Template-Type: ReDIF-Paper 1.0 Number: 2018.01 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-001.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.01 Title: Some Financial Implications of Global Warming: an Empirical Assessment Author-Name: Claudio Morana Author-X-Name-First: Claudio Author-X-Name-Last: Morana Author-WorkPlace-Name: Università di Milano Bicocca, CeRP-Collegio Carlo Alberto and Rimini Centre for Economic Analysis Author-Name: Giacomo Sbrana Author-X-Name-First: Giacomo Author-X-Name-Last: Sbrana Author-WorkPlace-Name: NEOMA Business School Abstract: Concurrent with the rapid development of the market for catastrophe (cat) bonds, a steady decline in their risk premia has been observed. Whether the latter trend is consistent with the evolution of natural disasters risk is an open question. Indeed, a large share of outstanding risk capital in the cat bonds market appears to be exposed to some climate change-related risk as, for instance, hurricane risk, which global warming is expected to enhance. This paper addresses the above issue by assessing the global warming evidence, its implications for the natural environment and the drivers of cat bonds risk premia. We find that radiative forcing, i.e. the net insolation absorbed by the Earth, drives the warming trend in temperature anomalies and the trend evolution of natural phenomena, such as ENSO and Atlantic hurricanes, enhancing their disruptive effects. Hence, in the light of the ongoing contributions of human activity to radiative forcing, i.e., greenhouse gases emissions, natural disasters risk appears to be on a raising trend. Yet, the latter does not appear to have been accurately priced in the cat bonds market so far. In fact, while we find that the falling trend in cat bonds multiples is accounted by the expansionary monetary stance pursued by the Fed, we do also find evidence of significant undervaluation of natural disasters risk. Keywords: Cat Bonds, Risk Premia/Multiples, Temperature Anomalies, Global Warming, Radiative Forcing, ENSO, El Niño, Atlantic Hurricanes, Dynamic Conditional Correlation Model Classification-JEL: G11, G23, C32 Creation-Date: 201802 Template-Type: ReDIF-Paper 1.0 Number: 2018.02 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-002.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.02 Title: The Strength of Weak Leaders - An Experiment on Social Influence and Social Learning in Teams Author-Name: Berno Büchel Author-X-Name-First: Berno Author-X-Name-Last: Büchel Author-WorkPlace-Name: University of Fribourg, Economics Author-Name: Stefan Klößner Author-X-Name-First: Stefan Author-X-Name-Last: Klößner Author-WorkPlace-Name: Saarland University, Statistics and Econometrics Author-Name: Martin Lochmüller Author-X-Name-First: Martin Author-X-Name-Last: Lochmüller Author-WorkPlace-Name: Saarland University, Statistics and Econometrics Author-Name: Heiko Rauhut Author-X-Name-First: Heiko Author-X-Name-Last: Rauhut Author-WorkPlace-Name: University of Zurich, Sociology Abstract: We investigate how the selection process of a leader affects team performance with respect to social learning. We use a lab experiment in which an incentivized guessing task is repeated in a star network with the leader at the center. Leader selection is either based on competence, on self-confidence, or made at random. Teams with random leaders do not underperform compared to competent leaders, and they even outperform teams whose leader is selected based on self-confidence. The reason is that random leaders are better able to use the knowledge within the team. We can show that it is the declaration of the selection procedure which makes non-random leaders overly influential. We set up a horse race between several rational and naïve models of social learning to investigate the micro-level mechanisms. We find that overconfidence and conservatism contribute to the fact that overly influential leaders mislead their team. Keywords: Social Networks, Social Influence, Confidence, Overconfidence, Bayesian Updating, Naïve Learning, Sortition, Wisdom of Crowds Classification-JEL: D83, D85, C91 Creation-Date: 201802 Template-Type: ReDIF-Paper 1.0 Number: 2018.03 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-003.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.03 Title: Interpreting the Oil Risk Premium: do Oil Price Shocks Matter? Author-Name: Daniele Valenti Author-X-Name-First: Daniele Author-X-Name-Last: Valenti Author-WorkPlace-Name: University of Milan, Department of Economics, Management and Quantitative Methods Author-Name: Matteo Manera Author-X-Name-First: Matteo Author-X-Name-Last: Manera Author-WorkPlace-Name: FEEM and University of Milan-Bicocca, Department of Economics, Management and Statistics Author-Name: Alessandro Sbuelz Author-X-Name-First: Alessandro Author-X-Name-Last: Sbuelz Author-WorkPlace-Name: Catholic University of Milan, Department of Mathematical Sciences, Mathematical Finance and Econometrics Abstract: This paper provides an analysis of the link between the global market for crude oil and oil futures risk premium at the aggregate level. It offers empirical evidence on whether the compensation for risk required by the speculators depends on the type of the structural shock of interest. Understanding the response of the risk premium to unexpected changes in the price of oil can be useful to address some research questions, among