Madrid (Spain) Author-Name: C. Dionisio Pérez-Blanco Author-X-Name-First: C. Dionisio Author-X-Name-Last: Pérez-Blanco Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Venice (Italy) Abstract: Greening the economy is mostly about improving water governance and not only about putting the existing resource saving technical alternatives into practice. Focusing on the second and forgetting the first risks finishing with a highly efficient use of water services at the level of each individual user but with an unsustainable amount of water use for the entire economy. This might be happening already in many places with the modernization of irrigated agriculture, the world’s largest water user and the one offering the most promising water saving opportunities. In spite of high expectations, modern irrigation techniques seem not to be contributing to reduce water scarcity and increase drought resiliency. In fact, according to the little evidence available, in some areas they are resulting in higher water use. Building on basic economic principles this study aims to show the conditions under which this apparently paradoxical outcome, known as the Jevons’ Paradox, might appear. This basic model is expected to serve as guidance for assessing the actual outcomes of increasing irrigation efficiency and to discuss the changes in water governance that would be required for this to make a real contribution to sustainable water management. Keywords: Jevons' Paradox, Rebound Effect, Agricultural Economics, Water Economics, Irrigation Efficiency Classification-JEL: Q15, Q18, Q25, Q51, Q58 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.09 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-009.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.09 Title: Implications of Weak Near-term Climate Policies on Long-term Mitigation Pathways Author-Name: Elorri Igos Author-X-Name-First: Elorri Author-X-Name-Last: Igos Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies (CRTE), Luxembourg Author-Name: Benedetto Rugani Author-X-Name-First: Benedetto Author-X-Name-Last: Rugani Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies (CRTE), Luxembourg Author-Name: Sameer Rege Author-X-Name-First: Sameer Author-X-Name-Last: Rege Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies (CRTE), Luxembourg Author-Name: Enrico Benetto Author-X-Name-First: Enrico Author-X-Name-Last: Benetto Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies (CRTE), Luxembourg Author-Name: Laurent Drouet Author-X-Name-First: Laurent Author-X-Name-Last: Drouet Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Italy Author-Name: Dan Zachary Author-X-Name-First: Dan Author-X-Name-Last: Zachary Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies (CRTE), Luxembourg Author-Name: Tom Hass Author-X-Name-First: Tom Author-X-Name-Last: Hass Author-WorkPlace-Name: Institut National de la Statistique et des Études Économique du Grand-Duché du Luxembourg (STATEC), Luxembourg Abstract: The future evolution of energy supply technologies strongly depends on (and affects) the economic and environmental systems, due to the high dependency of this sector on the availability and cost of fossil fuels, especially on the small regional scale. This paper aims at presenting the modeling system and preliminary results of a research project conducted on the scale of Luxembourg to assess the environmental impact of future energy scenarios for the country, integrating outputs from partial and computable general equilibrium models within hybrid Life Cycle Assessment (LCA) frameworks. The general equilibrium model for Luxembourg, LUXGEM, is used to evaluate the economic impacts of policy decisions and other economic shocks over the time horizon 2006-2030. A techno-economic (partial equilibrium) model for Luxembourg, ETEM, is used instead to compute operation levels of various technologies to meet the demand for energy services at the least cost along the same timeline. The future energy demand and supply are made consistent by coupling ETEM with LUXGEM so as to have the same macro-economic variables and energy shares driving both models. The coupling results are then implemented within a set of Environmentally-Extended Input-Output (EE-IO) models in historical time series to test the feasibility of the integrated framework and then to assess the environmental impacts of the country. Accordingly, a disaggregated energy sector was built with the different ETEM technologies in the EE-IO to allow hybridization with Life Cycle Inventory (LCI) and enrich the process detail. The results show that the environmental impact slightly decreased overall from 2006 to 2009. Most of the impacts come from some imported commodities (natural gas, used to produce electricity, and metalliferous ores and metal scrap). The main energy production technology is the combined-cycle gas turbine plant “Twinerg”, representing almost 80% of the domestic electricity production in Luxembourg. In the hybrid EE-IO model, this technology contributes to around 7% of the total impact of the country’s net consumption. The causes of divergence between ETEM and LUXGEM are also thoroughly investigated to outline possible strategies of modeling improvements for future assessment of environmental impacts using EE-IO. Further analyses focus first on the completion of the models’ coupling and its application to the defined scenarios. Once the coupling is consistently accomplished, LUXGEM can compute the IO flows from 2010 to 2030, while the LCI processes in the hybrid system are harmonized with ETEM to represent the future domestic and imported energy technologies. Keywords: Life Cycle Assessment, Energy Scenarios, General Equilibrium Model, Techno-economic Model, Environmentally-extended Input-output, Hybridization Classification-JEL: Q40, C61, C67, C68 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.10 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-010.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.10 Title: European Natural Gas Seasonal Effects on Futures Hedging Author-Name: Beatriz Martínez Author-X-Name-First: Beatriz Author-X-Name-Last: Martínez Author-WorkPlace-Name: University of Valencia (Spain) Author-Name: Hipòlit Torró Author-X-Name-First: Hipòlit Author-X-Name-Last: Torró Author-WorkPlace-Name: University of Valencia (Spain) Abstract: This paper is the first to discuss the design of futures hedging strategies in European natural gas markets (NBP, TTF and Zeebrugge). A common feature of energy prices is that conditional mean and volatility are driven by seasonal trends due to weather, demand, and storage level seasonalities. This paper follows and extends the Ederington and Salas (2008) framework and considers seasonalities in mean and volatility when minimum variance hedge ratios are computed. Our results show that hedging effectiveness is much higher when the seasonal pattern in spot price changes is approximated with lagged values of the basis (futures price minus spot price). This fact remain true for short (a week) and long (one, three and six months) hedging periods. Furthermore, volatility of weekly price changes also has a seasonal pattern and is higher in winter than in summer. A simple volatility seasonal model that is based on sinusoidal functions on the basis improves the risk reduction obtained by strategies in which hedging ratios are estimated with linear regressions. Seasonal hedging strategies, linear regression based strategies, or even a naïve position, perform better than more sophisticated statistical methods. Keywords: Natural Gas Market, Futures, Hedging Ratio, Natural Gas Price Risk Classification-JEL: G11, L95 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.11 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-011.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.11 Title: The Unilateral Implementation of a Sustainable Growth Path with Directed Technical Change Author-Name: Inge van den Bijgaart Author-X-Name-First: Inge Author-X-Name-Last: van den Bijgaart Author-WorkPlace-Name: Tilburg University (The Netherlands) Abstract: We determine the core characteristics of a climate coalition’s optimal policies in a dynamic two country directed technical change framework. Unilateral policies alter the structure of production and thereby innovation incentives across countries. Whenever feasible, optimal policies implement sustainable growth by directing global innovation to the nonpolluting sector. If nonparticipants drive global innovation, this requires policies relocating clean production to nonparticipants. A calibration exercise suggests that the US or EU alone are too small to implement sustainable growth. A coalition of Annex I countries that signed the Kyoto protocol can implement sustainable growth, yet required tax rates are very high. Keywords: Sustainable Growth, Technical Change, Innovation Classification-JEL: Q5, Q56 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.12 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-012.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.12 Title: Using Degree Days to Value Farmland Author-Name: Emanuele Massetti Author-X-Name-First: Emanuele Author-X-Name-Last: Massetti Author-WorkPlace-Name: Georgia Institute of Technology Author-Name: Robert Mendelsohn Author-X-Name-First: Robert Author-X-Name-Last: Mendelsohn Author-WorkPlace-Name: Yale University Author-Name: Shun Chonabayashi Author-X-Name-First: Shun Author-X-Name-Last: Chonabayashi Author-WorkPlace-Name: Cornell University Abstract: Farmland values have traditionally been valued using seasonal temperature and precipitation. A new strand of the literature uses degree days over the growing season to predict farmland value. We find that degree days and daily temperature are interchangeable over the growing season. However, the way that degree days are used in these recent studies is problematic and leads to biased and inaccurate results. These new findings have serious implications for any study that copies this methodology. Keywords: Degree Days, Climate Change Impacts, Agriculture, Land Values Classification-JEL: Q12, Q24, Q51, Q54 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.13 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-013.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.13 Title: Revisiting Worst-case DEA for Composite Indicators Author-Name: Stergios Athanassoglou Author-X-Name-First: Stergios Author-X-Name-Last: Athanassoglou Author-WorkPlace-Name: European Commission Joint Research Center Abstract: Composite indicators are becoming increasingly infuential tools of environmental assessment and advocacy. Nonetheless, their use is controversial as they often rely on ad-hoc and theoretically problematic assumptions regarding normalization, aggregation, and weighting. Nonparametric data envelopment analysis (DEA) methods, originating in the production economics literature, have been proposed as a means of addressing these concerns. These methods dispense with contentious normalization and weighting techniques by focusing on a measure of best-case relative performance. Recently, the standard DEA model for composite indicators was extended to account for worst-case analysis by Zhou, Ang, and Poh [21] (hereafter, ZAP). In this note we argue that, while valid and interesting in its own right, the measure adopted by ZAP may not capture, in a mathematical as well as practical sense, the notion of worst-case relative performance. By contrast, we focus on the strict worst case analogue of standard DEA for composite indicators and show how it leads to tractable optimization problems. Finally, we compare the two methodologies using data from ZAP's Sustainable Energy Index case study, demonstrating that they occasionally lead to divergent results. Keywords: Composite Indicator, Sustainability Index, DEA, Worst-case, Convex Optimization Classification-JEL: C43, C44, Q00 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.14 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-014.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.14 Title: Municipal Waste Selection and Disposal: Evidences from Lombardy Author-Name: Francesco Silvestri Author-X-Name-First: Francesco Author-X-Name-Last: Silvestri Author-WorkPlace-Name: University of Ferrara, Department of Economics and Management and eco&eco Ltd. Bologna (Italy) Author-Name: Stefano Ghinoi Author-X-Name-First: Stefano Author-X-Name-Last: Ghinoi Author-WorkPlace-Name: Alma Mater Studiorum University of Bologna, Department of Statistics (Italy) Abstract: This article exploit a data base of 1.522 observations related to Lombardy’s municipalities to run a cross sectional estimation of the drivers of MW selection. We find no evidence of a significant correlation between the percentage of selected MW selection and market variables such as the unit charge for waste management, a result probably affected by the high degree of integration existing in Lombardy among collectors and disposal operators. On the contrary, we discover robust and significant correlation with a set of geographical, socio-economic, and political variables. Among the latter ones, we have a confirmations on the influence of party competition on the percentage of household recycling, with the left wing ruling parties more addressed to it than the rivals, and on the high correlation existing between MW selection and the implementation of a unit pricing scheme. Other positive correlations with the independent variable are shown by per-capita income, while quite surprisingly the education level of citizens seems to play no role. Keywords: Solid Waste, Waste Management, Fractional Logit Estimation, Regional Economics Classification-JEL: C21, L97, Q53, R11 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.15 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-015.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.15 Title: The Impact of Ambiguity Prudence on Insurance and Prevention Author-Name: Loïc Berger Author-X-Name-First: Loïc Author-X-Name-Last: Berger Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC) Abstract: Most decisions concerning (self-)insurance and self-protection have to be taken in situations in which a) the effort exerted precedes the moment uncertainty realises, and b) the probabilities of future states of the world are not perfectly known. By integrating these two characteristics in a simple theoretical framework, this paper derives plausible conditions under which ambiguity aversion raises the demand for (self-)insurance and self-protection. In particular, it is shown that in most usual situations where the level of ambiguity does not increase with the level of effort, a simple condition of ambiguity prudence known as decreasing absolute ambiguity aversion (DAAA) is sufficient to give a clear and positive answer to the question: Does ambiguity aversion raise the optimal level of effort? Keywords: Non-expected Utility, Self-protection, Self-insurance, Ambiguity Prudence Classification-JEL: D61, D81, D91, G11 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.16 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-016.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.16 Title: Identifying the Link Between Coastal Tourism and Marine Ecosystems in the Baltic, North Sea, and Mediterranean Countries Author-Name: Vladimir Otrachshenko Author-X-Name-First: Vladimir Author-X-Name-Last: Otrachshenko Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and Nova School of Business and Economics and Universidade Nova de Lisboa Author-Name: Francesco Bosello Author-X-Name-First: Francesco Author-X-Name-Last: Bosello Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and University of Milan Abstract: This paper examines the impact of marine ecosystem quality on inbound coastal tourism in the Baltic, North Sea, and Mediterranean countries. Given extensive empirical findings in ecological science, we use marine protected areas (MPAs) and the fraction of species that are shed in each country’s exclusive economic zone that are overexploited or collapsed as a proxy for marine ecosystem quality. We use an autoregressive distributed lag model in a destination-origin panel set up. The empirical findings of this paper suggest that MPAs have a negative direct effect on tourism. However, this effect is reversed when the interaction terms with economic variables are included. Also, by using the fraction of species that are overexploited as an indicator of the deterioration of marine ecosystem quality, we find a considerable negative impact of this index on inbound coastal tourism. The short-term (current) impact of this index on tourism constitutes less than half of the long-term impact. Results provide valuable information for policy makers, suggesting that measures enhancing marine ecosystem quality should be considered in addition to conventional tourism policies focused on price. Keywords: Coastal Tourism, Marine Ecosystem Quality, Panel Data Classification-JEL: C33, Q57, Q26 Creation-Date: 201502 Template-Type: ReDIF-Paper 1.0 Number: 2015.17 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-017.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.17 Title: The Economics of Shale Gas Development Author-Name: Charles F. Mason Author-X-Name-First: Charles F. Author-X-Name-Last: Mason Author-WorkPlace-Name: University of Wyoming, London School of Economics (Grantham Institute) and Resources for the Future Author-Name: Lucija A. Muehlenbachs Author-X-Name-First: Lucija A. Author-X-Name-Last: Muehlenbachs Author-WorkPlace-Name: University of Calgary and Resources for the Future Author-Name: Sheila M. Olmstead Author-X-Name-First: Sheila M. Author-X-Name-Last: Olmstead Author-WorkPlace-Name: University of Texas at Austin and Resources for the Future Abstract: In the past decade, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas (as well as oil) from geological formations – primarily deep shales – in which hydrocarbon production was previously unprofitable. Impacts on U.S. fossil fuel production and the U.S. economy more broadly have been transformative, even in the first decade. The boom has been accompanied by concerns about negative externalities, including impacts to air, water, and quality of life in producing regions. We describe the economic benefits of the shale gas boom, including direct market impacts and positive externalities, providing back-of-the-envelope estimates of their magnitude. The paper also summarizes the current science and economics literatures on negative externalities. We conclude that the likely scope of economic benefits is extraordinarily large, and that continued research on the magnitude of negative externalities is necessary to inform risk-mitigating policies. Keywords: Hydraulic Fracturing, Economic Benefits, Positive Externalities, Negative Externalities, Environmental Impacts Classification-JEL: Q4, Q42, Q5 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.18 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-018.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.18 Title: Information v. Energy Efficiency Incentives: Evidence from Residential Electricity Consumption in Maryland Author-Name: Anna Alberini Author-X-Name-First: Anna Author-X-Name-Last: Alberini Author-WorkPlace-Name: University of Maryland Author-Name: Charles Towe Author-X-Name-First: Charles Author-X-Name-Last: Towe Author-WorkPlace-Name: University of Connecticut Abstract: We focus on two utility programs intended to reduce energy usage and the associated CO2 emissions—a home energy audit and rebates on the purchase of high-efficiency air-source heat pumps. We use a unique panel dataset from participating and non-participating households to estimate the average treatment effect of participating in either program on electricity usage. We fit models with household-by-season, season-by-year, and household-by-year fixed effects to account for all possible confounders that might be influence energy usage. Since the programs are voluntary, we seek to restore near-exogeneity of the program “treatment” by matching participating households with control households. We deploy coarsened exact matching (CEM; Iacus et al., 2011) as our main matching method. We ask whether it is sufficient to match households based on past electricity usage, or if we gain by adding structural characteristics of the home, including heating system type. We find that the two programs reduce electricity usage by 5% on average. The effects are strong in both winter and summer for the energy audit group but appear to be stronger in the winter for the heat pump rebate group. Adding house characteristics to the matching variables does seem to affect results, suggesting that using past usage alone may not be sufficient to identify the effects of program participation. Keywords: Energy Efficiency, Household Behavior, Energy Efficiency Incentives, Electricity Usage, Home Energy Audit Classification-JEL: Q41, D12, H3 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.19 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-019.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.19 Title: Crossing the River by Feeling the Stones: The Case of Carbon Trading in China Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: College of Management and Economics, Tianjin University, Tianjin and School of Economics, Fudan University, Shanghai (China) Abstract: Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme. Keywords: Pilot Carbon Trading Schemes, Low-carbon Development, Environmental Taxes, Market Stabilization Mechanism, Carbon Offsets, Enforcement and Compliance, China Classification-JEL: H23, O13, P28, Q43, Q48, Q52, Q54, Q58 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.20 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-020.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.20 Title: The Conservation versus Production Trade-off: Does Livestock Intensification Increase Deforestation? The Case of the Brazilian Amazon Author-Name: Petterson Molina Vale Author-X-Name-First: Petterson Author-X-Name-Last: Molina Vale Author-WorkPlace-Name: London School of Economics and Political Science Abstract: More cattle, less deforestation? Land use intensification in the Amazon is an unexpected phenomenon. Theories of hollow frontier, speculative behaviour and boom-bust all share the prediction that livestock production will remain largely extensive. Yet between 1996 and 2006 productivity of cattle grew by an astounding 57.5% in the average Amazon municipality. Does rising land productivity of cattle increase deforestation? I use secondary data and spatial econometrics to look for evidence of a positive relation between cattle intensification and deforestation (‘rebound effect’). The reduced-form model I employ is based on a spatial econometric specification by Arima et al. (2011) and uses panel data at the municipality-level. I show that mounting productivity in consolidated areas has been associated with lower deforestation both in frontier and consolidated municipalities. This suggests that any process of out-migration spurred by the rising productivity is insufficient to have a positive impact on deforestation. Keywords: Amazon, Rebound Effect, Intensification, Deforestation, Land Use, Cattle Ranching Classification-JEL: Q53, Q150 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.21 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-021.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.21 Title: Luring Others into Climate Action: Coalition Formation Games with Threshold and Spillover Effects Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Milan (Italy) and Bocconi University, Milan (Italy) Author-Name: Melanie Heugues Author-X-Name-First: Melanie Author-X-Name-Last: Heugues Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Milan (Italy) Author-Name: Alessandro Tavoni Author-X-Name-First: Alessandro Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Grantham Research Institute, London School of Economics, London (England) Abstract: We study the effect of leadership in an experimental threshold public ‘bad’ game, where we manipulate both the relative returns of two investments (the more productive of which causes a negative externality) and the extent to which the gains from leadership diffuse to the group. The game tradeoffs mimic those faced by countries choosing to what degree and when to transition from incumbent polluting technologies to cleaner alternatives, with the overall commitment dictating whether they manage to avert dangerous environmental thresholds. Leading countries, by agreeing on a shared effort, may be pivotal in triggering emission reductions in non-signatories countries. In addition, the leaders’ coalition might also work as innovation and technology adoption catalyzer, thus producing a public good (knowledge) that benefits all countries. In our game, players can choose to tie their hands to a cooperative strategy by signing up to a coalition of first movers. The game is setup such that as long as the leading group reaches a pivotal size, its early investment in the externality-free project may catalyze cooperation by non-signatories. We find that the likelihood of reaching the pivotal size is higher when the benefits of early cooperation are completely appropriated by the coalition members, less so when these benefits spillover to the non-signatories. On the other hand, spillovers have the potential to entice second movers into adopting the ‘clean’ technology. Keywords: Climate Change, International Cooperation, R&D Spillovers, Threshold Public Goods Game, Coalition Formation Game, Climate Experiment Classification-JEL: Q5, Q58 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.22 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-022.