which: what is the relationship between crude oil risk premium and unexpected rise in the price of oil? On average, what should speculators expect to receive as a compensation for the risk they are taking on? This work is based on a Structural Vector Autoregressive (SVAR) model of the crude oil market. Two main results emerge. First, the impulse response analysis provides evidence of a negative relationship between the risk premium and the changes in the price of oil triggered by shocks to economic fundamentals. Second, this analysis shows that the historical decline of the risk premium can be modelled as a part of endogenous effect of the oil market driven shocks. Keywords: Crude Oil Risk Premium, Bayesian SVAR Model, Oil Price Speculation Classification-JEL: Q40 ,Q41, Q43, E32 Creation-Date: 201802 Template-Type: ReDIF-Paper 1.0 Number: 2018.04 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-004.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.04 Title: Threshold Policy Effects and Directed Technical Change in Energy Innovation Author-Name: Lionel Nesta Author-X-Name-First: Lionel Author-X-Name-Last: Nesta Author-WorkPlace-Name: Université Côte d'Azur, CNRS, Gredeg, OFCE SciencesPo and SKEMA Business School Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: FEEM and CMCC Author-Name: Francesco Vona Author-X-Name-First: Francesco Author-X-Name-Last: Vona Author-WorkPlace-Name: OFCE SciencesPo, SKEMA Business School and Université Côte d'Azur (GREDEG) Abstract: This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country's relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries. Keywords: Directed Technical Change, Threshold Models, Environmental Policies, Policy Mix Classification-JEL: Q58, Q55, Q42, Q48, O34 Creation-Date: 201802 Template-Type: ReDIF-Paper 1.0 Number: 2018.05 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-005.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.05 Title: A Variational Approach to Network Games Author-Name: Emerson Melo Author-X-Name-First: Emerson Author-X-Name-Last: Melo Author-WorkPlace-Name: Indiana University, Department of Economics Abstract: This paper studies strategic interaction in networks. We focus on games of strategic substitutes and strategic complements, and departing from previous literature, we do not assume particular functional forms on players' payoffs. By exploiting variational methods, we show that the uniqueness, the comparative statics, and the approximation of a Nash equilibrium are determined by a precise relationship between the lowest eigenvalue of the network, a measure of players' payoff concavity, and a parameter capturing the strength of the strategic interaction among players. We apply our framework to the study of aggregative network games, games of mixed interactions, and Bayesian network games. Keywords: Network Games, Variational Inequalities, Lowest Eigenvalue, Shock Propagation Classification-JEL: C72, D85, H41, C61, C62 Creation-Date: 201802 Template-Type: ReDIF-Paper 1.0 Number: 2018.06 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-006.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.06 Title: Modelling the Global Price of Oil: Is there any Role for the Oil Futures-spot Spread? Author-Name: Daniele Valenti Author-X-Name-First: Daniele Author-X-Name-Last: Valenti Author-WorkPlace-Name: University of Milan, Department of Economics, Management and Quantitative Methods Abstract: In this work, we propose an analysis of the global market for crude oil based on a revised version of the Structural Vector Autoregressive (SVAR) model introduced by Kilian and Murphy (2014). On this respect, we replace the global proxy for above-ground crude oil inventories with the oil futures-spot spread. The latter is defined as the percent deviation of the oil futures price from the spot price of oil and it represents a measure of the convenience yield but expressed with an opposite sign. The following model provides an economic interpretation of the residual structural shock, namely the financial market shock. This new shock is designed to capture an unanticipated change in the benefit of holding crude oil inventories that is driven by financial incentives. We find evidence that financial market shocks have played an important role in explaining the rises in the price of oil during the period 2003-2008. Keywords: Global Market for Crude Oil, Bayesian SVAR Model, Oil Futures-spot Spread, Oil Classification-JEL: Q40 ,Q41, Q43, E32 Creation-Date: 201803 Template-Type: ReDIF-Paper 1.0 Number: 2018.07 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-007.