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.22 Title: Macro-economic Impact Assessment of Future Changes in European Marine Ecosystem Services Author-Name: Francesco Bosello Author-X-Name-First: Francesco Author-X-Name-Last: Bosello Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Centro Euro-Mediterraneo sui Cambiamenti Climatici and Università degli Studi di Milano Author-Name: Elisa Delpiazzo Author-X-Name-First: Elisa Author-X-Name-Last: Delpiazzo Author-WorkPlace-Name: Centro Euro-Mediterraneo sui Cambiamenti Climatici Author-Name: Fabio Eboli Author-X-Name-First: Fabio Author-X-Name-Last: Eboli Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici Abstract: The present research has been developed within the EU FP7 VECTORS project (http://www.marine-vectors.eu/). The main scope of the project (2011-2015) has been to evaluate, from a multilateral perspective, drivers, pressures and vectors of changes in marine life of three main European seas (Baltic, Western Mediterranean, North), the mechanisms by which they do so and the impacts that they have on ecosystem structures and functioning as well as on economic activities and wellbeing. This paper describes the methodology, data elaboration and main results of a modelling exercise aiming to assess the economic effect of future changes in the EU marine ecosystem in the medium term (2030). We focus on those changes potentially affecting the fishing and the tourism sectors in two different IPCC SRES scenarios, the A2 and B1, varying in the future trends of population, GDP, prices, as well as the overall impact on environment. Sector-specific economic impacts are channeled through increases in fishing effort, due to lower availability of commercial fish species, and decrease in tourism demand following deterioration of marine ecosystem quality. Impacts on EU coastal countries Gross Domestic Product are negative and larger when the tourism sector is affected. This is explained by the much higher contribution of tourism than fishery in the production of value added. Negative impacts are also larger in the A2 than in the B1 scenario. The largest GDP losses due to adverse impacts on fishery are experienced by Spain (-0.13%), those related to tourism by Italy (almost -1%). Percent changes in sectoral production are notably larger than GDP ones: the largest contraction in fish sector production occurs in France (-24.7%). Notable decrease in coastal tourism demand occurs in Spain and the Netherlands. In general the Western Mediterranean is the most adversely affected region, whereas the Baltic Sea denotes a particular vulnerability to losses in tourism value added compared to the BAU. North Sea countries experience smaller losses. Keywords: Impact Assessment, Computable General Equilibrium, Fisheries, Tourism, Marine Ecosystem Classification-JEL: C68, D58, L83, Q22, Q57 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.23 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-023.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.23 Title: Assessment of the Effectiveness of Global Climate Policies Using Coupled Bottom-up and Top-down Models Author-Name: Maryse Labriet Author-X-Name-First: Maryse Author-X-Name-Last: Labriet Author-WorkPlace-Name: Eneris Environment Energy Consultants, Spain Author-Name: Laurent Drouet Author-X-Name-First: Laurent Author-X-Name-Last: Drouet Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Euro-Mediterranean Center on Climate Change, Italy Author-Name: Marc Vielle Author-X-Name-First: Marc Author-X-Name-Last: Vielle Author-WorkPlace-Name: Ecole Polytechnique de Lausanne, Switzerland Author-Name: Richard Loulou Author-X-Name-First: Richard Author-X-Name-Last: Loulou Author-WorkPlace-Name: Kanlo Consultants Sàrl, France Author-Name: Amit Kanudia Author-X-Name-First: Amit Author-X-Name-Last: Kanudia Author-WorkPlace-Name: Kanors Consultants, India Author-Name: Alain Haurie Author-X-Name-First: Alain Author-X-Name-Last: Haurie Author-WorkPlace-Name: Ordecsys, Switzerland Abstract: In order to assess climate mitigation agreements, we propose an iterative procedure linking TIAM-WORLD, a global technology-rich optimization model, and GEMINI-E3, a global general equilibrium model. The coupling methodology combines the precise representation of energy and technology choices with a coherent representation of the macro-economic impacts, especially in terms of trade effects of climate policies on energy-intensive products. In climate mitigation scenarios, drastic technology breakthroughs are required as soon as possible, especially in large emitting countries, and in all sectors of the economy. Energy-intensive industries tend to be delocalized in regions where low-carbon production is feasible and cheap, or in regions without emission cap. However, emission leakage remains small, mainly due to global lower oil demand, and energy exporting countries are extremely penalized given lower energy exports. Emission reduction at least in the power sector and in energy-intensive industries of developing countries must be considered to reach the 2°C target. Keywords: Climate Policies, Energy, Techno-economic modelling, Macro-economic Modelling, World Classification-JEL: Q5, Q54, Q58 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.24 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-024.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.24 Title: On the Mechanism of International Technology Diffusion for Energy Technological Progress Author-Name: Wei Jin Author-X-Name-First: Wei Author-X-Name-Last: Jin Author-WorkPlace-Name: School of Public Policy, Zhejiang University, Hangzhou, China Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: School of Economics, Fudan University, Shanghai, China Abstract: International diffusion of energy-saving technologies has received considerable attention in recent energy and climate economics studies. As a helpful methodological complement to the existing large-scale CGE/IAM–based modelling for energy and climate policy studies, this paper contributes to a transparent analytical model for an economically intuitive exposition on the fundamental mechanism of international technology diffusion for energy technological growth. We first develop an efficiency-improving vertical innovation model where energy technological progress is specified as an improvement in primary energy use efficiency. Then a variety-expanding horizontal innovation model is presented where energy technological progress is described as an expansion of energy technology variety. We show that in both models there is a cross-country convergence in the growth rate of energy technology in a long-run balanced growth path, but the absolute levels of energy technology tend to diverge due to cross-country differences in indigenous innovation efficiencies and knowledge absorptive capacities. An economy with a stronger capacity of absorbing foreign knowledge diffusion and undertaking indigenous research tends to have a higher level of energy technology. Keywords: Technological Progress, Energy Technology, International Technology Diffusion, Endogenous Technological Change Classification-JEL: Q55, Q58, Q43, Q48, O13, O31, O33, O44, F18 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.25 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-025.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.25 Title: Greening Up or Not? The Determinants Political Parties’ Environmental Concern: An Empirical Analysis Based on European Data (1970-2008) Author-Name: Benjamin Michallet Author-X-Name-First: Benjamin Author-X-Name-Last: Michallet Author-WorkPlace-Name: University Paris I Panthéon-Sorbonne/Paris School of Economics, Paris (France) Author-Name: Giuseppe Lucio Gaeta Author-X-Name-First: Giuseppe Lucio Author-X-Name-Last: Gaeta Author-WorkPlace-Name: University of Naples, L’Orientale, Naples (Italy) Author-Name: François Facchini Author-X-Name-First: François Author-X-Name-Last: Facchini Author-WorkPlace-Name: University of Paris 11 (RITM), Paris (France) Abstract: Why do parties offer environmental policies in their political programs? While a number of papers examine the determinants of citizens’ pro-environmental behaviour, we know little about the extent to which political parties adjust their platform towards environmentalism. We investigate this process through data provided by the Manifesto Project Dataset (CMP) for 20 European countries over the period 1970-2008. Following the literature on public concern towards environment, we examine economic, environmental and political determinants. Our findings provide evidence that political parties’ environmental concern is strongly correlated with their political ideology and with country-level economic conditions. Keywords: Environmental Concern, Environmental Attitudes, Political Parties, Electoral Manifestos Classification-JEL: Q58, D78, Z13 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.26 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-026.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.26 Title: Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement Author-Name: Daniel M. Bodansky Author-X-Name-First: Daniel M. Author-X-Name-Last: Bodansky Author-WorkPlace-Name: Arizona State University Author-Name: Seth A. Hoedl Author-X-Name-First: Seth A. Author-X-Name-Last: Hoedl Author-WorkPlace-Name: Harvard University Author-Name: Gilbert E. Metcalf Author-X-Name-First: Gilbert E. Author-X-Name-Last: Metcalf Author-WorkPlace-Name: Tufts University Author-Name: Robert N. Stavins Author-X-Name-First: Robert N. Author-X-Name-Last: Stavins Author-WorkPlace-Name: Harvard University Abstract: Negotiations pursuant to the Durban Platform for Enhanced Action appear likely to lead to a 2015 Paris agreement that embodies a hybrid climate policy architecture, combining top-down elements, such as for monitoring, reporting, and verification, with bottom-up elements, including “nationally determined contributions” from each participating country, detailing what it intends to do to reduce emissions, based on its national circumstances. For such a system to be cost-effective—and thus more likely to achieve significant global emissions reductions—a key feature will be linkages among regional, national, and sub-national climate policies. By linkage, we mean a formal recognition by a greenhouse gas mitigation program in one jurisdiction (a regional, national, or sub-national government) of emission reductions undertaken in another jurisdiction for purposes of complying with the first jurisdiction’s mitigation program. We examine how a future international policy architecture could help facilitate the growth and operation of a robust system of international linkages of regional, national, and sub-national policies. Several design elements merit serious consideration for inclusion in the Paris agreement, either directly or by establishing a process for subsequent international elaboration. At the same time, including detailed linkage rules in the core agreement is not desirable because this could make it difficult for rules to evolve in light of experience. Keywords: Climate Policies, International Agreements Classification-JEL: Q5, Q58 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.27 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-027.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.27 Title: Time Scale Externalities and the Management of Renewable Resources Author-Name: Giannis Vardas Author-X-Name-First: Giannis Author-X-Name-Last: Vardas Author-Name: Anastasios Xepapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business Abstract: The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored. Keywords: Optimal Resource Harvesting, Fast Slow Dynamics, Singular Perturbation, Regulation, Open Loop, Closed Loop Classification-JEL: D81, Q20 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.28 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-028.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.28 Title: An Assessment of the Energy-Efficiency Gap and Its Implications for Climate Change Policy Author-Name: Todd D. Gerarden Author-X-Name-First: Todd D. Author-X-Name-Last: Gerarden Author-WorkPlace-Name: Harvard University Author-Name: Richard G. Newell Author-X-Name-First: Richard G. Author-X-Name-Last: Newell Author-WorkPlace-Name: Duke University Author-Name: Robert N. Stavins Author-X-Name-First: Robert N. Author-X-Name-Last: Stavins Author-WorkPlace-Name: Harvard University Author-Name: Robert C. Stowe Author-X-Name-First: Robert C. Author-X-Name-Last: Stowe Author-WorkPlace-Name: Harvard University Abstract: Improving end-use energy efficiency—that is, the energy-efficiency of individuals, households, and firms as they consume energy—is often cited as an important element in efforts to reduce greenhouse-gas (GHG) emissions. Arguments for improving energy efficiency usually rely on the idea that energy-efficient technologies will save end users money over time and thereby provide low-cost or no-cost options for reducing GHG emissions. However, some research suggests that energy-efficient technologies appear not to be adopted by consumers and businesses to the degree that would seem justified, even on a purely financial basis. We review in this paper the evidence for a range of explanations for this apparent “energy-efficiency gap.” We find most explanations are grounded in sound economic theory, but the strength of empirical support for these explanations varies widely. Retrospective program evaluations suggest the cost of GHG abatement varies considerably across different energy-efficiency investments and can diverge substantially from the predictions of prospective models. Findings from research on the energy-efficiency gap could help policy makers generate social and private benefits from accelerating the diffusion of energy-efficient technologies—including reduction of GHG emissions. Keywords: Energy Efficiency, Climate Change Policy Classification-JEL: Q4, Q48, Q5, Q55 Creation-Date: 201503 Template-Type: ReDIF-Paper 1.0 Number: 2015.29 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-029.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.29 Title: Migration and Climate Change in Rural Africa Author-Name: Cristina Cattaneo Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Emanuele Massetti Author-X-Name-First: Emanuele Author-X-Name-Last: Massetti Author-WorkPlace-Name: Georgia Institute of Technology, CESIfo and Fondazione Eni Enrico Mattei (FEEM) Abstract: We analyse whether migration is an adaptation that households employ to cope with climate in Ghana and Nigeria. If migration is part of the present adaptation portfolio of households in developing countries, it is reasonable to expect that it will also be an adaptation to future climate change. It is important to stress that we are interested in long-term climatic conditions rather than in short-term weather fluctuations. The data to test these predictions are drawn from two different household surveys: the Nigeria General Household Survey and the Ghana Living Standard Survey. We find a hill-shaped relationship between temperature in the dry sea son and the propensity to migrate in households that operate farms. We also find a significant hill-shaped relationship between precipitations in the wet seasons and the propensity to migrate in farm households. Climate has instead no significant impact on the propensity to migrate in non-farm households. Climate change scenarios generated by General Circulation model reveal that, ceteris paribus, migration may decline in Ghana and in Nigeria. Keywords: Climate Change Impacts, Migration, Development Economics Classification-JEL: O15, Q54, R23 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.30 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-030.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.30 Title: The Future of Renewable Energy in the Mediterranean. Translating Potential into Reality Author-Name: Simone Tagliapietra Author-X-Name-First: Simone Author-X-Name-Last: Tagliapietra Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: This study seeks to provide a clear and comprehensive overview on the various aspects related to the current status and the future prospects of renewable energy (namely solar and wind) in Southern and Eastern Mediterranean countries (SEMCs). In order to do so, the study will first provide a comprehensive analysis of the regional energy market, particularly focusing on the booming energy -and electricity- demand. This key trend is likely to further accelerate in the future, at a level that might create additional risks to the economic sustainability of the region, considering the extensive use of universal fossil-fuel consumption subsidies. Meanwhile, solar and wind energy continue to cover less than 1% of the region’s electricity generation mix: a figure that strongly collides with the region’s abundant solar and wind resources. In fact, SEMCs are endowed with a huge solar and wind energy potential. The exploitation of this potential could bring various benefits to the region, such as meeting the rising energy/electricity demand at a lower cost, freeing up additional export volumes of oil and gas in energy exporting countries, reducing energy bills in energy importing countries, creating new jobs, alleviating energy poverty, enhancing the quality of the environment and enhancing cooperation both among SEMCs and between SEMCs and the EU. Notwithstanding all the efforts to promote renewable energy carried out over the last decade both at the regional level and at the European level (e.g. Desertec, Mediterranean Solar Plan, etc.), SEMCs continue to lag far behind most other regions in the world in terms of solar and wind energy deployment. This study will try to explore the reasons of this paradox, particularly focusing on the key barriers to the development of renewable energy in the region: the extensive use of energy subsidies and the lack of adequate electricity infrastructures, energy regulatory frameworks and financing mechanisms. On the basis of this in-depth analysis, the study will propose an innovative approach to tackle these barriers, involving a joint action of MedTSO, MEDREG and key financial institutions under the umbrella of a newly-established “Euro-Med Renewable Energy Platform” designed to become -on the basis of an inclusive, pragmatic and bottom-up approach- the new catalyst for the development of renewable energy in SEMCs. Keywords: Mediterranean Energy Markets, Renewable Energy, CSP, Solar Energy, Wind Energy Classification-JEL: Q40, Q42, Q48 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.31 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-031.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.31 Title: A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare Author-Name: Jan Siegmeier Author-X-Name-First: Jan Author-X-Name-Last: Siegmeier Author-WorkPlace-Name: Technische Universität Berlin and Mercator Research Institute on Global Commons and Climate Change Author-Name: Linus Mattauch Author-X-Name-First: Linus Author-X-Name-Last: Mattauch Author-WorkPlace-Name: Technische Universität Berlin and Mercator Research Institute on Global Commons and Climate Change Author-Name: Max Franks Author-X-Name-First: Max Author-X-Name-Last: Franks Author-WorkPlace-Name: Technische Universität Berlin and Potsdam Institute for Climate Impact Research Author-Name: David Klenert Author-X-Name-First: David Author-X-Name-Last: Klenert Author-WorkPlace-Name: Technische Universität Berlin and Potsdam Institute for Climate Impact Research Author-Name: Anselm Schultes Author-X-Name-First: Anselm Author-X-Name-Last: Schultes Author-WorkPlace-Name: Technische Universität Berlin and Potsdam Institute for Climate Impact Research Author-Name: Ottmar Edenhofer Author-X-Name-First: Ottmar Author-X-Name-Last: Edenhofer Author-WorkPlace-Name: Technische Universität Berlin, Mercator Research Institute on Global Commons and Climate Change and Potsdam Institute for Climate Impact Research Abstract: Climate change economics mostly neglects sizeable interactions of carbon pricing with other fiscal policy instruments. Conversely, public finance typically overlooks the effects of future decarbonization efforts when devising instruments for the major goals of fiscal policy. We argue that such a compartmentalisation is undesirable: policy design taking into account such interdependencies may enhance welfare and change the distribution of mitigation costs within and across generations. This claim is substantiated by analyzing six interactions between climate policy and public finance that are insufficiently explored in current research: (i) reduced tax competition in an open economy, (ii) portfolio effects induced through climate policy, (iii) restructuring public spending, (iv) revenue recycling for productive public investment, (v) greater intragenerational equity through appropriate revenue recycling and (vi) intergenerational Pareto-improvements through intertemporal transfers. We thereby structure the hitherto identified interactions between climate change mitigation and public finance and show that jointly considering carbon pricing and fiscal policy is legitimate and mandatory for sound policy appraisal. Keywords: Carbon Pricing, Taxation, Public Spending, Redistribution, Policy Interactions Classification-JEL: B41, H21, H23, H54, H60, Q54 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.32 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-032.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.32 Title: Fiscal Policy and CO2 Emissions of New Passenger Cars in the EU Author-Name: Reyer Gerlagh Author-X-Name-First: Reyer Author-X-Name-Last: Gerlagh Author-WorkPlace-Name: Tilburg University, Netherlands Author-Name: Inge van den Bijgaart Author-X-Name-First: Inge Author-X-Name-Last: van den Bijgaart Author-WorkPlace-Name: Tilburg University, Netherlands Author-Name: Hans Nijland Author-X-Name-First: Hans Author-X-Name-Last: Nijland Author-WorkPlace-Name: PBL Netherlands Environmental Assessment Agency, Netherlands Author-Name: Thomas Michielsen Author-X-Name-First: Thomas Author-X-Name-Last: Michielsen Author-WorkPlace-Name: CPB Netherlands Bureau for Economic Policy Analysis, Netherlands Abstract:T o what extent have national fiscal policies contributed to the decarbonisation of newly sold passenger cars? We construct a simple model that generates predictions regarding the effect of fiscal policies on average CO2 emissions of new cars, and then test the model empirically. Our empirical strategy combines a diverse series of data. First, we use a large database of vehicle-specific taxes in 15 EU countries over 2001-2010 to construct a measure for the vehicle registration and annual road tax levels, and separately, for the CO2 sensitivity of these taxes. We find that for many countries the fiscal policies have become more sensitive to CO2 emissions of new cars. We then use these constructed measures to estimate the effect of fiscal policies on the CO2 emissions of the new car fleet. The increased CO2-sensitivity of registration taxes have reduced the CO2 emission intensity of the average new car by 1,3 percent, partly through an induced increase of the share of diesel-fuelled cars by 6,5 percentage points. Higher fuel taxes lead to the purchase of more fuel efficient cars, but higher annual road taxes have no or an adverse effect. Keywords: Vehicle Registration Taxes, Fuel Taxes, CO2 Emissions Classification-JEL: H30, L62, Q48, Q54, Q58, R48 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.33 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-033.