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.07 Title: It’s So Hot in Here: Information Avoidance, Moral Wiggle Room, and High Air Conditioning Usage Author-Name: Giovanna d’Adda Author-X-Name-First: Giovanna Author-X-Name-Last: d'Adda Author-WorkPlace-Name: University of Milano, Department of Economics Author-Name: Yu Gao Author-X-Name-First: Yu Author-X-Name-Last: Gao Author-WorkPlace-Name: Politecnico di Milano, Department of Management and Economics Author-Name: Russell Golman Author-X-Name-First: Russell Author-X-Name-Last: Golman Author-WorkPlace-Name: Carnegie Mellon University, Department of Social and Decision Sciences Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Politecnico di Milano, Department of Management and Economics and FEEM Abstract: Environmental policies based on information provision are widespread, but have often proven ineffective. One possible explanation for information’s low effectiveness is that people actively avoid it. We conduct an online field experiment on air conditioning usage to test the theory of moral wiggle room, according to which people avoid information that would compel them to act morally, against the standard theory of information acquisition, and identify conditions under which each theory applies. In the experiment, we observe how exogenously imposing a feeling of moral obligation to reduce air conditioning usage and exploiting natural variation in the cost of doing so, given by outside temperature, influences subjects’ avoidance of information about their energy use impacts on the environment. Moral obligation increases information avoidance when it is hot outside, consistent with the moral wiggle room theory, but decreases it when outside temperature is low. Avoiding information positively correlates with air conditioning usage. These findings provide guidance about tailoring the use of nudges and informational tools to the decision environment. Keywords: Information Avoidance, Energy Efficiency, Moral Wiggle Room Classification-JEL: D4, Q4 Creation-Date: 201803 Template-Type: ReDIF-Paper 1.0 Number: 2018.08 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-008.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.08 Title: Internal and External Barriers to Energy Efficiency: Made-to-Measure Policy Interventions Author-Name: Cristina Cattaneo Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: This paper has two objectives. First it provides a correlation between internal and external barriers to energy efficiency and consumer behaviour related to two domains. It evaluates behaviour related to energy curtailment, which represents routine, repetitive effort to decrease consumption on a day-to-day basis. It also considers behaviour related to investments, which are one time actions such as purchasing new energy efficiency technologies.. Second, it assesses the effectiveness of the different interventions and programs in addressing the two types of barriers (internal and external) with the aim of informing the policy debate. By assessing the value of a large number of interventions, this paper is one of the first that combines in a unified framework the main findings of different disciplines, from economics to psychology. Keywords: Energy Efficiency, Energy Policy, Behavioural Economics Classification-JEL: D9, Q4, Q48 Creation-Date: 201803 Template-Type: ReDIF-Paper 1.0 Number: 2018.09 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-009.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.09 Title: The Response of European Energy Prices to ECB Monetary Policy Author-Name: Hipòlit Torró Author-X-Name-First: Hipòlit Author-X-Name-Last: Torró Author-WorkPlace-Name: University of Valencia, Department of Financial and Actuarial Economics Abstract: To our knowledge, this paper is the first to discuss the response of European energy commodity prices to unexpected monetary policy surprises from the European Central Bank. Using the Rigobon (2003) identification through heteroscedasticity method, we find a significant and positive response during the crisis period for Brent and coal. Similar results are obtained by other authors for European financial assets in this period. This result reinforces the idea that during this period, financial assets and some commodities positively responded to conventional and unconventional expansionary monetary policy measures, increasing confidence about the survival of the European monetary union. The remaining European energy commodities (electricity, EUAs, and natural gas prices) seem to be unaffected by monetary policy actions. We think these results are of interest to those economic agents and institutions involved in European energy markets and are especially important for the European Central Bank in order to predict the consequences of its monetary policy on the inflation objective. Keywords: Brent, Monetary Policy, European Central Bank, Energy Commodities Classification-JEL: C26, E58, G13, Q41 Creation-Date: 201803 Template-Type: ReDIF-Paper 1.0 Number: 2018.10 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-010.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.10 Title: The Changing Role of Natural Gas in Nigeria Author-Name: Giovanni Occhiali Author-X-Name-First: Giovanni Author-X-Name-Last: Occhiali Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Giacomo Falchetta Author-X-Name-First: Giacomo Author-X-Name-Last: Falchetta Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Università Cattolica del Sacro Cuore Abstract: Nigeria is richly endowed with energy resources, and the Government has been making large profits from their export. However, windfall revenues have also been affecting the Government’s responsiveness and accountability towards the people and they have brought it into collusive relationship with international oil and gas companies operating in the country. A skewed distribution of petroleum resources costs and benefits, as well as the dependence on exports exposing the public finances to volatility in the international markets have represented further major issues. As a result, energy access and power generation still represent urgent issues for action in the country. Solid biomass accounts for 74% of the