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.33 Title: Energy Efficiency Policy with Price-quality Discrimination Author-Name: Marie-Laure Nauleau Author-X-Name-First: Marie-Laure Author-X-Name-Last: Nauleau Author-WorkPlace-Name: CIRED Author-Name: Louis-Gaëtan Giraudet Author-X-Name-First: Louis-Gaëtan Author-X-Name-Last: Giraudet Author-WorkPlace-Name: CIRED, Ecole des Ponts ParisTech Author-Name: Philippe Quirion Author-X-Name-First: Philippe Author-X-Name-Last: Quirion Author-WorkPlace-Name: CIRED, CNRS Abstract: We compare a range of energy efficiency policies in a durable good market subject to both energy-use externalities and price-quality discrimination by a monopolist. We find that the social optimum can be achieved with differentiated subsidies. With ad valorem subsidies, the subsidization of the high-end good leads the monopolist to cut the quality of the low-end good. The rates should always be decreasing in energy efficiency. With per-quality subsidies, there is no such interference and the rates can be increasing if the externality is large enough relative to the market share of low-type consumers. Stand-alone instruments only achieve second-best outcomes. A minimum quality standard may be set at the high-end of the product line if consumers are not too dissimilar, otherwise it should only target the low-end good. An energy tax should be set above the marginal external cost. Likewise, a uniform ad valorem subsidy should be set above the subsidy that would be needed to specifically internalize energy-use externalities. Lastly, if, as is often observed in practice, only the high-end good is to be incentivized, a per-quality schedule should be preferred over an ad valorem one. An ad valorem tax on the high-end good may even be preferred over an ad valorem subsidy if the externality is small enough and low-end consumers dominate the market. Keywords: Energy Efficiency, Price-Quality Discrimination Classification-JEL: Q4, Q41, Q48 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.34 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-034.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.34 Title: Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework Author-Name: Eftichios S. Sartzetakis Author-X-Name-First: Eftichios S. Author-X-Name-Last: Sartzetakis Author-WorkPlace-Name: University of Macedonia, Department of Economics Author-Name: Anastasios Xepapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business and Beijer Fellow Author-Name: Athanasios Yannacopoulos Author-X-Name-First: Athanasios Author-X-Name-Last: Yannacopoulos Author-WorkPlace-Name: Athens University of Economics and Business Abstract: Taking as given that we are consuming too much and that overconsumption leads to environmental degradation, the present paper examines the regulator's choices between informative advertisement and consumption taxation. We model overconsumption by considering individuals that care about social status apart from the intrinsic utility, derived from direct consumption. We assume that there also exist individuals that care only about their own private consumption and we examine the evolution of preferences through time by allowing individuals to alter their behavior as a result of a learning process, akin to a replicator dynamics type. We consider the regulator's choice of consumption taxation and informative advertisement both in an arbitrary and an optimal control context. In the arbitrary overconsumption control context we find that the regulator could decrease, or even eliminate, the share of status seekers in the population. In the context of optimal overconsumption control, we show that the highest welfare is attained when status seekers are completely eliminated, while the lowest in the case that the entire population consists of status seekers. Keywords: Status-seaking, Replicator Dynamics, Information Provision, Environmental Taxation Classification-JEL: Q53, Q58, D62, D82 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.35 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-035.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.35 Title: Assessing the Energy-Efficiency Gap Author-Name: Todd D. Gerarden Author-X-Name-First: Todd D. Author-X-Name-Last: Gerarden Author-WorkPlace-Name: Harvard University Author-Name: Richard G. Newell Author-X-Name-First: Richard G. Author-X-Name-Last: Newell Author-WorkPlace-Name: Duke University Author-Name: Robert N. Stavins Author-X-Name-First: Robert N. Author-X-Name-Last: Stavins Author-WorkPlace-Name: Harvard University Abstract: Energy-efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but these technologies appear not to be adopted by consumers and businesses to the degree that would apparently be justified, even on a purely financial basis. We present two complementary frameworks for understanding this so-called “energy paradox” or “energy-efficiency gap.” First, we build on the previous literature by dividing potential explanations for the energy-efficiency gap into three categories: market failures, behavioral anomalies, and model and measurement errors. Second, we posit that it is useful to think in terms of the fundamental elements of cost-minimizing energy-efficiency decisions. This provides a decomposition that organizes thinking around four questions. First, are product offerings and pricing economically efficient? Second, are energy operating costs inefficiently priced and/or understood? Third, are product choices cost-minimizing in present value terms? Fourth, do other costs inhibit more energy-efficient decisions? We review empirical evidence on these questions, with an emphasis on recent advances, and offer suggestions for future research. Keywords: Energy-Efficiency, Financial Costs, Environmental Damages Classification-JEL: Q4, Q48, Q5, Q55 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.36 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-036.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.36 Title: Implications of the 2030 EU Resource Efficiency Target on Sustainable Development Author-Name: Lorenza Campagnolo Author-X-Name-First: Lorenza Author-X-Name-Last: Campagnolo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici Author-Name: Fabio Eboli Author-X-Name-First: Fabio Author-X-Name-Last: Eboli Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici Keywords: Material Productivity, Resource Efficiency, Sustainable Development Indicators, Computable General Equilibrium Classification-JEL: C68, D58, L61, O13 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.37 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-037.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.37 Title: Why Finance Ministers Favor Carbon Taxes, Even if They Do not Take Climate Change into Account Author-Name: Max Franks Author-X-Name-First: Max Author-X-Name-Last: Franks Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research and Berlin Institute of Technology Author-Name: Ottmar Edenhofer Author-X-Name-First: Ottmar Author-X-Name-Last: Edenhofer Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change, Berlin Institute of Technology and Potsdam Institute for Climate Impact Research Author-Name: Kai Lessmann Author-X-Name-First: Kai Author-X-Name-Last: Lessmann Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research Abstract: Fiscal considerations may shift governmental priorities away from environmental concerns: Finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition. We develop a multi-region model of tax competition and resource extraction to assess the fiscal incentive of imposing a tax on carbon rather than on capital. We explicitly model international capital and resource markets, as well as intertemporal capital accumulation and resource extraction. While fossil resources give rise to scarcity rents, capital does not. With carbon taxes the rents can be captured and invested in infrastructure, which leads to higher welfare than under capital taxation. This result holds even without modeling environmental damages. It is robust under a variation of the behavioral assumptions of resource importers to coordinate their actions, and a resource exporter's ability to counteract carbon policies. Further, no green paradox occurs - instead, the carbon tax constitutes a viable green policy, since it postpones extraction and reduces cumulative emissions. Keywords: Carbon Pricing, Green Paradox, Infrastructure, Optimal Taxation, Strategic Instrument Choice, Supply-Side Dynamics, Tax Competition Classification-JEL: F21, H21, H30, H73, Q38 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.38 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-038.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.38 Title: Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: College of Management and Economics, Tianjin University and School of Economics, Fudan University, China Abstract: The Chinese central government has approved the seven pilot carbon trading schemes. These seven pilot regions are deliberately selected to be at varying stages of development and are given considerable leeway to design their own schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the key common and varying features of these carbon trading pilots and their first-year performance, draws the lessons learned, discusses the potential pathways for evolution of regional pilot carbon trading schemes into a nationwide carbon trading scheme, and raises fundamental issues that must be addressed in order to make such an emissions trading scheme to work reliably and effectively and with an increasingly expanded coverage and scope. Keywords: Pilot Carbon Trading Schemes, Environmental Taxes, Compliance, Carbon Offsets, Energy Prices, China Classification-JEL: H23, O13, P28, Q43, Q48, Q52, Q54, Q58 Creation-Date: 201504 Template-Type: ReDIF-Paper 1.0 Number: 2015.39 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-039.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.39 Title: Weather and Income: Lessons from the Main European Regions Author-Name: David García-León Author-X-Name-First: David Author-X-Name-Last: García-León Author-WorkPlace-Name: Universidad de Alicante Abstract: Some recent papers by Dell et al. (2009) and Dell et al. (2012) (DJO) relating weather and economic outcomes, have delivered meaningful messages with clear implications to the effects of a changing climate. In a nutshell, the authors claim that a 1°C increase in global average temperatures would harm both the level and growth capacities of relatively poor countries, leaving rich countries basically unaffected. In this study, we make use of a detailed weather and economic dataset covering the main regions of the five largest economies in the Euro area in an attempt to refute the previous affirmation. In particular, we find in our sample that global warming affects, although in a modest manner, all regions within well-developed countries in the long-term (level effect). As in DJO, the level effect in poor regions is exacerbated. The latter regions also suffer from a slight negative short-term effect (growth effect). We claim also that the larger short-time response of these regions to a climate shock is partially adapted in the long-run. Keywords: Economic Growth, Weather, Ricardian Analysis, Developed Economies, Climate Change, Adaptation, NUTS Classification-JEL: O1, O4, Q51, Q54, Q59, R11 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.40 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-040.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.40 Title: Partnerships for Affordable and Equitable Disaster Insurance Author-Name: Jaroslav Mysiak Author-X-Name-First: Jaroslav Author-X-Name-Last: Mysiak Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: C. D. Pérez-Blanco Author-X-Name-First: C. D. Author-X-Name-Last: Pérez-Blanco Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) Abstract: Extreme events are becoming more frequent and intense, inflating the economic damages and social hardship set-off by natural catastrophes. Amidst budgetary cuts, there is a growing concern on societies’ ability to design solvent disaster recovery strategies, while addressing equity and affordability concerns. The participation of private sector along with public one through Public-Private Partnerships (PPPs) has gained on importance as a means to address these seemingly conflicting objectives through the provision of (catastrophic) natural hazard insurance. This is the case of many OECD countries, notably some EU Member States such as the United Kingdom and Spain. The EU legislator has adapted to this new scenario and recently produced major reforms in the legislation and regulation that govern the framework in which PPPs for (catastrophic) natural hazard insurance develop. This paper has a dual objective: 1) review the complex legal background that rules the provision of insurance against natural catastrophes in the EU after these major reforms; 2) assess the implications of the reforms and offer concise Policy Guiding Principles. Keywords: Public-Private Partnerships (PPPs), Natural Hazards Insurance, Economic Instruments, Solidarity Classification-JEL: Q54, Q58, G22 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.41 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-041.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.41 Title: Reflections on the Current Debate on How to Link Flood Insurance and Disaster Risk Reduction in the European Union Author-Name: S. Surminski Author-X-Name-First: S. Author-X-Name-Last: Surminski Author-WorkPlace-Name: The Grantham Research Institute on Climate Change and the Environment London School of Economics, London, United Kingdom Author-Name: J.C.J.H. Aerts Author-X-Name-First: J.C.J.H. Author-X-Name-Last: Aerts Author-WorkPlace-Name: Institute for Environmental Studies, VU University Amsterdam, the Netherlands Author-Name: W.J.W. Botzen Author-X-Name-First: W.J.W. Author-X-Name-Last: Botzen Author-WorkPlace-Name: Institute for Environmental Studies, VU University Amsterdam, the Netherlands Author-Name: P. Hudson Author-X-Name-First: P. Author-X-Name-Last: Hudson Author-WorkPlace-Name: Institute for Environmental Studies, VU University Amsterdam, the Netherlands Author-Name: J. Mysiak Author-X-Name-First: J. Author-X-Name-Last: Mysiak Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici Author-Name: C. D. Pérez-Blanco Author-X-Name-First: C. D. Author-X-Name-Last: Pérez-Blanco Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici Abstract: Flood insurance differs widely in scope and form across Europe. Against the backdrop of rising flood losses a debate about the role of EU policy in shaping the future of this compensation tool is led by policy makers and industry. In this paper we investigate if and how current EU policies influence flood insurance. While the question of supply and demand is at the core of the debate, we argue that another key dimension is often overlooked: how to use insurance as a lever for risk reduction and prevention efforts. We investigate if and how current EU policies interplay with these two dimensions and then reflect on the national policy level, by illustrating two conflicting cases of flood insurance: the United Kingdom (UK), where flood insurance provision is widely available, but subject to current reform, and the Netherlands, where efforts to introduce flood insurance have only recently failed. In analysing the current positions on the role of the EU in shaping flood insurance we conclude that there is wide agreement that harmonisation of flood insurance offering across the EU is unlikely to be effective. We conclude that there is clear scope for the EU to play a greater role in linking risk transfer and prevention, beyond existing channels, to ensure an integrated approach to flood risk management across the EU. Keywords: Flood Insurance, Disaster Risk Reduction, Europe Classification-JEL: Q54, Q58, G22 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.42 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-042.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.42 Title: Decision Frameworks and the Investment in R&D Author-Name: Erin Baker Author-X-Name-First: Erin Author-X-Name-Last: Baker Author-WorkPlace-Name: Department of Mechanical and Industrial Engineering, College of Engineering, University of Massachusetts, Amherst, MA Author-Name: Olaitan Olaleye Author-X-Name-First: Olaitan Author-X-Name-Last: Olaleye Author-WorkPlace-Name: Department of Mechanical and Industrial Engineering, College of Engineering, University of Massachusetts, Amherst, MA Author-Name: Lara Aleluia Reis Author-X-Name-First: Lara Aleluia Author-X-Name-Last: Reis Author-WorkPlace-Name: Centro Euro-Mediterraneo per i Cambiamenti Climatici, Fondazione Eni Enrico Mattei (FEEM) Abstract: In this paper we provide an overview of decision frameworks aimed at crafting an energy technology Research & Development portfolio, based on the results of three large expert elicitation studies and a large scale energy-economic model. We introduce importance sampling as a technique for integrating elicitation data and large IAMs into decision making under uncertainty models. We show that it is important to include both parts of this equation – the prospects for technological advancement and the interactions of the technologies in and with the economy. We find that investment in energy technology R&D is important even in the absence of climate policy. We illustrate the value of considering dynamic two-stage sequential decision models under uncertainty for identifying alternatives with option value. Finally, we consider two frameworks that incorporate ambiguity aversion. We suggest that these results may be best used to guide future research aimed at improving the set of elicitation data. Keywords: Decision Making Under Uncertainty, Climate Change, Stabilization Pathways, Energy technology, Ambiguity Aversion Classification-JEL: Q42 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.43 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-043.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.43 Title: Revealing the Willingness to Pay for Income Insurance in Agriculture Author-Name: C. D. Pérez-Blanco Author-X-Name-First: C. D. Author-X-Name-Last: Pérez-Blanco Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici Author-Name: C. M. Gómez Author-X-Name-First: C. M. Author-X-Name-Last: Gómez Author-WorkPlace-Name: University of Alcalá de Henares, Madrid Institute for Advanced Studies in Water Technologies (IMDEA-Water) and University of Oxford Abstract: A stable agricultural income is often regarded as a way to achieve a better environmental performance in this sector. However, conventional income stabilization tools have been showing recently signs of exhaustion. Under this critical juncture, EU institutions have encouraged the expansion of agricultural insurance. With different degrees of public support, insurance systems against several risks have been successfully developed across the EU and have adopted increasingly comprehensive forms. Eventually, EU institutions have started to assess the development of a comprehensive income insurance framework. Income insurance covers a wider variety of risks and has higher costs than conventional single risk or combined insurance. This demands an in depth knowledge of farmers’ Willingness To Pay (WTP) for this product. The following pages present a methodology that calculates the WTP for different degrees of income protection using a Revealed Preferences Model and the Certainty Equivalent theory. The methodology is applied in a drought prone area in southeastern Spain. Results show that WTP for income insurance in this area is higher than observed insurance premiums. This may play in favor of the development of sustainable income insurance systems, though additional evidence is required. Keywords: Insurance, Income, Agriculture, Certainty Equivalent, Revealed Preference Models Classification-JEL: Q14, Q17, Q18, Q20 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.44 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-044.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.44 Title: On the Interaction between Player Heterogeneity and Partner Heterogeneity in Two-way Flow Strict Nash Networks Author-Name: Banchongsan Charoensook Author-X-Name-First: Banchongsan Author-X-Name-Last: Charoensook Author-WorkPlace-Name: Keimyung University, Republic of Korea Abstract: This paper brings together analyses of two-way flow Strict Nash networks under exclusive player heterogeneity assumption and exclusive partner heterogeneity assumption. This is achieved through examining how the interactions between these two assumptions influence important properties of Strict Nash networks. Built upon the findings of Billand et al (2011) and Galleotti et al (2006), which assume exclusive partner heterogeneity and exclusive player heterogeneity respectively, I provide a proposition that generalizes the results of these two models by stating that: (i) Strict Nash network consists of multiple non-empty components as in Galleotti et al (2006), and (ii) each non-empty component is a branching or Bi network as in Billand et al (2011). This proposition requires that a certain restriction on link formation cost (called Uniform Partner Ranking), which encloses exclusive partner heterogeneity and exclusive player heterogeneity as a specific case, is satisfied. In addition, this paper shows that value heterogeneity plays a relatively less important role in changing the shapes of Strict Nash networks. Keywords: Network Formation, Strict Nash Network, Two-way Flow Network, Branching Network, Agent Heterogeneity Classification-JEL: C72, D85 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.45 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-045.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.45 Title: Future Costs of Key Low-Carbon Energy Technologies: Harmonization and Aggregation of Energy Technology Expert Elicitation Data Author-Name: Erin Baker Author-X-Name-First: Erin Author-X-Name-Last: Baker Author-WorkPlace-Name: University of Massachusetts Amherst, Amherst, MA, United States Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Bocconi University, Italy Author-Name: Laura Diaz Anadon Author-X-Name-First: Laura Author-X-Name-Last: Diaz Anadon Author-WorkPlace-Name: Harvard University, Cambridge, MA, United States Author-Name: Max Henrion Author-X-Name-First: Max Author-X-Name-Last: Henrion Author-WorkPlace-Name: Lumina Decision Systems, Los Gatos, CA, United States Author-Name: Lara Aleluia Reis Author-X-Name-First: Lara Author-X-Name-Last: Aleluia Reis Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, Italy Abstract: In this paper we standardize, compare, and aggregate results from thirteen surveys of technology experts, performed over a period of five years using a range of different methodologies, but all aiming at eliciting expert judgment on the future cost of five key energy technologies and how future costs might be influenced by public R&D investments. To enable researchers and policy makers to use the wealth of collective knowledge obtained through these expert elicitations we develop and present a set of assumptions to harmonize them. We also aggregate expert estimates within each study and across studies to facilitate the comparison. The analysis showed that, as expected, technology costs are expected to go down by 2030 with increasing levels of R&D investments, but that there is not a high level of agreement between individual experts or between studies regarding the technology areas that would benefit the most from R&D investments. This indicates that further study of prospective cost data may be useful to further inform R&D investments. We also found that the contributions of additional studies to the variance of costs in one technology area differed by technology area, suggesting that (barring new information about the downsides of particular forms of elicitations) there may be value in not only including a diverse and relatively large group of experts, but also in using different methods to collect estimates. Keywords: Expert Elicitation, Energy Technology Cost, R&D Investments Classification-JEL: O30, O32, Q40, Q55 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.46 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-046.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.46 Title: Sovereign States and Surging Water: Brahmaputra River between China and India Author-Name: Sushanta Kumar Mahapatra Author-X-Name-First: Sushanta Kumar Author-X-Name-Last: Mahapatra Author-WorkPlace-Name: University of Bologna, Italy and Amrita University, India Author-Name: Keshab Chandra Ratha Author-X-Name-First: Keshab Chandra Author-X-Name-Last: Ratha Author-WorkPlace-Name: Sambalpur University, India Abstract: Brahmaputra river basin is one of the most vulnerable areas in the world subject to combined effects of glacier melt, extreme monsoon rainfall and sea level rise. Water is emerging as a new possible irritant between China and India. For India, Water of Brahmaputra constitutes a major lifeline for people of Tibet and North Eastern states. The building of dams and diversion projects in Tibet by China is a matter of grave concern for lower riparian states. For China, it is having hidden inclination to create employment potentials for more than millions of people by making Brahmaputra diversion project forward. The requirement of fresh water as the pollution grows and population rise has forced China to have the Tsangpo-Brahmaputra River project. The objective of this paper is to focus the reaction of both people on the water diversion issue, disastrous ecological consequences and the urgent necessity for having a water treaty between Asian giants. It also examines the hegemonic tendencies of China on Brahmaputra River & exercise of power for economic gains and outcomes. The policies China takes on trans- Boundary Rivers are not symptom of peaceful nature of its rise. In addition, it establishes the fact that sharing of information, ecosystem-friendly policies, thought and mutual understanding will dispel the suspicion and develop trust between two countries, creating an enabling environment for better management of Brahmaputra River. Keywords: Water Governance, Trans-Boundary, River Dispute, India, China Classification-JEL: H79, L95, Q28, K33, N50, Q25 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.47 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-047.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.47 Title: CO2 Intensity and the Importance of Country Level Differences: An Analysis of the Relationship Between per Capita Emissions and Population Density Author-Name: Thomas Longden Author-X-Name-First: Thomas Author-X-Name-Last: Longden Author-WorkPlace-Name: Institute of Transport and Logistics Studies - The University of Sydney Business School Faculty of Business and Economics - Macquarie University Abstract: Previous studies have found an inverse (or negative) correlation between urban population density and per capita emissions from land transport. In contrast, this paper finds a positive relationship between per capita CO2 emissions from transport and population density using a dataset of over 200 cities from 28 countries. This positive relationship holds when a range of variables are accounted for and the specification of the regression analysis captures the distinction between country level differences, high/low emission intensity or city specific fixed effects. Separating the cities into two groups based on the clustering that occurs on either side of a crucial point of three tonnes of CO2 emissions per capita highlights the peculiarity of the higher emission intensity of North American cities. Rather than finding a consistent relationship across all cities, this paper finds that cities in North America are distinct from those located in other countries and that the estimated relationship between urban population density and emissions from transport is different across the two groups of countries. The results of this paper have consequences for policy prescriptions that are related to previous results that find that a reduction in per capita emissions tends to occur with an increase population density. Keywords: Transport, CO2 Emissions, Population Density Classification-JEL: R40, Q54, Q56 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.48 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-048.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.48 Title: Optimal Management of Markets for Bankable Emission PermitsOptimal Management of Markets for Bankable Emission Permits Author-Name: Jussi Lintunen Author-X-Name-First: Jussi Author-X-Name-Last: Lintunen Author-WorkPlace-Name: Natural Resources Institute Finland Author-Name: Olli-Pekka Kuusela Author-X-Name-First: Olli-Pekka Author-X-Name-Last: Kuusela Author-WorkPlace-Name: Natural Resources Institute Finland Abstract: We examine the optimal management of emission permit markets when banking but not borrowing of permits is allowed. The regulator maximizes expected social welfare through an optimal allocation rule in an infinite horizon setting. The policy is second-best as the emission cap is set before the uncertainty about the current state of the economy is resolved. In this setting, the role of banking is to decrease the regulator’s risk as it generates an endogenous price floor in the permit markets. We show that the regulator’s optimal policy adjusts the emissions cap irrespective of the existing number of permits in the bank, with the implication that the regulator neutralizes the effect of the existing bank on future permit prices. We derive the optimality conditions for the second-best emission cap with banking and solve the model analytically in the case of IID shocks. Our results show that the discount factor together with the slopes of the marginal damages and benefits determine the welfare gains from allowing baking of permits. Finally, to address the current state of the EU Emission Trading Scheme (EU ETS) and guide the design of future permit markets, we solve the model numerically with persistent shock process and show that the optimal emission cap is positively correlated with business cycles, meaning that during downturns the regulator should tighten the cap. The expected emissions and permit prices also correlate positively with economic activity Keywords: Cap and Trade, Climate Change, Business Cycle, Second Best, Prices vs. Quantities Classification-JEL: E32, Q54, Q58 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.49 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-049.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.49 Title: Uncertainty and Natural Resources - Prudence Facing Doomsday Author-Name: Johannes Emmerling Author-X-Name-First: Johannes Author-X-Name-Last: Emmerling Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC) Abstract: This paper studies the optimal extraction of a non-renewable resource under uncertainty using a discrete-time approach in the spirit of the literature on precautionary savings. We find that boundedness of the utility function, in particular the assumption about U(0), gives very different results in the two settings which are often considered as equivalent. For a bounded utility function, we show that in a standard two-period setting, prudence is no longer sufficient to ensure a more conservationist extraction policy than under certainty. If on the other hand we increase the number of periods to infinity, we find that prudence is not anymore not anymore necessary to induce a more conservationist extraction policy and risk aversion is sufficient. These results highlight the importance of the specification of the utility function and its behavior at the point of origin. Keywords: Expected Utility, Non-Renewable Resource, Prudence, Uncertainty Classification-JEL: Q30, D81 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.50 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-050.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.50 Title: Turkish Stream: What Strategy for Europe? Author-Name: Manfred Hafner Author-X-Name-First: Manfred Author-X-Name-Last: Hafner Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Simone Tagliapietra Author-X-Name-First: Simone Author-X-Name-Last: Tagliapietra Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: On December 1, 2014 Russian President Vladimir Putin surprised the energy world by announcing, during a state visit to Turkey, the demise of the long-planned South Stream pipeline project and the launch of a new project to evacuate Russian gas to Turkey and South-East Europe bypassing Ukraine: Turkish Stream. Since 2007 South Stream has represented a key element of the discussions concerning the EU security of gas supply and the overall EU-Russia relations. For this reason, the unexpected demise of South Stream and the quick rise of Turkish Stream need to be carefully evaluated both under the economic and geopolitical perspectives. This paper will first provide an overview of the Russian gas export strategy to Europe in order to entrench the current discussion on the major long-term trends concerning the issue. On the basis of this analysis the paper will then discuss the future prospects of Turkish Stream, arguing that the EU could seize this new reality to launch the formation of a fluid, reliable and interconnected South-Eastern European regional gas hub. Keywords: Turkish Stream, South Stream, Energy Security, Gas Markets, EU Energy Union Classification-JEL: Q40, Q42, Q48 Creation-Date: 201505 Template-Type: ReDIF-Paper 1.0 Number: 2015.51 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-051.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.51 Title: Can EU’s Decarbonisation Agenda Break the State-Company Axis in the Power Sector? Author-Name: Thomas Sattich Author-X-Name-First: Thomas Author-X-Name-Last: Sattich Author-WorkPlace-Name: Vrije Universiteit Brussel, Belgium Author-Name: Inga Ydersbond Author-X-Name-First: Inga Author-X-Name-Last: Ydersbond Author-WorkPlace-Name: University of Oslo, Norway Author-Name: Daniel Scholten, Author-X-Name-First: Daniel Scholten Author-X-Name-Last: Scholten Author-WorPlace Name: Delft University of Technology, the Netherlands Keywords: Decarbonisation, Electricity generation, Energy policy, European Union, Interconnectors, Member States, Political negotiations, Policy making, Power grid, Power transmission system, Power pools, Power system, Regulatory framework, Renewable energy Classification-JEL: O13, Q4, Q42, Q48 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.52 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-052.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.52 Title: Big Fish: Oil Markets and Speculation Author-Name: Alessandro Cologni Author-X-Name-First: Alessandro Author-X-Name-Last: Cologni Author-WorkPlace-Name: Edison Trading S.p.A. Author-Name: Elisa Scarpa Author-X-Name-First: Elisa Author-X-Name-Last: Scarpa Author-WorkPlace-Name: Edison Trading S.p.A., University of Milan, Polytechnic University of Milan Author-Name: Francesco Giuseppe Sitzia Author-X-Name-First: Francesco Giuseppe Author-X-Name-Last: Sitzia Author-WorkPlace-Name: Edison Trading S.p.A. Abstract: The role of speculators in the oil markets has been vastly investigated during the last few years. Several authors focused on the definition of speculation while others examined the relationship between oil prices and the behavior of trading actors. In this paper, we formulate a new theory able to describe “hedging needs” as well as the role of speculators in the crude oil market. According to our model, the different strategies of producers and consumers aimed at defending themselves against abrupt oil price changes can be satisfied only if speculators play a very active role. Due to the rapid growth in shale oil production, the importance of speculation in ensuring an equilibrium in the U.S. crude oil market has consequently grown noticeably. We estimate an econometric conditional Error Correction Model (ECM) applying Pesaran’s bound tests, over the sample February 2000 November 2014, using WTI and CFTC data. Our theory is well supported by econometric evidence. In other words, our model is suitable to demonstrate how commercial operators act on the market. In addition, the increasing importance of future contracts (also known as financialisation of crude oil market) helps in reaching a level of prices close to the equilibrium one. Finally, we are able to find evidence of a positive impact of the action of speculators on the efficiency of oil markets as they help stabilizing prices. Keywords: Oil Price Dynamics, Speculation and Fundamentals, Conditional Error, Correction Models, Pesaran Bounds Testing Approach Classification-JEL: Q4, Q41, D84, G15 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.53 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-053.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.53 Title: Multilateral Bargaining in Networks: On the Prevalence of Inefficiencies Author-Name: Joosung Lee Author-X-Name-First: Joosung Author-X-Name-Last: Lee Author-WorkPlace-Name: University of Edinburgh, United Kingdom Abstract: We introduce a noncooperative multilateral bargaining model for a network-restricted environment, in which players can communicate only with their neighbors. Each player strategically chooses the bargaining partners among the neighbors to buy out their communication links with upfront transfers. The main theorem characterizes a condition on network structures for efficient equilibria and shows the prevalence of strategic delays. If the underlying network is either complete or circular, then an efficient stationary subgame perfect equilibrium exists for all discount factors: all the players always try to reach an agreement as soon as practicable and hence no strategic delay occurs. In any other network, however, an efficient equilibrium is impossible for sufficiently high discount factors because some players strategically delay an agreement. We also provide an example of a Braess-like paradox, in which the more links are available, the less links are actually used. Thus, network improvements may decrease social welfare Keywords: Noncooperative Bargaining, Coalition Formation, Communication Restriction, Buyout, Network, Braess's Paradox Classification-JEL: C72, C78, D72, D74, D85 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.54 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-054.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.54 Title: Equilibrium and Matching under Price Controls Author-Name: P. Jean-Jacques Herings Author-X-Name-First: P. Jean-Jacques Author-X-Name-Last: Herings Author-WorkPlace-Name: Maastricht University, The Netherlands Abstract: The paper considers a one-to-one matching with contracts model in the presence of price controls. This set-up contains two important streams in the matching literature, those with and those without monetary transfers, as special cases and allows for intermediate cases with some restrictions on the monetary transfers that are feasible. An adjustment process that ends with a stable outcome is presented, thereby proving the existence of stable outcomes. The process contains the deferred acceptance algorithm of Gale and Shapley (1962) and the approximate auction mechanism of Demange, Gale, and Sotomayor (1986) as special cases. The paper presents a notion of competitive equilibrium, called Drèze equilibrium, for this class of models, an extension of the concept as developed by Drèze (1975) for economies with divisible commodities subject to price controls. It is shown that Drèze equilibrium allocations are equivalent to allocations induced by stable outcomes. One implication is the existence of Drèze equilibria. Another implication is the equivalence of a competitive equilibrium concept and the concept of stable outcomes that is valid with and without monetary transfers as well as when monetary transfers are limited. Keywords: Price Controls, Matching, Stable Outcomes, Competitive Equilibrium, Drèze Equilibrium Classification-JEL: C71, C78, D45, D51 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.55 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-055.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.55 Title: Diffusion of Multiple Information: On Information Resilience and the Power of Segregation Author-Name: Nicole Tabasso Author-X-Name-First: Nicole Author-X-Name-Last: Tabasso Author-WorkPlace-Name: University of Surrey, United Kingdom Abstract: We introduce two pieces of information, denoted memes, into a diffusion process in which memes are transmitted when individuals meet and forgotten at an exogenous rate. At most one meme can be transmitted at a meeting, which introduces opportunity costs in the process. Individuals differ according to which meme they find more interesting, and that is the one they transmit if they face a choice. We find that both memes survive under the same parameter values, and that relative interest is the main determinant in the number of people informed of a meme in the long run. We apply our framework to analyze the impact of segregation and find that segregation leads to polarization. Segregation also reduces the overall number of people informed in the long run. Our final set of results shows that agents are more likely to prefer segregation if their information preferences are more extreme, if they have few social contacts, or if they prefer a meme that is preferred by only a small fraction of the population Keywords: Social Networks, Information Transmission, Multiple States, Segregation Classification-JEL: D83, D85 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.56 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-056.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.56 Title: Contagion Risk and Network Design Author-Name: Diego Cerdeiro Author-X-Name-First: Diego Author-X-Name-Last: Cerdeiro Author-WorkPlace-Name: The International Monetary Fund Author-Name: Marcin Dziubinski Author-X-Name-First: Marcin Author-X-Name-Last: Dziubinski Author-WorkPlace-Name: Warsaw University Author-Name: Sanjeev Goyal Author-X-Name-First: Sanjeev Author-X-Name-Last: Goyal Author-WorkPlace-Name: University of Cambridge Abstract: Individuals derive benefits from their connections, but these may, at the same time, transmit external threats. Individuals therefore invest in security to protect themselves. However, the incentives to invest in security depend on their network exposures. We study the problem of designing a network that provides the right individual incentives. Motivated by cybersecurity, we first study the situation where the threat to the network comes from an intelligent adversary. We show that, by choosing the right topology, the designer can bound the welfare costs of decentralized protection. Both over-investment as well as under-investment can occur depending on the costs of security. At low costs, over-protection is important: this is addressed by disconnecting the network into two unequal components and sacrificing some nodes. At high costs, under-protection becomes salient: it is addressed by disconnecting the network into equal components. Motivated by epidemiology, we then turn to the study of random attacks. The over-protection problem is no longer present, whereas under-protection problems is mitigated in a diametrically opposite way: namely, by creating dense networks that expose the individuals to the risk of contagion. Keywords: Cybersecurity, Epidemics, Security choice, Externalities Classification-JEL: D82, D85 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.57 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-057.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.57 Title: Networks of Many Public Goods with Non-Linear Best Replies Author-Name: Yann Rébillé Author-X-Name-First: Yann Author-X-Name-Last: Rébillé Author-WorkPlace-Name: LEMNA, Université de Nantes Author-Name: Lionel Richefort Author-X-Name-First: Lionel Author-X-Name-Last: Richefort Author-WorkPlace-Name: LEMNA, Université de Nantes Abstract: We model a bipartite network in which links connect agents with public goods. Agents play a voluntary contribution game in which they decide how much to contribute to each public good they are connected to. We show that the problem of finding a Nash equilibrium can be posed as a non-linear complementarity one. The existence of an equilibrium point is established for a wide class of individual preferences. We then find a simple sufficient condition, on network structure only, that guarantees the uniqueness of the equilibria, and provide an easy procedure for building networks that respects this condition. Keywords: Bipartite Graph, Public Good, Nash Equilibrium, Non-Linear, Complementarity Problem Classification-JEL: C72, D85, H41 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.58 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-058.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.58 Title: International Environmental Agreements with Asymmetric Countries: Climate Clubs vs. Global Cooperation Author-Name: Achim Hagen Author-X-Name-First: Achim Author-X-Name-Last: Hagen Author-WorkPlace-Name: Carl von Ossietzky University Oldenburg, Germany Author-Name: Klaus Eisenack Author-X-Name-First: Klaus Author-X-Name-Last: Eisenack Author-WorkPlace-Name: Carl von Ossietzky University Oldenburg, Germany Abstract: We investigate whether global cooperation for emission abatement can be improved if asymmetric countries can sign different parallel environmental agreements. The analysis assumes a two-stage game theoretical model. Conditions for self-enforcing sets of agreements and the resulting total emission abatement are determined. We allow for multiple coalitions with multiple types of asymmetric countries. We then analyze the effect of multiple coalitions for the case of increasing marginal costs of abatement as well as for decreasing marginal benefits of abatement more generally. The results are sensitive to the assumptions on the benefits from abatement. For constant marginal benefits, the possibility of multiple agreements increases the number of cooperating countries and total abatement (compared to the standard case with a single agreement). For decreasing marginal benefits, total emissions are independent of the number of admitted agreements. The paper thus contributes to the emerging discussion on the scope and limits of climate clubs. Keywords: Multiple International Environmental Agreements, Coalition Formation Classification-JEL: Q54, C72 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.59 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-059.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.59 Title: Constitutions and Social Networks Author-Name: Ana Mauleon Author-X-Name-First: Ana Author-X-Name-Last: Mauleon Author-WorkPlace-Name: CEREC, Saint-Louis University ?Brussels and CORE, University of Louvain, Belgium Author-Name: Nils Roehl Author-X-Name-First: Nils Author-X-Name-Last: Roehl Author-WorkPlace-Name: University of Paderborn and Bielefeld University, Germany Author-Name: Vincent Vannetelbosch Author-X-Name-First: Vincent Author-X-Name-Last: Vannetelbosch Author-WorkPlace-Name: CORE, University of Louvain and CEREC, Saint-Louis University ?Brussels, Belgium Abstract: The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market. Keywords: Social Networks, Constitutions, Stability, Many-to-Many Matchings Classification-JEL: C72, C78, D85 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.60 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-060.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.60 Title: The Rise and Fall of the Great Fish Pact under Endogenous Risk of Stock Collapse Author-Name: Adam N. Walker Author-X-Name-First: Adam N. Author-X-Name-Last: Walker Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University, The Netherlands Author-Name: Hans-Peter Weikard Author-X-Name-First: Hans-Peter Author-X-Name-Last: Weikard Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University, The Netherlands Author-Name: Andries Richter Author-X-Name-First: Andries Author-X-Name-Last: Richter Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University, The Netherlands and Centre for Ecological and Evolutionary Synthesis (CEES), The Department of Biosciences, University of Oslo Abstract: Risk of stock collapse is a genuine motivation for cooperative fisheries management. We analyse the effect of an endogenously determined risk of stock collapse on the incentives to cooperate in a Great Fish War model. We establish that equilibrium harvest strategies are non-linear in stock and find that Grand Coalitions can be stable for any number of players if free-riding results in a total depletion of the fish stock. The results thus show conditions under which a Great Fish War becomes a Great Fish Pact. However, this conclusion no longer holds upon dropping the standard assumption that payoffs are evaluated in steady states. If payoffs in the transition between steady states are included, the increased incentives to deviate offset the increased benefits from cooperation due to the presence of endogenous risk and the Great Fish Pact returns to being a Great Fish War. Keywords: Coalition Stability, Dynamic Games, Endogenous Risk, Fish Stock Collapse, Fish War, Renewable Resource Exploitation Classification-JEL: C72, C73, Q22 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.61 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-061.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.61 Title: Agglomeration, Urban Growth and Infrastructure in Global Climate Policy: A Dynamic CGE Approach Author-Name: Fabio Grazi Author-X-Name-First: Fabio Author-X-Name-Last: Grazi Author-WorkPlace-Name: Agence Française de Développement, Research Directorate Author-Name: Henri Waisman Author-X-Name-First: Henri Author-X-Name-Last: Waisman Author-WorkPlace-Name: Centre International de Recherche sur l’Environnement et le Développement Abstract: This paper presents an integrated model of urban agglomeration economies within a computable general equilibrium (CGE) model of global economic activity, energy use and carbon emissions to explore the theoretical and empirical nature of the interdependence of cities and the world economy in a climate policy context. Based on calibration data for 74 major OECD agglomerations, the integrated model is used to gauge the long-term impact of: i) global carbon pricing on urban systems and the economic activity; ii) urban infrastructure development on the economic costs of curbing carbon emissions. Importantly, it is found that combining urban infrastructure and carbon pricing allows for stringent emissions reduction targets, while still avoiding the economic and welfare costs of the carbon price only. Keywords: Calibration, Cities, Hybrid Energy-Economy Modeling, New Economic Geography, Trade and Transport, Urban Infrastructure, Welfare Classification-JEL: C68, R12, Q54 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.62 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-062.