primary energy consumption, while the electrification rate stands at 34% in rural areas. Active power plants are mainly gas-fired, but they face capacity, maintenance, and financial constraints. While historically natural gas has been disregarded or flared into the atmosphere because it was considered a by-product of oil due to lacking market conditions and processing capacity, today the development of a domestic market for natural gas is seen as a key priority to guarantee energy security and boost industrial development in Nigeria. A more efficient and equitable governance of the sector and management of export revenues can play a major role in this sense. In this context, this paper highlights the main current issues and underpins key policy conditions for this transition to take place in Nigeria. Keywords: Nigeria, Natural Gas, Domestic Energy Development, Government Policy, Resource Governance Classification-JEL: Q32, Q41, Q48 Creation-Date: 201803 Template-Type: ReDIF-Paper 1.0 Number: 2018.11 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-011.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.11 Title: Climate Change and Kuznets Curve: Portuguese Experience Author-Name: Nuno Carlos Leitão Author-X-Name-First: Nuno Carlos Author-X-Name-Last: Leitão Author-WorkPlace-Name: Polytechnic Institute of Santarém, ESGTS and CEFAGE-UE, Évora University Abstract: The climate change has inspired the interest of the academic community in the most diverse areas of knowledge. This study tests and revisited the environmental Kuznets curve assumptions for Portugal. The econometric strategy used in this research is time series (ARIMA model, OLS estimator, ARCH regression, VAR model, and Granger causality) for the time period 1980-2013.The econometric results show that the income per capita and squared income per capita are according to the expected signs, i.e. a positive impact of income per capita on carbon dioxide emissions, and a negative effect of squared income per capita on carbon dioxide emissions. The empirical study also demonstrates that Portugal presents a dependence on energy consumption. The openness trade and foreign direct investment are negatively correlated with carbon dioxide emissions. Keywords: Environmental Kuznets Curve, Climate Changes, Time Series and Openness Trade Classification-JEL: C50, Q43, Q53 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.12 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-012.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.12 Title: Bi and Branching Strict Nash Networks in Two-way Flow Models: a Generalized Sufficient Condition Author-Name: Banchongsan Charoensook Author-X-Name-First: Banchongsan Author-X-Name-Last: Charoensook Author-WorkPlace-Name: Keimyung Adams College, Keimyung University, Department of International Business Abstract: Bi and branching networks are two classes of minimal networks often found in the literatures of two-way flow Strict Nash networks. Why so? In this paper, we answer this question by establishing a generalized condition that holds together many models in the literature, and then show that this condition is sufficient to guarantee their common result: every non-empty component of minimal SNN is either a branching or Bi network. This paper, therefore, contributes to the literature by providing a generalization of several existing works in the literature of two-way flow Strict Nash networks. Keywords: Network Formation, Strict Nash Network, Two-way Flow Network, Branching Network Classification-JEL: C72, D85 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.13 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-013.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.13 Title: Investment-Uncertainty Relationship in the Oil and Gas Industry Author-Name: Maryam Ahmadi Author-X-Name-First: Maryam Author-X-Name-Last: Ahmadi Author-WorkPlace-Name: University of Milan-Bicocca 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: Institute for Management and Planning Studies (IMPS) Abstract: Recent studies on oil market demonstrate endogeneity of oil price by modeling it as a function of consumption and precautionary demands and producers’ supply. However, studies analysing the effect of oil price uncertainty on investment, do not disentangle uncertainties raised by underlying components playing a role in oil market. Accordingly, this study investigates the relationship between investment and uncertainty for a panel of U.S. firms operating in oil and gas industry with a new approach. We decompose oil price volatility to be driven by structural shocks that are recognized in oil market literature, over and above other determinants, to study whether investment uncertainty relationship depends on the drivers of uncertainty. Our findings suggest that oil market uncertainty lowers investment only when it is caused by global consumption demand shocks. Stock market uncertainty is found to have a negative effect on investment with a year of delay. The results suggest no positive relation between irreversible investment and uncertainty, but interestingly, positive relation exists for reversible investment. This finding is in line with the option theory of investment and implies that irreversibility effect of increased uncertainty dominates the traditional convexity effect. Keywords: Oil Market, Investment, Uncertainty, SVAR-GARCH Classification-JEL: C3, G11, Q41, Q43 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.14 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-014.