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.62 Title: Combination of Equilibrium Models and Hybrid Life Cycle–Input-Output Analysis to Predict the Environmental Impacts of Energy Policy Scenarios Author-Name: Elorri Igos Author-X-Name-First: Elorri Author-X-Name-Last: Igos Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg Author-Name: Benedetto Rugani Author-X-Name-First: Benedetto Author-X-Name-Last: Rugani Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg Author-Name: Sameer Rege Author-X-Name-First: Sameer Author-X-Name-Last: Rege Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg Author-Name: Enrico Benetto Author-X-Name-First: Enrico Author-X-Name-Last: Benetto Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg Author-Name: Laurent Drouet Author-X-Name-First: Laurent Author-X-Name-Last: Drouet Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies, Luxembourg Fondazione Eni Enrico Mattei and Euro-Mediterranean Center on Climate Change, Italy Author-Name: Dan Zachary Author-X-Name-First: Dan Author-X-Name-Last: Zachary Author-WorkPlace-Name: Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Whiting School of Engineering, The Johns Hopkins University, USA Abstract: Nowadays, many countries adopt an active agenda to mitigate the impact of greenhouse gas emissions by moving towards less polluting energy generation technologies. The environmental costs, directly or indirectly generated to achieve such a challenging objective, remain however largely underexplored. Until now, research has focused either on pure economic approaches such as computable general equilibrium (CGE) and partial equilibrium (PE) models, or on (physical) energy supply scenarios. These latter could be used to evaluate the environmental impacts of various energy saving or cleaner technologies via life cycle assessment (LCA) methodology. These modelling efforts have, however, been pursued in isolation, without exploring the possible complementarities and synergies. In this study, we have undertaken a practical combination of these approaches into a common framework: on the one hand, by coupling a CGE with a PE model, and, on the other hand, by linking the outcomes from the coupling with a hybrid input-output-process based life cycle inventory. The methodological framework aimed at assessing the environmental consequences of two energy policy scenarios in Luxembourg between 2010 and 2025. The study highlights the potential of coupling CGE and PE models but also the related methodological difficulties (e.g. small number of available technologies in Luxembourg, intrinsic limitations of the two approaches, etc.). The assessment shows both environmental synergies and trade-offs due to the implementation of energy policies. For example, despite the changes in technologies towards the reduction of greenhouse gas emissions, only marginal improvements are observed in the climate change mitigation scenario as compared to the business-as-usual. The energy related production and imports are indeed expected to increase over time and represent a large contribution to the country’s impacts. Interestingly, side effects on other impacts than climate change or fossil resource depletion (e.g. ionising radiation and water depletion) may also occur mainly due to the use of nuclear energy in neighbouring countries. Keywords: Computable General Equilibrium Model, Partial Equilibrium Model, Energy Policy Life Cycle Assessment, Consequential, Input-Output Classification-JEL: Q40, C67, C68 Creation-Date: 201506 Template-Type: ReDIF-Paper 1.0 Number: 2015.63 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-063.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.63 Title: Estimating Global Damages from Sea Level Rise with the Coastal Impact and Adaptation Model (CIAM) Author-Name: Delavane B. Diaz Author-X-Name-First: Delavane B. Author-X-Name-Last: Diaz Author-WorkPlace-Name: Department of Management Science and Engineering, Stanford University, USA Abstract: The costs of coastal sector impacts from sea level rise (SLR) are an important component of the total projected economic damages of climate change, a major input to decision-making and design of climate policy. Moreover, the ultimate costs to coastal resources will depend strongly on adaptation, society's response to cope with the impacts. This paper presents a new model to assess coastal impacts from SLR, combining global scope with high spatial resolution to fill a gap between very detailed local studies and aggregate global estimates. The Coastal Impact and Adaptation Model (CIAM) determines the optimal strategy for adaptation at the local level, evaluating over 12,000 coastal segments, as described in the DIVA database (Vafeidis et al, 2006), based on their socioeconomic characteristics and the potential impacts of relative sea level rise and uncertain storm surge. An application of CIAM is then presented to demonstrate the model's ability to assess local impacts and direct costs, choose the least-cost adaptation, and estimate global net damages for several probabilistic SLR scenarios (Kopp et al, 2014). CIAM finds that there is large potential for coastal adaptation to reduce the expected impacts of SLR compared to the alternative of no adaptation, lowering global net present costs by a factor of 10 to less than $1.5 trillion over the next two centuries, although this does not include initial transition costs to overcome an under-adapted current state. In addition to producing aggregate estimates, CIAM results can also be interpreted at the local level, where we find that retreat (e.g., relocate inland) is often a more cost-effective adaptation strategy than protect (e.g., construct physical defenses). Keywords: Adaptation, Coastal Impacts, Climate Change, Sea Level Rise, Storm Surge, Flooding Classification-JEL: C61, Q25, Q51, Q54 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.64 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-064.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.64 Title: Integrated Assessment of Climate Catastrophes with Endogenous Uncertainty: Does the Risk of Ice Sheet Collapse Justify Precautionary Mitigation? Author-Name: Delavane B. Diaz Author-X-Name-First: Delavane B. Author-X-Name-Last: Diaz Author-WorkPlace-Name: Department of Management Science and Engineering, Stanford University, USA Abstract: Greenhouse gas policies confront the trade-off between the costs of reducing emissions and the benefits of avoided climate change. The risk of uncertain and potentially irreversible catastrophes is an important issue related to the latter, and one that has not yet been well incorporated into economic models for climate change policy analysis. This paper demonstrates a multistage stochastic programming framework for catastrophe modeling with endogenous uncertainty, applied to a benchmark integrated assessment model. This study moves beyond recent catastrophe or tipping point studies with arbitrary risk, instead investigating the specific threat of the uncertain collapse of the West Antarctic Ice Sheet (WAIS), characterized in accordance with recent expert elicitations, empirical results, and physical relationships. The stochastic DICE-WAIS model introduced here informs risk management strategies that balance uncertain future climate change impacts with the costs of mitigation investments today. This work finds that accounting for the consequences of the possible WAIS collapse in a stochastic setting with endogenous uncertainty leads to more stringent climate policy recommendations (increasing the CO2 control rate by an additional 4% of global emissions and raising the social cost of carbon by $10), reflecting the need to hedge against uncertainties with downside risk as well as pursue precautionary mitigation. Keywords: Climate Change Policy, Sea Level Rise, Ice Sheet Collapse, Endogenous Uncertainty, Stochastic Optimization, Greenhouse Gas Mitigation, Risk Management Classification-JEL: C61, D61, D81, H23, Q54, Q58 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.65 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-065.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.65 Title: Bending The Learning Curve Author-Name: Jan Witajewski-Baltvilks Author-X-Name-First: Jan Author-X-Name-Last: Witajewski-Baltvilks Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) and Politecnico di Milano Abstract: This paper aims at improving the application of the learning curve, a popular tool used for forecasting future costs of renewable technologies in integrated assessment models (IAMs). First, we formally discuss under what assumptions the traditional (OLS) estimates of the learning curve can deliver meaningful predictions in IAMs. We argue that the most problematic of them is the absence of any effect of technology cost on its demand (reverse causality). Next, we show that this assumption can be relaxed by modifying the traditional econometric method used to estimate the learning curve. The new estimation approach presented in this paper is robust to the reverse causality problem but preserves the reduced form character of the learning curve. Finally, we provide new estimates of learning curves for wind turbines and PV technologies which are tailored for use in IAMs. Our results suggest that the learning rate should be revised downward for wind power, but possibly upward for solar PV. Keywords: Learning Curve, Renewable Technologies, Integrated Assessment Models Classification-JEL: Q42, Q55, C55, C26 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.66 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-066.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.66 Title: Modeling Coupled Climate, Ecosystems, and Economic Systems Author-Name: W. A. Brock Author-X-Name-First: W. A. Author-X-Name-Last: Brock Author-WorkPlace-Name: Department of Economics, University of Wisconsin, and Department of Economics, University of Missouri, Columbia, USA Author-Name: A. Xepapadeas Author-X-Name-First: A. Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Department of International and European Economic Studies, Athens University of Economics and Business, Greece Abstract: Human economies and ecosystems form a coupled system coevolving in time and space, since human economies use ecosystems services and at the same time affect ecosystems through their production and consumption activities. The study of the interactions between human economies and ecosystems is fundamental for the efficient use of natural resources and the protection of the environment. This necessitates the development and use of models capable of tracing the main interactions, links and feedbacks. In developing this chapter, our objective was to focus on a segment of rapidly developing literature on coupled ecological/economic models with an emphasis on climate change. The advantage of this approach is that it introduces the reader to a very important current research topic, but it also allows, by using climate as the reference ecosystem, the exploration of new modeling approaches which are relevant and useful for the modeling of other types of coupled ecological/economic systems. These include modeling of deep structural uncertainty by using robust control methods, exploring modeling through cumulative carbon budgeting, studying spatial transport phenomena and spatial aspects in economic/ecological modelling. Keywords: Coupled Ecological/Economic Models, Climate Change, Deep Uncertainty, Robust Control, Cumulative Carbon Budgeting, Energy Balance Climate Models, spatial Aspects in Ecological/Economic Modeling Classification-JEL: Q20, Q40, Q54, Q57 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.67 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-067.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.67 Title: The Coalitional Nash Bargaining Solution with Simultaneous Payoff Demands Author-Name: Ricardo Nieva Author-X-Name-First: Ricardo Author-X-Name-Last: Nieva Author-WorkPlace-Name: Universidad de Lima, Lima, Peru Abstract: We consider a standard coalitional bargaining game where once a coalition forms it exits as in Okada (2011), however, instead of alternating offers, we have simultaneous payoff demands. We focus in the producer game he studies. Each player is chosen with equal probability. If that is the case, she can choose any coalition she belongs to. However, a coalition can form if an only if payoff demands are feasible as in the Nash (1953) demand game. After smoothing the game (as in Van Damme (1991)), when the noise vanishes, when the discount factor is close to 1, and as in Okada´s (2011), the coalitional Nash bargaining solution is the unique stationary subgameperfect equilibrium. Keywords: Coalitional Bargaining, Nash Program, Simultaneous Payoff, Demands, Uncertainty Classification-JEL: C71, C72, C78 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.68 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-068.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.68 Title: Modelling of Distributional Impacts of Energy Subsidy Reforms: an Illustration with Indonesia Author-Name: Olivier Durand-Lasserve Author-X-Name-First: Olivier Author-X-Name-Last: Durand-Lasserve Author-WorkPlace-Name: OECD Environmental Directorate, France Author-Name: Lorenza Campagnolo Author-X-Name-First: Lorenza Author-X-Name-Last: Campagnolo Author-WorkPlace-Name: Ca’ Foscari University of Venice, Centro Euro-Mediterraneo sui Cambiamenti Climatici and Fondazione Eni Enrico Mattei, Italy Author-Name: Jean Chateau Author-X-Name-First: Jean Author-X-Name-Last: Chateau Author-WorkPlace-Name: OECD Environmental Directorate, France Author-Name: Rob Dellink Author-X-Name-First: Rob Author-X-Name-Last: Dellink Author-WorkPlace-Name: OECD Environmental Directorate, France Abstract: This report develops an analytical framework that assesses the macroeconomic, environmental and distributional consequences of energy subsidy reforms. The framework is applied to the case of Indonesia to study the consequences in this country of a gradual phase out of all energy consumption subsidies between 2012 and 2020. The energy subsidy estimates used as inputs to this modelling analysis are those calculated by the International Energy Agency, using a synthetic indicator known as “price gaps”. The analysis relies on simulations made with an extended version of the OECD’s ENV-Linkages model. The phase out of energy consumption subsidies was simulated under three stylised redistribution schemes: direct payment on a per household basis, support to labour incomes, and subsidies on food products. The modelling results in this report indicate that if Indonesia were to remove its fossil fuel and electricity consumption subsidies, it would record real GDP gains of 0.4% to 0.7% in 2020, according to the redistribution scheme envisaged. The redistribution through direct payment on a per household basis performs best in terms of GDP gains. The aggregate gains for consumers in terms of welfare are higher, ranging from 0.8% to 1.6% in 2020. Both GDP and welfare gains arise from a more efficient allocation of resources across sectors resulting from phasing out energy subsidies. Meanwhile, a redistribution scheme through food subsidies tends to create other inefficiencies. The simulations show that the redistribution scheme ultimately matters in determining the overall distributional performance of the reform. Cash transfers, and to a lesser extent food subsidies, can make the reform more attractive for poorer households and reduce poverty. Mechanisms that compensate households via payments proportional to labour income are, on the contrary, more beneficial to higher income households and increase poverty. This is because households with informal labour earnings, which are not eligible for these payments, are more represented among the poor. The analysis also shows that phasing out energy subsidies is projected to reduce Indonesian CO2 emissions from fuel combustion by 10.8% to 12.6% and GHG emissions by 7.9% to 8.3%, in 2020 in the various scenarios, with respect to the baseline. These emission reductions exclude emissions from deforestation, which are large but highly uncertain and for which the model cannot make reliable projections. Keywords: Computable General Equilibrium Model, Households’ Heterogeneity, Fossil Fuel Subsidy Reforms, Distributional Impacts, Indonesia Classification-JEL: C68, H23, O53 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.69 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-069.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.69 Title: Transboundary Capital and Pollution Flows and the Emergence of Regional Inequalities Author-Name: Simon Levin Author-X-Name-First: Simon Author-X-Name-Last: Levin Author-WorkPlace-Name: Department of Ecology and Evolutionary Biology, Princeton University, Beijer Institute of Ecological Economics and RFF University Author-Name: A. Xepapadeas Author-X-Name-First: A. Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business, Department of International and European Economic Studies and Beijer Institute of Ecological Economics Abstract: We seek to explain the emergence of spatial heterogeneity regarding development and pollution on the basis of interactions associated with the movement of capital and polluting activities from one economy to another. We use a simple dynamical model describing capital accumulation along the lines of a ?fixed-savings-ratio Solow-type model capable of producing endogenous growth and convergence behavior, and pollution accumulation in each country with pollution diffusion between countries or regions. The basic mechanism underlying the movements of capital across space is the quest for locations where the marginal productivity of capital is relatively higher than the productivity at the location of origin. The notion that capital moves to locations of relatively higher productivity but not necessarily from locations of high concentration to locations of low concentration, does not face difficulties associated with the Lucas paradox. We show that, for a wide range of capital and pollution rates of flow, spatial heterogeneity emerges even between two economies with identical fundamental structures. These results can be interpreted as suggesting that the neoclassical convergence hypothesis might not hold under differential rates of fl?ow of capital and polluting activities among countries of the same fundamental structure. Keywords: Transboundary Flows, Capital, Pollution, Diffusion, Turing Instability, Spatial Heterogeneity Classification-JEL: O44, R12, Q52, C65 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.70 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-070.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.70 Title: Sendai Framework for Disaster Risk Reduction – Success or Warning Sign for Paris? Author-Name: Jaroslav Mysiak Author-X-Name-First: Jaroslav Author-X-Name-Last: Mysiak Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Euro-Mediterranean Centre on Climate Change, Venice, Italy Author-Name: Swenja Surminski Author-X-Name-First: Swenja Author-X-Name-Last: Surminski Author-WorkPlace-Name: Grantham Research Institute on Climate Change and the Environment, London School of Economics, London, United Kingdom Author-Name: Annegret Thieken Author-X-Name-First: Annegret Author-X-Name-Last: Thieken Author-WorkPlace-Name: Institut für Erd- und Umweltwissenschaften Geographie und Naturrisikenforschung, Universität Potsdam, Germany Author-Name: Reinhard Mechler Author-X-Name-First: Reinhard Author-X-Name-Last: Mechler Author-WorkPlace-Name: Risk Policy and Vulnerability Program, International Institute for Applied Risk Analysis, Laxenburg, Austria Author-Name: Jeroen Aerts Author-X-Name-First: Jeroen Author-X-Name-Last: Aerts Author-WorkPlace-Name: Water and Climate Risk, Institute for Environmental Studies, Amsterdam, The Netherlands Abstract: In March 2015, a new international blueprint for disaster risk reduction (DRR) has been adopted in Sendai, Japan, at the end of the Third UN World Conference on Disaster Risk Reduction (WCDRR, March 14-18, 2015). We review and discuss the agreed commitments and targets, as well as the negotiation leading the Sendai Framework for DRR (SFDRR) and discuss briefly its implication for the later UN-led negotiations on sustainable development goals and climate change. Keywords: Disaster Risk, World Conference on Disaster Risk Reduction, Sendai Framework for Disaster Risk Reduction Classification-JEL: Q5, Q54 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.71 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-071.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.71 Title: Regional Carbon Budgets: Do They Matter for Climate Policy? Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Politecnico di Milano Author-Name: Detlef van Vuuren Author-X-Name-First: Detlef Author-X-Name-Last: van Vuuren Author-WorkPlace-Name: PBL and Utrecht University Abstract: Carbon budgets have emerged as a robust metric of warming, but little is known about the usefulness of regional carbon budgets as indicators of policy. This article explores the potential of regional carbon budgets to inform climate policy. Using the large database of scenarios from IPCC AR5 WGIII, we show that regional budgets are important metrics of the long term contribution to climate change and the effort required to mitigate it. However, their value appears to be more limited for informing short term courses of actions, and for predicting the economic consequences of emission reduction policies. Keywords: Carbon Budgets, Climate Policy, IPCC Classification-JEL: Q54, Q40 Creation-Date: 201507 Template-Type: ReDIF-Paper 1.0 Number: 2015.72 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-072.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.72 Title: Green Skills Author-Name: Francesco Vona Author-X-Name-First: Francesco Author-X-Name-Last: Vona Author-WorkPlace-Name: OFCE SciencesPo and SKEMA Business School, France Author-Name: Giovanni Marin Author-X-Name-First: Giovanni Author-X-Name-Last: Marin Author-WorkPlace-Name: IRCrES-CNR, Italy and OFCE-SciencesPo, France Author-Name: Davide Consoli Author-X-Name-First: Davide Author-X-Name-Last: Consoli Author-WorkPlace-Name: Ingenio CSIC-UPV, Spain Author-Name: David Popp Author-X-Name-First: David Author-X-Name-Last: Popp Author-WorkPlace-Name: Department of Public Administration and International Affairs, The Maxwell School, Syracuse University, US Abstract: While policymakers talk of ‘green skills’, there is little systematic empirical research on the demand for skills that will be needed to operate and develop green technology. We propose a data-driven methodology to identify green skills and to gauge the ways in which the demand for these competences respond to environmental regulation. We find that green skills are high-level analytical and technical know-how related to the design, production, management and monitoring of technology. Environmental regulation triggers technological and organizational changes that increase the demand for these skills. Our analysis suggests also that this is not just a compositional change in skill demand due to job losses in sectors highly exposed to trade and regulation. Keywords: Green Skills, Environmental Regulation, Task Model, Workforce Composition, Structural Shocks Classification-JEL: J24, Q52 Creation-Date: 201508 Template-Type: ReDIF-Paper 1.0 Number: 2015.73 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-073.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.73 Title: Cournot Competition and "Green" Innovation: An Inverted-U Relationship Author-Name: Luca Lambertini Author-X-Name-First: Luca Author-X-Name-Last: Lambertini Author-WorkPlace-Name: University of Bologna, Italy Author-Name: Joanna Poyago-Theotoky Author-X-Name-First: Joanna Author-X-Name-Last: Poyago-Theotoky Author-WorkPlace-Name: La Trobe University, Australia Author-Name: Alessandro Tampieri Author-X-Name-First: Alessandro Author-X-Name-Last: Tampieri Author-WorkPlace-Name: University of Luxembourg, Luxembourg Abstract: We examine the relationship between competition and innovation in an industry where production is polluting and R&D aims to reduce emissions ("green" innovation). We present an n-firm oligopoly where firms compete in quantities and decide their investment in "green" R&D. When environmental taxation is exogenous, aggregate R&D investment always increases with the number of firms in the industry. Next we analyse the case where the emission tax is set endogenously by a regulator (committed or time-consistent) with the aim to maximise social welfare. We show that an inverted-U relationship exists between aggregate R&D and industry size under reasonable conditions, and is driven by the presence of R&D spillovers. Keywords: "Green" R&D, R&D Spillovers, Emission Taxation, Time-Consistent Emission Tax, Pre-Commited Emission Tax Classification-JEL: Q55, Q56, O30, L13 Creation-Date: 201508 Template-Type: ReDIF-Paper 1.0 Number: 2015.74 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-074.