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.14 Title: The Chinese are Here: Firm Level Analysis of Import Competition and Performance in Sub-Saharan Africa Author-Name: Christian K. Darko Author-X-Name-First: Christian K. Author-X-Name-Last: Darko Author-WorkPlace-Name: University of Birmingham Author-Name: Giovanni Occhiali Author-X-Name-First: Giovanni Author-X-Name-Last: Occhiali Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Overseas Development Institute Author-Name: Enrico Vanino Author-X-Name-First: Enrico Author-X-Name-Last: Vanino Author-WorkPlace-Name: London School of Economics Abstract: This study uses firm level data on 19 Sub-Saharan Africa countries between 2004 and 2016 to provide a rigorous analysis on the impact of Chinese import competition on productivity, skills, and performance of firms., We measure import competition and ports accessibility at the city-industry level to identify the relevance of firms’ location in determining the impact of Chinese imports competition. To address endogeneity concerns, a time-varying instrument for Chinese imports based on the interaction between an exogenous geographic characteristic and a shock in transportation technology is developed. The results show that imports competition has a positive impact on firm performance, mainly in terms of productivity catch-up and skills upgrading. Of particular interest is the finding that the effects of import competition from China are stronger for more remote firms that have lower port accessibility, an indication that Chinese imports in remote areas improves productivity of laggard firms, employment, and intensity of skilled workers. Our findings indicate that African firms are improving their performance as a consequence of the higher Chinese import intensity, mainly through direct competition and the use of higher quality inputs of production sourced from China. Keywords: Import Competition, Productivity Catch-up, Trade Infrastructure, Skills, Employment, Sub-Saharan Africa, China Classification-JEL: F16, F61, F63, R11, J21, J24 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.15 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-015.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.15 Title: Repeated Shocks and Preferences for Redistribution Author-Name: Giovanni Gualtieri Author-X-Name-First: Giovanni Author-X-Name-Last: Gualtieri Author-WorkPlace-Name: National Research Council, Institute of Biometeorology Author-Name: Marcella Nicolini Author-X-Name-First: Marcella Author-X-Name-Last: Nicolini Author-WorkPlace-Name: University of Pavia, Department of Economics and Management Author-Name: Fabio Sabatini Author-X-Name-First: Fabio Author-X-Name-Last: Sabatini Author-WorkPlace-Name: Sapienza University of Rome, Department of Economics and Law Author-Name: Luca Zamparelli Author-X-Name-First: Luca Author-X-Name-Last: Zamparelli Author-WorkPlace-Name: Sapienza University of Rome, Department of Economics and Law Abstract: A society that believes wealth to be determined by random “luck” rather than by merit, demands more redistribution. The theoretical literature shows that any increase in the volatility of income caused by unpredictable adverse shocks implies a higher support for redistribution. We present evidence of this behavior by exploiting a natural experiment provided by the L’Aquila earthquake in 2009, which hit a large area of Central Italy through a series of destructive shakes over eight days. Matching detailed information on the ground acceleration registered during each shock with survey data about individual opinions on redistribution we show that the average intensity of the shakes is associated with subsequent stronger beliefs that, for a society to be fair, income inequalities should be levelled by redistribution. The shocks, however, are not all alike. We find that only the last three shakes - occurred on the fourth and the eighth day of the earthquake - have a statistically significant impact. Overall, we find that the timing and repetition of the shock play a role in shaping redistributive preferences. Keywords: Redistribution, Inequality, Natural Disasters, Earthquakes, Multiple Shocks Classification-JEL: H10, H53, D63, D69, Z1 Creation-Date: 201901 Template-Type: ReDIF-Paper 1.0 Number: 2018.16 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-016.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.16 Title: Periurban Agriculture: do the Current EU Agri-environmental Policy Programmes Fit with it? Author-Name: Linda Arata Author-X-Name-First: Linda Author-X-Name-Last: Arata Author-WorkPlace-Name: Università Cattolica del Sacro Cuore Author-Name: Gianni Guastella Author-X-Name-First: Gianni Author-X-Name-Last: Guastella Author-WorkPlace-Name: Università Cattolica del Sacro Cuore and Fondazione ENI Enrico Mattei Author-Name: Stefano Pareglio Author-X-Name-First: Stefano Author-X-Name-Last: Pareglio Author-WorkPlace-Name: Università Cattolica del Sacro Cuore and Fondazione ENI Enrico Mattei Author-Name: Riccardo Scarpa Author-X-Name-First: Riccardo Author-X-Name-Last: Scarpa Author-WorkPlace-Name: University of Durham, University of Verona and University of Waikato Author-Name: Paolo Sckokai Author-X-Name-First: Paolo Author-X-Name-Last: Sckokai Author-WorkPlace-Name: Università