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.74 Title: From the Cradle to the Grave: the Effect of Family Background on the Career Path of Italian Men Author-Name: Michele Raitano Author-X-Name-First: Michele Author-X-Name-Last: Raitano Author-WorkPlace-Name: Department of Economics and Law, Sapienza University of Rome Author-Name: Francesco Vona Author-X-Name-First: Francesco Author-X-Name-Last: Vona Author-WorkPlace-Name: OFCE SciencesPo and SKEMA Business School Abstract: This paper investigates the influence of parental education on the returns to experience of Italian men using a new longitudinal dataset that contains detailed information on individual working histories. Our favourite panel estimates indicate that an additional year of parental education increases sons' weekly wages by 11.7% after twenty years of experience and that 71% of this effect emerges during the career. We show that this effect holds irrespective of individual abilities, and it appears the result of both a glass ceiling effect, due to the complementarity between parental education and son’s abilities, and a parachute effect, associated with family labour market connections. Keywords: Intergenerational Inequality, Parental Education, Experience-Earnings profiles, Human Capital Classification-JEL: J62, J24, J31 Creation-Date: 201508 Template-Type: ReDIF-Paper 1.0 Number: 2015.75 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-075.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.75 Title: Positive Freedom in Networked Capitalism: An Empirical Analysis Author-Name: Davide Carbonai Author-X-Name-First: Davide Author-X-Name-Last: Carbonai Author-WorkPlace-Name: Universidade Federal do Rio Grande do Sul, Brazil Author-Name: Carlo Drago Author-X-Name-First: Carlo Author-X-Name-Last: Drago Author-WorkPlace-Name: University of Rome "Niccolò Cusano", Italy Abstract: The article proposes a social network analysis of the main European capitalisms and its correspondence with an index of economic freedom. The analysis relates to two kinds of economic liberties taken from the concept of freedom formulated by Isaiah Berlin. While the first kind of freedom (negative freedom) depends on the external system (e.g. the constraints on the firm defined by the regulations), the second refers to the internal obligations within the business system itself that prevent the free exercise of business (positive freedom): specifically, the social network, in which the company is embedded. After an operationalization of the two concepts of freedom, the analysis of a comprehensive database allows us to explore the relationship between the two kinds of freedom. Keywords: Social Network Analysis, Antitrust Policies, Interlocking Directorates, Europe, Positive Freedom, Negative Freedom Classification-JEL: L4, P Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.76 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-076.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.76 Title: Levelling the Playing Field: On the Missing Role of Network Externality in Designing Renewable Energy Technology Deployment Policies Author-Name: Wei Jin Author-X-Name-First: Wei Author-X-Name-Last: Jin Author-WorkPlace-Name: School of Public Policy, Zhejiang University, Hangzhou, China Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: College of Management and Economics, Tianjin University, Tianjin, China Abstract: In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps Keywords: Renewable Energy Deployment, Energy Technology Adoption, Network Externality, Climate Technology Policies Classification-JEL: Q41, Q42, Q48, Q54, Q55, Q58, H23, O13 Creation-Date: 201509 Template-Type: ReDIF-Paper 1.0 Number: 2015.77 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-077.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.77 Title: The Role of Outliers and Oil Price Shocks on Volatility of Metal Prices Author-Name: Niaz Bashiri Behmiri Author-X-Name-First: Niaz Author-X-Name-Last: Bashiri Behmiri Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: University of Milan-Bicocca and FEEM Abstract: This study investigates the price volatility of metals, using the GARCH and GJR models. First we examine the persistence of volatility and the leverage effect across metal markets taking into account the presence of outliers, and second we estimate the effects of oil price shocks on the price volatility of metals, allowing for the asymmetric responses. We use daily spot prices for the selected metals, including aluminum, copper, lead, nickel, tin, zinc, gold, silver, palladium and platinum. The main findings indicate that, returns show a high degree of volatility persistence before and after correcting outliers, outliers bias the parameters estimation of the GARCH-type models, and removing outliers improves the performance of models in capturing volatility. However in a comparison, Student-t distribution outperforms the approach of correcting outliers in capturing volatility. Moreover, we find the existence of inverse leverage effect for seven metals, the leverage effect for copper and no leverage effect for nickel and palladium. Finally, price volatility of metals differently reacts to oil price shocks and there is an asymmetric reaction of volatility to oil price shocks for seven metals. Keywords: Metals, Commodities, Volatility, Oil Price, Outliers Classification-JEL: G13, Q4, C1 Creation-Date: 201509 Template-Type: ReDIF-Paper 1.0 Number: 2015.78 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-078.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.78 Title: Directed Technological Change and Energy Efficiency Improvements Author-Name: Jan Witajewski-Baltvilks Author-X-Name-First: Jan Author-X-Name-Last: Witajewski-Baltvilks Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Politecnico di Milano Abstract: This paper applies the Directed Technical Change (DTC) framework to study improvements in the efficiency of energy use. We present a theoretical model which (1) shows that the demand for energy is shifted down by innovations in energy intensive sectors and (2) highlights the drivers of innovative activity in these sectors. We then estimate the model through an empirical analysis of patent and energy data. Our contribution is fivefold. First, our model shows that under very general assumptions information about energy expenditures, knowledge spillovers and the parameters governing the R&D process are sufficient to predict the R&D effort in efficiency improving technologies. Second, we pin down the conditions for a log-linear relation between energy expenditure and the R&D effort. Third, the calibration of the model provides clear evidence that the value of the energy market as well as international and inter-temporal spillovers play a significant role in determining the level of innovative activity. Fourth, we show that innovative activity in energy intensive sectors shifts down the (Marshallian) demand for energy. Finally, we show that due to the streamlined modelling framework we adopt, the point estimates from our regression can potentially be used to calibrate any model of DTC in the context of energy consumption. Keywords: Energy Efficiency, Directed Technological Change, Induced Innovations, Patents Econometrics Classification-JEL: O31, O33, Q43 Creation-Date: 201509 Template-Type: ReDIF-Paper 1.0 Number: 2015.79 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-079.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.79 Title: The Effect of the Spanish Reconquest on Iberian Cities Author-Name: David Cuberes Author-X-Name-First: David Author-X-Name-Last: Cuberes Author-WorkPlace-Name: Clark University Author-Name: Rafael González-Val Author-X-Name-First: Rafael Author-X-Name-Last: González-Val Author-WorkPlace-Name: Universidad de Zaragoza and Institut d’Economia de Barcelona Abstract: This paper studies the effect of the Spanish Reconquest, a military campaign that aimed to expel the Muslims from the Iberian Peninsula, on the population of its most important cities. The almost four centuries of Reconquest offer a “quasi-natural” experiment to study the persistence of population shocks at the city level. Using a generalized difference in differences approach, we find that the Reconquest had an average significant negative effect on the relative population of the main Iberian cities even after controlling for a large set of country and city-specific geographical and economic indicators, as well as city-specific time trends. Nevertheless, our results show that this negative shock was short-lived, vanishing within the first one hundred years after the onset of the Reconquest. These results can be interpreted as weak evidence on the negative effect that war and conflict have on urban primacy. They also suggest that the locational fundamentals that determined the relative size of Iberian cities before the Reconquest were more important determinants of the fate of these cities than the direct negative impact that the Reconquest had on their population. Keywords: Locational Fundamentals, City Growth, Lock-in Effects, Warfare and Cities Classification-JEL: R12, N9 Creation-Date: 201509 Template-Type: ReDIF-Paper 1.0 Number: 2015.80 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-080.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.80 Title: Pathways to Deep Decarbonization in Italy Author-Name: Isabella Alloisio Author-X-Name-First: Isabella Author-X-Name-Last: Alloisio Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Alessandro Antimiani Author-X-Name-First: Alessandro Author-X-Name-Last: Antimiani Author-WorkPlace-Name: INEA Author-Name: Simone Borghesi Author-X-Name-First: Simone Author-X-Name-Last: Borghesi Author-WorkPlace-Name: University of Siena and Fondazione Eni Enrico Mattei (FEEM) Author-Name: Enrica De Cian Author-X-Name-First: Enrica Author-X-Name-Last: De Cian Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Maria Gaeta Author-X-Name-First: Maria Author-X-Name-Last: Gaeta Author-WorkPlace-Name: Studies and Strategy Unit, ENEA Author-Name: Chiara Martini Author-X-Name-First: Chiara Author-X-Name-Last: Martini Author-WorkPlace-Name: Energy Efficiency Unit, ENEA Author-Name: Ramiro Parrado Author-X-Name-First: Ramiro Author-X-Name-Last: Parrado Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Maria Cristina Tommasino Author-X-Name-First: Maria Cristina Author-X-Name-Last: Tommasino Author-WorkPlace-Name: Studies and Strategy Unit, ENEA Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Maria Rosa Virdis Author-X-Name-First: Maria Rosa Author-X-Name-Last: Virdis Author-WorkPlace-Name: Studies and Strategy Unit, ENEA Abstract: The Deep Decarbonization Pathways Project (DDPP), an initiative of the Sustainable Development Solutions Network (SDSN) and the Institute for Sustainable Development and International Relations (IDDRI), aims to demonstrate how countries can transform their energy systems by 2050 in order to achieve a low-carbon economy and significantly reduce the global risk of catastrophic climate change. Built upon a rigorous accounting of national circumstances, the DDPP defines transparent pathways supporting the decarbonization of energy systems while respecting the specifics of national political economy and the fulfillment of domestic development priorities. The project comprises 16 Country Research Teams, composed of leading research institutions from countries representing about 70% of global GHG emissions and at very different stages of development. These 16 countries are: Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, South Africa, South Korea, the United Kingdom, and the United States. “Pathways to Deep Carbonization in Italy” contributes to the national debate on climate-change mitigation, and the importance of deep decarbonization, by examining three alternative pathways that could reduce Italian CO2 emissions by at least 40% in 2030 and 80% in 2050, compared to 1990. It analyzes the challenges the Italian energy system faces, and possible future technological developments that will need to be pursued. Keywords: Decarbonization, Low-carbon Economy, Climate Change Classification-JEL: Q4, Q5 Creation-Date: 201509 Template-Type: ReDIF-Paper 1.0 Number: 2015.81 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-081.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.81 Title: The Potential of REDD+ for Carbon Sequestration in Tropical Forests: Supply Curves for carbon storage for Kalimantan, Indonesia Author-Name: Yonky Indrajaya Author-X-Name-First: Yonky Author-X-Name-Last: Indrajaya Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University (The Netherlands) Author-Name: Edwin van der Werf Author-X-Name-First: Edwin Author-X-Name-Last: van der Werf Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University (The Netherlands) and CESifo (Germany) Author-Name: Hans-Peter Weikard Author-X-Name-First: Hans-Peter Author-X-Name-Last: Weikard Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University (The Netherlands) Author-Name: Frits Mohren Author-X-Name-First: Frits Author-X-Name-Last: Mohren Author-WorkPlace-Name:Forest Ecology and Forest Management Group, Wageningen University (The Netherlands) Author-Name: Ekko C. van Ierland Author-X-Name-First: Ekko C. Author-X-Name-Last: van Ierland Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University (The Netherlands) Abstract: We study the potential of tropical multi-age multi-species forests for sequestering carbon in response to financial incentives from REDD+. The use of reduced impact logging techniques (RIL) allows a forest owner to apply for carbon credits whereas the use of conventional logging techniques (CL) does not. This paper is the first to develop a Hartman model with selective cutting in this setting that takes additionality of carbon sequestration explicitly into account. We apply the model using data for Kalimantan, Indonesia. RIL leads to less damages on the residual stand than CL and has lower variable but higher fixed costs. We find that a system of carbon credits through REDD+ has a large potential for carbon storage. Interestingly, awarding carbon credits to carbon stored in end-use wood products does not increase the amount of carbon stored and reduces Land Expectation Value. We also observe that the level of the carbon price at which it becomes optimal not to harvest depends on the interpretation of the steady state model. Keywords: REDD+, Carbon Credits, Carbon Sequestration, Sustainable Forest Management, Reduced Impact Logging, Optimal Forest Management, Carbon Price Classification-JEL: Q2, Q23 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.82 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-082.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.82 Title: An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform Author-Name: Carlo Drago Author-X-Name-First: Carlo Author-X-Name-Last: Drago Author-WorkPlace-Name: “Niccolò Cusano” University Author-Name: Roberto Ricciuti Author-X-Name-First: Roberto Author-X-Name-Last: Ricciuti Author-WorkPlace-Name: University of Verona and CESifo Author-Name: Paolo Santella Author-X-Name-First: Paolo Author-X-Name-Last: Santella Author-WorkPlace-Name: ESMA Abstract: The purpose of this paper is to analyze the effects on the Italian directorship network of the corporate governance reform that was introduced in Italy in 2011 to prevent interlocking directorships in the financial sector. Interlocking directorships are important communication channels among companies and may have anticompetitive effect. We apply community detection techniques to the analysis of the networks in 2009 and 2012 to ascertain the effect of the reform. We find that, although the number of interlocking directorships decreases in 2012, the reduction takes place mainly at the periphery of the network whereas the network core is stable, allowing the most connected companies to keep their strategic position. Keywords: Interlocking Directorships, Corporate Governance, Community Detection, Social Networks Classification-JEL: C33, G34, G38, L14 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.83 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-083.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.83 Title: Policy Surveillance in the G-20 Fossil Fuel Subsidies Agreement: Lessons for Climate Policy Author-Name: Joseph E. Aldy Author-X-Name-First: Joseph E. Author-X-Name-Last: Aldy Author-WorkPlace-Name: Harvard Kennedy School Abstract: Inadequate policy surveillance has undermined the effectiveness of multilateral climate agreements. To illustrate an alternative approach to transparency, I evaluate policy surveillance under the 2009 G-20 fossil fuel subsidies agreement. The Leaders of the Group of 20 nations tasked their energy and finance ministers to identify and phase-out fossil fuel subsidies. The G-20 leaders agreed to submit their subsidy reform strategies to peer review and to independent expert review conducted by international organizations. This process of developed and developing countries pledging to pursue the same policy objective, designing and publicizing implementation plans, and subjecting plans and performance to review by international organizations differs considerably from the historic approach under the UN Framework Convention on Climate Change. This paper draws lessons from the fossil fuel subsidies agreement for climate policy surveillance. Keywords: Transparency, Pledge and Review, International Environmental Agreements Classification-JEL: F53, H23, Q40 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.84 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-084.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.84 Title: Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe Author-Name: Milan Šcasný Author-X-Name-First: Milan Author-X-Name-Last: Šcasný Author-WorkPlace-Name: Charles University in Prague, Environment Center Author-Name: Emanuele Massetti Author-X-Name-First: Emanuele Author-X-Name-Last: Massetti Author-WorkPlace-Name: Georgia Institute of Technology, CESIfo and FEEM Author-Name: Jan Melichar Author-X-Name-First: Jan Author-X-Name-Last: Melichar Author-WorkPlace-Name: Charles University in Prague, Environment Center Author-Name: Samuel Carrara Author-X-Name-First: Samuel Author-X-Name-Last: Carrara Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: This paper presents estimates of the economic benefit of air quality improvements in Europe that occur as a side effect of GHG emission reductions. We consider three climate policy scenarios that reach radiative forcing levels in 2100 of three Representative Concentration Pathways (RCPs). These targets are achieved by introducing a global uniform tax on all GHG emissions in the Integrated Assessment Model WITCH, assuming both full as well as limited technological flexibility. The resulting consumption patterns of fossil fuels are used to estimate the physical impacts and the economic benefits of pollution reductions on human health and on key assets by implementing the most advanced version of the ExternE methodology with its Impact Pathway Analysis. We find that the mitigation scenario compatible with +2°C reduces total pollution costs in Europe by 76%. Discounted ancillary benefits are more than €2.5 trillion between 2015 and 2100. The monetary value of reduced pollution is equal to €22 per abated ton of CO2 in Europe. Less strict climate policy scenarios generate overall smaller, but still considerable, local benefits (14 € or 18 € per abated ton of CO2). Without discounting, the ancillary benefits are in a range of €36 to €50 per ton of CO2 abated. Cumulative ancillary benefits exceed the cumulative additional cost of electricity generation in Europe. Each European country alone would be better off if the mitigation policy was implemented, although the local benefits in absolute terms vary significantly across the countries. We can identify the relative losers and winners of ancillary benefits in Europe. In particular, we find that large European countries contribute to as much as they benefit from ancillary benefits. The scenarios with limited technology flexibility do deliver results that are similar to the full technology flexibility scenario. Keywords: Ancillary benefits, External costs, Climate change mitigation, Integrated Assessment Models, ExternE, Impact Pathway Analysis Classification-JEL: Q47, Q51, Q53, Q54 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.85 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-085.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.85 Title: Solving the Clinker Dilemma with Hybrid Output-based Allocation Author-Name: Frédéric Branger Author-X-Name-First: Frédéric Author-X-Name-Last: Branger Author-WorkPlace-Name: CIRED and AgroParistech ENGREF, France Author-Name: Misato Sato Author-X-Name-First: Misato Author-X-Name-Last: Sato Author-WorkPlace-Name: LSE, UK Abstract: This paper proposes an innovative solution to distribute free allowances to the cement sector under emissions trading systems, called hybrid output-based allocation (OBA). We demonstrate that unlike many of the allocation methods currently being used, our design provides incentives which are aligned with the mitigation options available to this sector in the short to medium term. Specifically, it increases the incentive to improve the carbon intensity of clinker production; reduces the incentive to import clinker to avoid carbon costs; increases the incentive to use more low-carbon clinker alternatives to produce cement; and finally it reduces excess allocation and reduces incentives to inflate production volumes to obtain more free allowances. The hybrid OBA does not, however, provide incentives to reduce the consumption of cement or to bring about break-through technologies, hence should be considered as a mid-term solution to aid the decarbonization of the cement sector in conjunction with other support mechanisms. Keywords: Emissions Trading, Output-based Allocation, Climate Policy, Cement sector, Clinker Dilemma Classification-JEL: Q50, Q54, H23 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.86 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-086.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.86 Title: The Role of Natural Gas in the EU Decarbonisation Path Author-Name: Manfred Hafner Author-X-Name-First: Manfred Author-X-Name-Last: Hafner Author-WorkPlace-Name: Associate Researcher, FEEM Author-Name: Simone Tagliapietra Author-X-Name-First: Simone Author-X-Name-Last: Tagliapietra Author-WorkPlace-Name: Senior Researcher, FEEM Abstract: Over the last decade decarbonisation has become a key priority for the EU. However, on the contrary of renewable energy or energy efficiency, the role of gas in this process has never been clearly defined. This uncertainty opens a wide debate on the future role of gas in the EU energy system, particularly vis-à-vis the progressively stronger role of renewables in the EU energy mix. This paper tackles this issue with the aim to explore what role gas might play in making the EU decarbonisation path more balanced and secure up to 2030 and beyond. Keywords: Gas, Decarbonisation, EU Energy Policy Classification-JEL: Q40, Q42, Q48 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.87 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-087.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.87 Title: The Migration Response to Increasing Temperatures Author-Name: Cristina Cattaneo Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: FEEM and CMCC Author-Name: Giovanni Peri Author-X-Name-First: Giovanni Author-X-Name-Last: Peri Author-WorkPlace-Name: University of California, Davis Abstract: Climate change, especially the warming trend experienced by several countries, could affect agricultural productivity. As a consequence, rural incomes will change, and with them the incentives for people to remain in rural areas. Using data from 116 countries between 1960 and 2000, we analyze the effect of differential warming trends across countries on the probability of either migrating out of the country or from rural to urban areas. We find that higher temperatures increased migration rates to urban areas and other countries in middle income economies. In poor countries, higher temperatures reduced the probability of migration to cities or to other countries, consistent with the presence of severe liquidity constraints. In middle-income countries, migration represents an important margin of adjustment to global warming, potentially contributing to structural change and even increasing income per worker. Such a mechanism, however, does not seem to work in poor economies. Keywords: Global Warming, Emigration, Rural-Urban Migration, Agricultural Productivity Classification-JEL: F22, Q54, O13 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.88 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-088.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.88 Title: How much Electricity do we Consume? A Guide to German and European Electricity Consumption and Generation Data Author-Name: Maximilian Schumacher Author-X-Name-First: Maximilian Author-X-Name-Last: Schumacher Author-WorkPlace-Name: Neon Neue Energieökonomik GmbH (Neon), Germany Author-Name: Lion Hirth Author-X-Name-First: Lion Author-X-Name-Last: Hirth Author-WorkPlace-Name: Neon Neue Energieökonomik GmbH (Neon), Germany, Potsdam Institute for Climate Impact Research (PIK), Germany, Mercator Research Institute on Global Commons and Climate Change (MCC), Germany Abstract: Accurate information about electricity generation and consumption is crucial to power system modelling. Several institutions publish such data: for European countries these include the association of system operators ENTSO-E, the EU body Eurostat, and the International Energy Agency; for Germany they comprise the sector organisation BDEW, the federal statistical office Statistisches Bundesamt, the working group AG Energiebilanzen, and the four transmission system operators. This paper compares the terminology, methodology, and reported data of these sources, finding inconsistencies at all three levels. For example, annual electricity generation from wind and solar power in Germany differs by as much as 10% – 20%, depending on who you ask. ENTSO-E publishes “hourly load”, which is widely used among power system modellers. The data documentation provides a (constant) “representativity factor” that should be used to scale the hourly load values. However, we find that the scaling factor, when derived from ENTSO-E’s own more comprehensive data sources (“monthly consumption”), is neither the one provided, nor is it constant. The deviation is particularly worrying in Germany, where peak electricity demand might be underestimated by up to a quarter, and so we propose a scaling procedure that avoids such bias. Keywords: Power system data, Power market modelling Classification-JEL: L94, C63 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.89 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-089.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.89 Title: Assessing SDGs: A New Methodology to Measure Sustainability Author-Name: Lorenza Campagnolo Author-X-Name-First: Lorenza Author-X-Name-Last: Campagnolo Author-WorkPlace-Name: FEEM and CMCC Author-Name: Carlo Carraro Author-X-Name-First: Carlo Author-X-Name-Last: Carraro Author-WorkPlace-Name: University Ca’ Foscari of Venice, FEEM and CMCC Author-Name: Fabio Eboli Author-X-Name-First: Fabio Author-X-Name-Last: Eboli Author-WorkPlace-Name: FEEM and CMCC Author-Name: Luca Farnia Author-X-Name-First: Luca Author-X-Name-Last: Farnia Author-WorkPlace-Name: FEEM and CMCC Abstract: The FEEM project APPS – Assessment, Projections and Policy of Sustainable Development Goals – focuses on the quantitative assessment of the seventeen Sustainable Development Goals (SDGs), adopted by the United Nations at the end of September 2015. The project consists of two phases. The first, retrospective, computes indicators for all SDGs in 139 countries and then derives a composite multi-dimensional index and a worldwide ranking of current sustainability. This allows informing on strengths and weaknesses of today socio-economic development, as well as environmental criticalities, all around the world. The second phase, prospective, aims at evaluating the future trends of sustainability in the world by 2030. The assessment of the SDGs is carried out by means of an extended version of the recursive-dynamic computable general equilibrium ICES macro-economic model that includes social and environmental indicators. The final goal is to highlight future challenges left unsolved in the next 15 years of socio-economic development and to analyze costs and benefits of specific policies to support the achievement of proposed targets. This paper presents the methodology and the results of the retrospective assessment. Five main steps are described: i) screening of indicators eligible to address the UN SDGs; ii) data collection from relevant sources; iii) organization in the three pillars of sustainability (economy, society, environment); iv) normalization to a common metrics; v) aggregation of the 25 indicators in composite indices by pillars as well as in the multi-dimensional index. The final ranking summarizes countries’ sustainability performance. As expected, Middle-North European countries are at top of the ranking (Sweden, Norway and Switzerland the first three), with the most industrialized European countries such as Germany and UK, however, penalized by insufficient environmental performance. Other highly developed countries are between 24th (Canada) and 52nd place (United States). The emerging nations are scattered in our sustainability ranking. Brazil (43rd) and Russia (45th) precede China (80th) and India (102nd), the latter two especially penalized because of their social complexity. The worst performances, in terms of overall sustainability, are in Sub-Saharan Africa (Comoros, the Central African Republic and Chad occupy the last places in the ranking). Keywords: Sustainable Development Goals, Composite Index, Ranking, Indicators Classification-JEL: O44, O57, Q01 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.90 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-090.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.90 Title: Municipal Waste Collection: Market Competition and the EU Policy Author-Name: Carlo Reggiani Author-X-Name-First: Carlo Author-X-Name-Last: Reggiani Author-WorkPlace-Name: School of Social Sciences - Economics, University of Manchester Author-Name: Francesco Silvestri Author-X-Name-First: Francesco Author-X-Name-Last: Silvestri Author-WorkPlace-Name: Department of Economics and Management, University of Ferrara Abstract: Two of the main pillars of the EU waste collection policy are the Proximity Principle and Self-Sufficiency Principle. According to those, waste should be disposed as close as possible to where it has been produced. The effect of such provision is to increase the market power of local disposers, with possible undesirable consequences for other firms in the vertical chain. We show through a simple spatial model that one effect of the Proximity Principle and Self-Sufficiency Principle is to provide an incentive to collectors and waste producers to increase the amount of separated waste. Keywords: EU Municipal Waste Policy, Self-Sufficiency Principle, Proximity Principle Classification-JEL: Q53, L13, L44 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.91 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-091.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.91 Title: Global Oil Market and the U.S. Stock Returns Author-Name: Maryam Ahmad Author-X-Name-First: Maryam Author-X-Name-Last: Ahmad Author-WorkPlace-Name: Lombardy Advanced School of Economic Research (LASER) Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: University of Milan-Bicocca and Fondazione Eni Enrico Mattei (FEEM) Author-Name: Mehdi Sadeghzadeh Author-X-Name-First: Mehdi Author-X-Name-Last: Sadeghzadeh Author-WorkPlace-Name: Bocconi University Abstract: This paper provides an analysis of the link between the oil market and the U.S. stock market returns at the aggregate as well as industry levels. We empirically model oil price changes as driven by speculative demand shocks along with consumption demand and supply shocks in the oil market. We also take into account in our model all the factors that affect stock market price movements over and above the oil market, in order to quantify the pure effect of oil price shocks on returns. The results show that stock returns respond to oil price shocks differently, depending on the causes behind the shocks. Impulse response analysis suggests that consumption demand shocks are the most relevant drivers of the stock market return, relative to other oil market driven shocks. Industry level analysis is performed to control for the heterogeneity of the responses of returns to oil price changes. The results show that both cost side and demand side effects of oil price shocks matter for the responses of industries to oil price shocks. However, the main driver of the variation in industries’ returns is the shock to aggregate stock market. Keywords: Oil Market, Oil Price, Stock Market Classification-JEL: G1, G12, Q41 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.92 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-092.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.92 Title: Improving Flood Damage Assessment Models in Italy Author-Name: Mattia Amadio Author-X-Name-First: Mattia Author-X-Name-Last: Amadio Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Euro-Mediterranean Centre on Climate Change, Italy Author-Name: Jaroslav Mysiak Author-X-Name-First: Jaroslav Author-X-Name-Last: Mysiak Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Euro-Mediterranean Centre on Climate Change, Italy Author-Name: Lorenzo Carrera Author-X-Name-First: Lorenzo Author-X-Name-Last: Carrera Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Euro-Mediterranean Centre on Climate Change, Italy Author-Name: Elco Koks Author-X-Name-First: Elco Author-X-Name-Last: Koks Author-WorkPlace-Name: Institute for Environmental Studies (IVM), VU University Amsterdam, The Netherlands Abstract: Flood damage assessments are often based on Stage-Damage Curve (SDC) models that estimate economic damage as a function of flood characteristics, typically flood depths, and land use. SDCs are developed through site-specific analysis but rarely adjusted to economic circumstances in areas to which they are applied. In Italy, assessments confide in SDC models developed elsewhere, even if empirical damage reports are collected after every major flood event. In this paper we tested, adapted and extended an up-to-date SDC model using flood records from Northern Italy. The model calibration is underpinned with empirical data from compensation records. Our analysis takes into account both physical asset and foregone production losses, the latter measured amidst the spatially distributed gross added value (GVA). Keywords: Flood Risk Management, Stage Depth Damage Curves, Economic Damage, Disaster Losses, Italy Classification-JEL: Q54 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.93 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-093.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.93 Title: Could Resource Rents Finance Universal Access to Infrastructure? A First Exploration of Needs and Rents Author-Name: Sabine Fuss Author-X-Name-First: Sabine Author-X-Name-Last: Fuss Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change Author-Name: Claudine Chen Author-X-Name-First: Claudine Author-X-Name-Last: Chen Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change Author-Name: Michael Jakob Author-X-Name-First: Michael Author-X-Name-Last: Jakob Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change and Potsdam Institute for Climate Change Impact Research Author-Name: Annika Marxen Author-X-Name-First: Annika Author-X-Name-Last: Marxen Author-WorkPlace-Name: Technical University Berlin and Mercator Research Institute on Global Commons and Climate Change Author-Name: Narasimha D. Rao Author-X-Name-First: Narasimha D. Author-X-Name-Last: Rao Author-WorkPlace-Name: International Institute of Systems Analysis Author-Name: Ottmar Edenhofer Author-X-Name-First: Ottmar Author-X-Name-Last: Edenhofer Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change, Technical University Berlin and Potsdam Institute for Climate Change Impact Research Abstract: It is often argued that, ethically, resource rents should accrue to all citizens. Yet in reality the rents from exploiting national resources are often concentrated in the hands of a few. If resource rents were to be taxed, on the other hand, substantial amounts of public money could be raised and used to cover the population’s infrastructure needs, such as access to electricity, water, sanitation, communication technology and roads, which all play important roles in a nation’s economic development process. Here, we examine to what extent existing resource rents could be used to provide universal access to these infrastructures. Keywords: Resource Rents, Infrastructure, Economic Development Classification-JEL: H54 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.94 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-094.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.94 Title: Using Carbon Pricing Revenues to Finance Infrastructure Access Author-Name: Michael Jakob Author-X-Name-First: Michael Author-X-Name-Last: Jakob Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Chang and Potsdam Institute for Climate Change Impact Research Author-Name: Claudine Chen Author-X-Name-First: Claudine Author-X-Name-Last: Chen Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change Author-Name: Sabine Fuss Author-X-Name-First: Sabine Author-X-Name-Last: Fuss Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change Author-Name: Annika Marxen Author-X-Name-First: Annika Author-X-Name-Last: Marxen Author-WorkPlace-Name: Technical University Berlin and Mercator Research Institute on Global Commons and Climate Change Author-Name: Narasimha Rao Author-X-Name-First: Narasimha Author-X-Name-Last: Rao Author-WorkPlace-Name: International Institute of Systems Analysis Author-Name: Ottmar Edenhofer Author-X-Name-First: Ottmar Author-X-Name-Last: Edenhofer Author-WorkPlace-Name: Mercator Research Institute on Global Commons and Climate Change, Potsdam Institute for Climate Change Impact Research and Technical University Berlin Abstract: Introducing a price on greenhouse gas emissions would not only contribute to reducing the risk of dangerous anthropogenic climate change, but would also generate substantial public revenues. Some of these revenues could be used to cover investment needs for infrastructure providing access to water, sanitation, electricity, telecommunications and transport. In this way, emission pricing could promote sustainable socio-economic development by safeguarding the stability of natural systems which constitute the material basis of economies while at the same time providing public goods that are essential for human well- being. An analysis of several climate scenarios with different stabilization targets and technological assumptions reveals that emission pricing has a substantial potential to close existing access gaps. Keywords: Q31, H54 Classification-JEL: Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.95 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-095.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.95 Title: Making China the Transition to a Low-Carbon Economy: Key Challenges and Responses Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: College of Management and Economics, Tianjin University Abstract: China has realized that for its own sake and from the international community’s perspective, it cannot afford to continue along the conventional path of encouraging economic growth at the expense of the environment. Accordingly, the country has placed ecological goals at the same level of priority as policies on economic, political, cultural and social development. Specifically, to meet the grand goal involves not only capping China’s nationwide coal consumption to let it peak before 2020 and carbon emissions peak around 2030, but also putting in place a variety of flagship programs and initiatives, prices and policies. This paper argues that the 2030 carbon emissions peak goal is ambitious but achievable and concludes by arguing why China’s anti-pollution outcomes this time might be different from the previous ones. Keywords: Low-Carbon Economy, Carbon Emissions Peaks, Coal Consumption, Carbon Pricing, Energy Prices, Resource Tax Reform, Renewable Energy, China Classification-JEL: H23, P28, Q42, Q43, Q48, Q53, Q54, Q58 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.96 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-096.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.96 Title: The Basilicata Wealth Fund: Resource Policy and Long-run Economic Development in Southern Italy Author-Name: Roberto Iacono Author-X-Name-First: Roberto Author-X-Name-Last: Iacono Author-WorkPlace-Name: Sør-Trøndelag University College (HiST), Department of Applied Social Science Abstract: This paper contributes to the growing political economy literature of within-country natural resources management, by proposing a new resource policy for the oil-rich southern Italian region of Basilicata. The policy proposal is to establish a (regional) wealth fund in which all the royalty revenues from non-renewable natural resource exploitation in Basilicata would be stored and fully converted into low-risk financial assets. The scope is to give priority to long-run investments as to better exploit revenues from large-scale extraction of natural capital. Establishing a wealth fund at the regional sub-national level is a novel approach that can be applied to other resource-rich regions in the world. I label the fund as the Basilicata Wealth Fund (BWF). The BWF would be a regionally owned investment fund, however independently administered from national authorities (for instance, as an independent legal entity under the jurisdiction of the Bank of Italy). In addition, the paper posits a transparent and clear-cut spending fiscal rule in order to let regional authorities use the resource revenues to finance economic policy. The clear advantage from the BWF would be the stronger focus on long-run economic development and the higher accountability, hence avoiding misuse of resource revenues for myopic fiscal spending. Keywords: Exhaustible Natural Resources, Sovereign Wealth Fund, Regional Economy, Long-run Economic Development, Basilicata Classification-JEL: O13, Q32, R11, R58 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.97 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-097.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.97 Title: Development, Climate Change Adaptation, and Maladaptation: Some Econometric Evidence Author-Name: Francesco Bosello Author-X-Name-First: Francesco Author-X-Name-Last: Bosello Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Euro-Mediterranean Centre on Climate Change (CMCC) and Università degli Studi di Milano Author-Name: Shouro Dasgupta Author-X-Name-First: Shouro Author-X-Name-Last: Dasgupta Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Università Ca’ Foscari Venezia and Euro-Mediterranean Centre on Climate Change (CMCC) Abstract: This paper examines the determinants of climate related disasters and attempts to estimate the presence of adaptive capacity in terms of per capita income and population density elasticities. We find evidence of adaptive capacity in a “weak” form both in terms of income and population density elasticities over our entire sample. That is, damages are in fact increasing with income and population, but less than proportionally. There is also evidence of countries improving their adaptive capacity over the long run, but of maladaptation occurring in the short run. Repeating the analysis splitting the sample by per-capita income levels, we find that higher income countries show adaptive capacity in a “strong form”, i.e. damages decrease with GDP, while lower income countries highlight exactly the opposite behavior. Finally, using Granger causality tests for panel data, we find evidence of increase in GDP per capita Granger causing climate related damages for lower income countries, but not in higher income countries. Keywords: Climate Change Damages, Adaptation, Panel Granger Causality Classification-JEL: C19, Q54, Q56 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.98 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-098.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.98 Title: Sensitivity to Energy Technology Costs: A Multi-model Comparison Analysis Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Author-Name: Giacomo Marangoni Author-X-Name-First: Giacomo Author-X-Name-Last: Marangoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, CMCC and Politecnico di Milano Author-Name: Emanuele Borgonovo Author-X-Name-First: Emanuele Author-X-Name-Last: Borgonovo Author-WorkPlace-Name: Bocconi University Author-Name: Laura Diaz Anadon Author-X-Name-First: Laura Diaz Author-X-Name-Last: Anadon Author-WorkPlace-Name: Harvard Kennedy School, Harvard University Author-Name: Robert Barron Author-X-Name-First: Robert Author-X-Name-Last: Barron Author-WorkPlace-Name: University of Massachusetts Amherst Author-Name: Haewon C. McJeon Author-X-Name-First: Haewon C. Author-X-Name-Last: McJeon Author-WorkPlace-Name: Pacific Northwest National Laboratory, JGCRI Author-Name: Savvas Politis Author-X-Name-First: Savvas Author-X-Name-Last: Politis Author-WorkPlace-Name: Brookhaven National Laboratory Author-Name: Paul Friley Author-X-Name-First: Paul Author-X-Name-Last: Friley Author-WorkPlace-Name: Brookhaven National Laboratory Abstract: In the present paper we use the output of multiple expert elicitation surveys on the future cost of key low-carbon technologies and use it as input of three Integrated Assessment models, GCAM, MARKAL_US and WITCH. By means of a large set of simulations we aim to assess the implications of these subjective distributions of technological costs over key model outputs. We are able to detect what sources of technology uncertainty are more influential, how this differs across models, and whether and how results are affected by the time horizon, the metric considered or the stringency of the climate policy. In unconstrained emission scenarios, within the range of future technology performances considered in the present analysis, the cost of nuclear energy is shown to dominate all others in affecting future emissions. Climate-constrained scenarios, stress the relevance, in addition to that of nuclear energy, of biofuels, as they represent the main source of decarbonization of the transportation sector and bioenergy, since the latter can be coupled with Carbon Capture and Storage (CCS) to produce negative emissions. Keywords: Sensitivity Analysis, Integrated Assessment models, Expert elicitation, Technology Cost Classification-JEL: O30, O33, Q41, Q50, Q55 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.99 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-099.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.99 Title: The Impacts of Oil Price Shocks on Stock Market Volatility: Evidence from the G7 Countries Author-Name: Andrea Bastianin Author-X-Name-First: Andrea Author-X-Name-Last: Bastianin Author-WorkPlace-Name: University of Milan and Fondazione Eni Enrico Mattei Author-Name: Francesca Conti Author-X-Name-First: Francesca Author-X-Name-Last: Conti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: University of Milan-Bicocca and Fondazione Eni Enrico Mattei Abstract: We study the effects of crude oil price shocks on the stock market volatility of the G7 economies. We rely on a structural VAR model to identify the causes underlying the oil price shocks and gauge the differential impact that oil supply and oil demand innovations have on financial volatility. We show that stock market volatility does not respond to oil supply shocks. On the contrary, demand shocks impact significantly on the variability of the G7 stock markets. Keywords: Volatility, Oil Price Shocks, Oil Price, Stock Prices, Structural VAR Classification-JEL: C32, C58, E44, Q41, Q43 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.100 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-100.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.100 Title: The Impacts of Exogenous Oil Supply Shocks on Mediterranean Economies Author-Name: Andrea Bastianin Author-X-Name-First: Andrea Author-X-Name-Last: Bastianin Author-WorkPlace-Name: University of Milan and FEEM Author-Name: Marzio Galeotti Author-X-Name-First: Marzio Author-X-Name-Last: Galeotti Author-WorkPlace-Name: University of Milan and IEFE-Bocconi Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: University of Milan-Bicocca and FEEM Abstract: The security of energy supply is a key geopolitical factor in the relationship between the European Union and the southern neighborhood countries of the Middle East and North Africa region. We study the response of eight Mediterranean economies to exogenous oil supply shocks. We focus on the effects on economic activity - as measured by real Gross Value Added - for the whole economy, as well as for selected industries. We show that there are clear patterns characterizing the response of different economies to an unexpected reduction in global oil production. The main determinants of these patterns are the degree of energy intensity and energy dependence of the country, as well as the composition of its Gross Value Added. Keywords: Oil Supply Shocks, Mediterranean, Growth Classification-JEL: C22, E32, Q43, Q41 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.101 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2015-101.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.101 Title: How is Volatility in Commodity Markets Linked to Oil Price Shocks? Author-Name: Maryam Ahmadi Author-X-Name-First: Maryam Author-X-Name-Last: Ahmadi Author-WorkPlace-Name: Lombardi Advanced School of Economic Research (LASER) and University of Milan Author-Name: Niaz Bashiri Behmiri Author-X-Name-First: Niaz Bashiri Author-X-Name-Last: Behmiri Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: University of Milan-Bicocca and FEEM Abstract: This study investigates the effects of oil price shocks on volatility of selected agricultural and metal commodities. To achieve this goal, we decompose an oil price shock to its underlying components, including macroeconomics and oil specific shocks. The applied methodology is the structural vector autoregressive (SVAR) model and the time span is from April 1983 to December 2013. The investigation is divided into two subsamples, before and after 2006 for agricultures taking into account the 2006-2008 food crisis, and before and after 2008 for metals considering the recent global financial crisis. The validity of time divisions is confirmed by historical decomposition accomplishment. We find that, based on impulse response functions, the response of volatility of each commodity to an oil price shock differs significantly depending on the underlying cause of the shock for the both pre and post-crisis periods. moreover, according to variance decomposition the explanatory power of oil shocks becomes stronger after the crisis. The different responses of commodities are described in detail by investigating market characteristics in each period. Keywords: Metals, Commodities, Volatility, Oil Price Classification-JEL: Q02, Q14, Q41, C22 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.102 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2015-102.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.102 Title: Qualitative Scenario Building for Post-carbon Cities Author-Name: Margaretha Breil Author-X-Name-First: Margaretha Author-X-Name-Last: Breil Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Author-Name: Cristina Cattaneo Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Author-Name: Katie Johnson Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Abstract: In defining the transition towards a post-carbon future, understanding the needs and determinants for policy priorities in different types of cities will help tailor a common roadmap that can be adopted under various socio-economic contexts. This paper provides an analysis of results collected in a participatory scenario building exercise undertaken within a research project on post-carbon urban futures (Post-Carbon Cities of Tomorrow, POCACITO). It is based on local workshops organised in nine European case study cities, which employed a three-step methodology consisting of an initial assessment, vision building and backcasting exercises. All exercises had a strong focus on the inclusion of stakeholders. Comparison of outcomes from the visions and scenarios resulting from these workshops provides insights on the drivers that determine different priorities in policy action for cities working to transition toward post-carbon futures. Results from the case study cities show similar elements in the strategies proposed by stakeholders, focusing primarily on urban projects for energy efficiency and the transition to non-fossil energy resources. However, the specific mix of strategies envisaged for each city has been influenced by local issues, such as the geographical location or the size, as well as different points of departure with regards to emission reductions and sustainability strategies already achieved. Keywords: Post-carbon, Visions, Scenarios, Transition, Sustainability Classification-JEL: Q50, Q56, Q58 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.103 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-103.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.103 Title: Bargaining to Lose the Global Commons Author-Name: Natasha Chichilnisky-Heal Author-X-Name-First: Natasha Author-X-Name-Last: Chichilnisky-Heal Author-WorkPlace-Name: Yale University Author-Name: Graciela Chichilnisky Author-X-Name-First: Graciela Author-X-Name-Last: Chichilnisky Author-WorkPlace-Name: Columbia University and Stanford University Abstract: In "Bargaining to Lose: The Permeability Approach to Post Transition Resource Extraction" [1] Natasha Chichilnisky-Heal introduces an original and fertile explanation for the resource curse. Her "permeability" approach questions the treatment of the state as a decision maker having the public good as an objective, and replaces it by the results of a bargaining game between the state and International organizations. Her new theory is illustrated with unique hands-on experience in the case of copper and gold mines in Mongolia and Zambia, and focuses on a bargaining game between the state and key financial organizations: the Bretton Woods Institutions (IMF, World Bank) and MNCs. This piece extends and generalizes "Bargaining to lose" providing economic models that validate the original conclusions, and exploring its implications for the global commons: the atmosphere, the oceans and biodiversity. Chichilnisky-Heal’s "permeable state" is a transition to a new globalized society where the sovereign state - a relatively recent creation - is receding giving rise to a new set of global economic agents and institutions that better explain the dynamics of the global commons. We show that the permeable state complements other explanations for the resource curse [2] as a global market failure magnified by globalization and based on the lack of well-defined property rights on natural resources during the pre-industrial period. We generalize Chichilnisky-Heal’s "bargaining to lose" approach to the resource curse and explore its natural implications for the environmental crisis on the global commons. The solutions that Chichilnisky-Heal proposes, e.g. limiting the Bretton Woods’ Institutions’ ‘seat at the negotiation table’ of resource extraction contracts, could help resolve the environmental crisis that is based on over-extraction of global resources. Keywords: Bargaining, Global Commons Classification-JEL: C70, C78 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.104 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-104.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.104 Title: Technology Invention and Diffusion in Residential Energy Consumption. A Stochastic Frontier Approach Author-Name: Giovanni Marin Author-X-Name-First: Giovanni Author-X-Name-Last: Marin Author-WorkPlace-Name: IRCrES-CNR and SEEDS Author-Name: Alessandro Palma Author-X-Name-First: Alessandro Author-X-Name-Last: Palma Author-WorkPlace-Name: IEFE Bocconi – Centre for Research on Energy and Environmental Economics and Policy and SEEDS Abstract: Traditional large appliances absorb a large share of residential electricity consumption and represent important targets of energy policy strategies aimed at achieving energy security. Despite being characterized by rather mature technologies, this group of appliances still offers large potential in terms of efficiency gains due to their pervasive diffusion. In this paper we analyse the electricity consumption of a set of four traditional ‘white goods’ in a panel of ten EU countries observed over 21 years (1990-2010), with the aim of disentangling the amount of technical efficiency from the overall energy saving. The technical efficiency trend is modelled through a set of technology components representing both the invention and adoption process by means of specific patents weighted by production and bilateral import flows, which allows to overcome the rigid Stochastic Frontier framework in modelling the effect of technical change. Our results show that the derived energy demand and inefficiency trends are both related to changes in the amount of available technology embodied in energy efficient appliances. The effect is significant both in its domestic and international components and suggests an active role of innovation and trade policies for achieving efficiency targets which directly impact the amount of electricity consumed by households. Keywords: Energy Efficiency, Technological Diffusion, Electrical Appliances, Stochastic Frontier Analysis, Residential Sector Classification-JEL: O33, Q55, Q41 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.105 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-105.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.105 Title: The Long Italian Stagnation and the Welfare Effects of Outsourcing Author-Name: Jacopo Zotti Author-X-Name-First: Jacopo Author-X-Name-Last: Zotti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and University of Trieste, Department of Political and Social Sciences Abstract: The stagnation of the Italian economy over the last two decades is widely documented. During this period, the world economy has become highly integrated, and foreign outsourcing has become a standard practice for firms. While trade theory predicts benefits from the internationalization of production, Italy seems to have gained negligibly from it, or, rather to have lost. In a simple model, we show that this may be the case when markets are overregulated and competition policies are weak. We study a small open economy with one oligopolistic and one competitive sector, which outsources part of its production process abroad. Advances in globalization entail lower tariff rates of outsourcing. Contrary to the common wisdom, we show that national welfare is an inverted U-shaped function of tariffs. There exists a tariff threshold, below which the economy loses from globalization because the competitive sector overproduces and the oligopolistic underproduces (the oligopolistic good has a higher marginal effect on welfare). Competition policies that target the competitive sector lower the threshold and allow the economy to benefit from increased openness. Keywords: Italy’s Economic Decline, General Equilibrium, Cournot Oligopoly, Outsourcing Classification-JEL: D43, D51, F12, F62, L13 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.106 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-106.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.106 Title: Second-Best Analysis of European Energy Policy: Is One Bird in the Hand Worth Two in the Bush? Author-Name: Michael Hübler Author-X-Name-First: Michael Author-X-Name-Last: Hübler Author-WorkPlace-Name: Institute for Environmental Economics and World Trade, Leibniz Universität Hannover Author-Name: Oliver Schenker Author-X-Name-First: Oliver Author-X-Name-Last: Schenker Author-WorkPlace-Name: Centre for European Economic Research (ZEW) Author-Name: Carolyn Fischer Author-X-Name-First: Carolyn Author-X-Name-Last: Fischer Author-WorkPlace-Name: Resources for the Future (RFF) Abstract: This paper studies policy instruments that correct insufficient learning-by-doing (LbD) and research and development (R&D) of renewable electricity technologies and insufficient investments in energy efficiency (EE) in the presence of carbon pricing. The theoretical model analysis shows how to re-adjust the first-best in second-best situations, in which one of the policy instruments is restricted. Calibrated to the European power sector, the first-best choice of all instruments reduces the climate policy cost by one third. Feed-in tariffs turn out to be good substitutes for LbD, but not for R&D or EE subsidies. Keywords: Second-best, Climate Policy, Energy Policy, Feed-in tariff, Power Sector, EU Classification-JEL: C61, O33, Q48, Q54, Q55 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.107 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-107.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.107 Title: Lessons Learned from Three Decades of Experience with Cap-and-Trade Author-Name: Richard Schmalensee Author-X-Name-First: Richard Author-X-Name-Last: Schmalensee Author-WorkPlace-Name: Massachusetts Institute of Technology Author-Name: Robert N. Stavins Author-X-Name-First: Robert N. Author-X-Name-Last: Stavins Author-WorkPlace-Name: , Harvard Kennedy School, Resources for the Future and National Bureau of Economic Research Abstract: This essay provides an overview of the major emissions trading programs of the past thirty years on which significant documentation exists, and draws a number of important lessons for future applications of this environmental policy instrument. References to a larger number of other emissions trading programs that have been implemented or proposed are included. Keywords: Market-based instruments, Cap-and-trade, Leaded Gasoline Phasedown, Clean Air Act Amendments of 1990, Sulfur Dioxide, Acid Rain, Carbon Dioxide, Global Climate Change, European Union Emissions Trading System Classification-JEL: Q540, Q580, Q400, Q480 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.108 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-108.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.108 Title: The not so Gentle Push: Behavioral Spillovers and Policy Instruments Author-Name: Giovanna d’Adda Author-X-Name-First: Giovanna Author-X-Name-Last: d’Adda Author-WorkPlace-Name: Politecnico di Milano Author-Name: Valerio Capraro Author-X-Name-First: Valerio Author-X-Name-Last: Capraro Author-WorkPlace-Name: Center for Mathematics and Computer Science (CWI) Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Politecnico di Milano, Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC) Abstract: We examine whether spillovers of pro-social behavior depend on how behavioral changes are induced. We conduct a large experiment using economic games, with a Dictator Game (DG) followed by either an identical game or a Prisoner’s Dilemma (PD). We influence initial behavior through widely used policy instruments, either behaviorally informed (default, social norms) or with an economic/regulatory rationale (incentives, regulation). Our results provide evidence of positive spillovers to subsequent economic games (which are not treated), but only for the traditional economic/regulatory interventions and within the same game type. Specifically, inducing higher giving in the first stage leads to subsequent higher altruism in the DG, but not to more cooperation in the PD. The carry over of pro-social behavior appears to be driven by an anchoring on the initial donation. We also measure observers’ beliefs and we find that these results are not correctly anticipated by third parties, who systematically overestimate both the direct effect of behaviorally informed interventions on initial donations and their spillover to subsequent donations. Keywords: Pro-social Behavior, Traditional and Behavioral Policies, Spillover Effects, Online Experiment Classification-JEL: H4, I3 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.109 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-109.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.109 Title: Including System Integration of Variable Renewable Energies in a Constant Elasticity of Substitution Framework: the Case of the WITCH Model Author-Name: Samuel Carrara Author-X-Name-First: Samuel Author-X-Name-Last: Carrara Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) Author-Name: Giacomo Marangoni Author-X-Name-First: Giacomo Author-X-Name-Last: Marangoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM), Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) and Politecnico di Milano Abstract: The penetration of Variable Renewable Energies (VREs) in the electricity mix poses serious challenges in terms of management of the electrical grids, as the associated variability and non-dispatchability are in contrast with the requirement that the load be instantaneously equalized by the generation. One of the goals of Integrated Assessment Models (IAMs) is to simulate the evolution of electricity demand and generation mix over time, therefore a proper modeling of VRE system integration is crucial. In this paper we discuss how different modeling mechanisms can profoundly impact the evolution of the electricity mix, and specifically renewable penetration. In particular, we focus on the effects of introducing a set of explicit system integration constraints in a model, WITCH, characterized by a Constant Elasticity of Substitution (CES) framework. Keywords: Variable Renewable Energies, System Integration, Electrical Grid, Constant Elasticity of Substitution, Integrated Assessment Models Classification-JEL: Q4, Q41, Q42 Creation-Date: 201510 Template-Type: ReDIF-Paper 1.0 Number: 2015.110 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2015-110.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2015.110 Title: Regional Low-Emission Pathways from Global Models Author-Name: Heleen van Soest Author-X-Name-First: Heleen Author-X-Name-Last: van Soest Author-WorkPlace-Name: PBL Netherlands Environmental Assessment Agency, The Netherlands Author-Name: Lara Aleluia Reis Author-X-Name-First: Lara Aleluia Author-X-Name-Last: Reis Author-WorkPlace-Name: Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Italy and Fondazione Eni Enrico Mattei Author-Name: Detlef van Vuuren Author-X-Name-First: Detlef Author-X-Name-Last: van Vuuren Author-WorkPlace-Name: PBL Netherlands Environmental Assessment Agency, The Netherlands Author-Name: Christoph Bertram Author-X-Name-First: Christoph Author-X-Name-Last: Bertram Author-WorkPlace-Name: Potsdam-Institut für Klimafolgenforschung (PIK), Germany Author-Name: Laurent Drouet Author-X-Name-First: Laurent Author-X-Name-Last: Drouet Author-WorkPlace-Name: Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Italy and Fondazione Eni Enrico Mattei Author-Name: Jessica Jewell Author-X-Name-First: Jessica Author-X-Name-Last: Jewell Author-WorkPlace-Name: International Institute for Applied Systems Analysis (IIASA), Austria Author-Name: Elmar Kriegler Author-X-Name-First: Elmar Author-X-Name-Last: Kriegler Author-WorkPlace-Name: Potsdam-Institut für Klimafolgenforschung (PIK), Germany Author-Name: Gunnar Luderer Author-X-Name-First: Gunnar Author-X-Name-Last: Luderer Author-WorkPlace-Name: Potsdam-Institut für Klimafolgenforschung (PIK), Germany Author-Name: Keywan Riahi Author-X-Name-First: Keywan Author-X-Name-Last: Riahi Author-WorkPlace-Name: International Institute for Applied Systems Analysis (IIASA), Austria Author-Name: Joeri Rogelj Author-X-Name-First: Joeri Author-X-Name-Last: Rogelj Author-WorkPlace-Name: International Institute for Applied Systems Analysis (IIASA), Austria Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Italy, Fondazione Eni Enrico Mattei and Politecnico di Milano, Italy Author-Name: Michel den Elzen Author-X-Name-First: Michel Author-X-Name-Last: den Elzen Author-WorkPlace-Name: PBL Netherlands Environmental Assessment Agency, The Netherlands Author-Name: Aayushi Awasthy Author-X-Name-First: Aayushi Author-X-Name-Last: Awasthy Author-WorkPlace-Name: The Energy and Resources Institute (TERI), India Author-Name: Katherine Calvin Author-X-Name-First: Katherine Author-X-Name-Last: Calvin Author-WorkPlace-Name: Pacific Northwest National Laboratory (PNNL), United States Author-Name: Pantelis Capros Author-X-Name-First: Pantelis Author-X-Name-Last: Capros Author-WorkPlace-Name: Institute of Communication and Computer Systems (ICCS), Greece Author-Name: Leon Clarke Author-X-Name-First: Leon Author-X-Name-Last: Clarke Author-WorkPlace-Name: Pacific Northwest National Laboratory (PNNL), United States Author-Name: Michel Colombier Author-X-Name-First: Michel Author-X-Name-Last: Colombier Author-WorkPlace-Name: Institut du Développement Durable et des Relations Internationales (IDDRI), France Author-Name: Teng Fei Author-X-Name-First: Teng Author-X-Name-Last: Fei Author-WorkPlace-Name: Tsinghua University (TU), China Author-Name: Amit Garg Author-X-Name-First: Amit Author-X-Name-Last: Garg Author-WorkPlace-Name: Indian Institute of Management Ahmedabad (IIMA), India Author-Name: Fernanda Guedes Author-X-Name-First: Fernanda Author-X-Name-Last: Guedes Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Mariana Imperio Author-X-Name-First: Mariana Author-X-Name-Last: Imperio Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Mikiko Kainuma Author-X-Name-First: Mikiko Author-X-Name-Last: Kainuma Author-WorkPlace-Name: National Institute for Environmental Studies (NIES), Japan Author-Name: Jiang Kejun Author-X-Name-First: Jiang Author-X-Name-Last: Kejun Author-WorkPlace-Name: Energy Research Institute of NDRC (ERI), China Author-Name: Alexandre C. Köberle Author-X-Name-First: Alexandre C. Author-X-Name-Last: Köberle Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Peter Kolp Author-X-Name-First: Peter Author-X-Name-Last: Kolp Author-WorkPlace-Name: International Institute for Applied Systems Analysis (IIASA), Austria Author-Name: Volker Krey Author-X-Name-First: Volker Author-X-Name-Last: Krey Author-WorkPlace-Name: International Institute for Applied Systems Analysis (IIASA), Austria Author-Name: Alban Kitous Author-X-Name-First: Alban Author-X-Name-Last: Kitous Author-WorkPlace-Name: European Commission, DG Joint Research Centre (JRC), Spain Author-Name: Paroussos Leonidas Author-X-Name-First: Paroussos Author-X-Name-Last: Leonidas Author-WorkPlace-Name: Energy - Economy - Environment Modelling Laboratory (E3M Lab), Greece Author-Name: Andre Lucena Author-X-Name-First: Andre Author-X-Name-Last: Lucena Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Toshihiko Masui Author-X-Name-First: Toshihiko Author-X-Name-Last: Masui Author-WorkPlace-Name: National Institute for Environmental Studies (NIES), Japan Author-Name: Larissa Nogueira Author-X-Name-First: Larissa Author-X-Name-Last: Nogueira Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Roberta Pierfederici Author-X-Name-First: Roberta Author-X-Name-Last: Pierfederici Author-WorkPlace-Name: Institut du Développement Durable et des Relations Internationales (IDDRI), France Author-Name: Bert Saveyn Author-X-Name-First: Bert Author-X-Name-Last: Saveyn Author-WorkPlace-Name: European Commission, DG Joint Research Centre (JRC), Spain Author-Name: Roberto Schaeffer Author-X-Name-First: Roberto Author-X-Name-Last: Schaeffer Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Fu Sha Author-X-Name-First: Fu Author-X-Name-Last: Sha Author-WorkPlace-Name: Renmin University and National Centre for Climate Change Strategy and International Cooperation, China Author-Name: Bianka Shoai Author-X-Name-First: Bianka Author-X-Name-Last: Shoai Author-WorkPlace-Name: Research Institute of Innovative Technology for the Earth (RITE), Japan Author-Name: P.R. Shukla Author-X-Name-First: P.R. Author-X-Name-Last: Shukla Author-WorkPlace-Name: Indian Institute of Management Ahmedabad (IIMA), India Author-Name: Thomas Spencer Author-X-Name-First: Thomas Author-X-Name-Last: Spencer Author-WorkPlace-Name: Institut du Développement Durable et des Relations Internationales (IDDRI), France Author-Name: Alexandre Szklo Author-X-Name-First: Alexandre Author-X-Name-Last: Szklo Author-WorkPlace-Name: The Alberto Luiz Coimbra Institute for Graduate Studies and Research, Federal University of Rio de Janeiro (COPPE/UFRJ), Brazil Author-Name: Henri Waisman Author-X-Name-First: Henri Author-X-Name-Last: Waisman Author-WorkPlace-Name: Institut du Développement Durable et des Relations Internationales (IDDRI), France Abstract: Governments worldwide have agreed that international climate policy should aim to limit the increase of global mean temperature to less than 2oC with respect to pre-industrial levels. The purpose of this paper is to analyse the emission reductions and related energy system changes in various countries in pathways consistent with the 2oC target. We synthesize and provide an overview of the national and regional information contained in different scenarios from various global models published over the last few years, as well as yet unpublished scenarios submitted by modelling teams participating in the MILES project (Modelling and Informing Low-Emission Strategies). We find that emissions in the mitigation scenarios are significantly reduced in all regions compared to the baseline without climate policies. The regional cumulative CO2 emissions show on average a 76% reduction between the baseline and 450 scenario. The 450 scenarios show a reduction of primary energy demand in all countries of roughly 30-40% compared to the baseline. In the baseline scenario, the contribution of low-carbon energy technology remains around 15%, i.e. similar as today. In the mitigation scenario, these numbers are scaled up rapidly towards 2050. Looking at air quality, sulphur dioxide and black carbon emissions are strongly reduced as a co-benefit of greenhouse gas emission reductions, in both developing and developed countries. However, black carbon emissions increase in countries that strongly rely on bioenergy to reach mitigation targets. Concerning energy security, energy importing countries generally experience a decrease in net-energy imports in mitigation scenarios compared to the baseline development, while energy exporters experience a loss of energy export revenues. Keywords: Climate policy, Mitigation, Global and national policy comparison Classification-JEL: Q54 Creation-Date: 201510