Cattolica del Sacro Cuore Abstract: In the European Union (EU) periurban agriculture is under the same agri-environmental policy regime designed for general agriculture. We argue that the specific needs of periurban agriculture may justify ad hoc agri-environmental policy measures. We present results from a Choice Experiment (CE) performed on a sample of 600 people living in the municipality of Milan, which was designed to assess the willingness to pay (WTP) for ecological benefits generated by four agri-environmental practices implementable in the periurban area and already included in the Rural Development Programmes of the Lombardy region. Results suggest that a large population share is willing to pay to support an increase in the use of the agricultural practices studied with an average WTP ranging between 5.6 to 16.3 euro/person/year, according to the type of practice. These results are in contrast with their current low level of adoption. The sub-optimal uptake rate is likely due to an insufficient per hectare compensating payment, which is too low to cover the income foregone consequent to the adoption of sustainable agriculture measures in this area. The mismatch between the low uptake rate and the high social benefits generated by the four agri-environmental agricultural practices sheds light on the need to design agri-environmental policy programmes specifically targeted to periurban areas, where the costs of compliance with AEMs are high and the social benefits of their adoption are large. Keywords: Periurban Agriculture, Agri-environmental Policy, Choice Experiment, Random Parameter Logit Model, Error Component, WTP Space Classification-JEL: Q18, Q57, C35 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.17 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-017.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.17 Title: The Impact of China’s Electricity Deregulation on Coal and Power Industries: Two-stage Game Modeling Approach Author-Name: HuiHui Liu Author-X-Name-First: HuiHui Author-X-Name-Last: Liu Author-WorkPlace-Name: Academy of Chinese Energy Strategy, China University of Petroleum Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: Ma Yinchu School of Economics and China Academy of Energy, Environmental and Industrial Economics, Tianjin University Author-Name: ZhanMing Chen Author-X-Name-First: ZhanMing Author-X-Name-Last: Chen Author-WorkPlace-Name: Department of Energy Economics, School of Economics, Renmin University of China Author-Name: DeSheng Dou Author-X-Name-First: DeSheng Author-X-Name-Last: Dou Author-WorkPlace-Name: Academy of Chinese Energy Strategy, China University of Petroleum Abstract: The regulated price mechanism in China’s power industry has attracted much criticism because of its incapability to optimize the allocation of resources. To build an “open, orderly, competitive and complete” power market system, the Chinese government launched an unprecedented marketization reform in 2015 to deregulate the electricity price. This paper examines the impact of the electricity price deregulation in the industry level. We first construct two-stage dynamic game models by taking the coal and coal-fired power industries as the players. Using the models, we compare analytically the equilibriums with and without electricity regulation, and examine the changes in electricity price, electricity generation, coal price and coal traded quantity. The theoretical analyses show that there are three intervals of the regulated electricity sales prices which influence the impact of electricity price deregulation. Next, we collect empirical data to estimate the parameters in the game models, and simulate the influence of electricity deregulation on the two industries in terms of market outcome and industrial profitability. Our results suggest that the actual regulated electricity price falls within the medium interval of the theoretical results, which means the price deregulation will result in higher electricity sales price but lower coal price, less coal traded amount and less electricity generation amount. The robustness analysis shows that our results hold with respect to the electricity generation efficiency and price elasticity of electricity demand. Keywords: China, Electricity Deregulation, Reform, Coal Industry, Power Industry Classification-JEL: Q41, Q43, Q48, L94, L98 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.18 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-018.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.18 Title: Energy Price Reform in China Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: Ma Yinchu School of Economics and China Academy of Energy, Environmental and Industrial Economics, Tianjin University Abstract: The Chinese leadership has determined to assign the market a decisive role in allocating resources. To have the market to play that role, getting the energy prices right is crucial because this sends clear signals to both producers and consumers of energy. While the overall trend of China’s energy pricing reform since 1984 has been moving away from the prices set by the central government in the centrally planned economy and towards a more market-oriented pricing mechanism, the pace and scale of the reform differ across energy types. This article discusses the evolution of price reforms for coal, petroleum products, natural gas, electricity and renewable power in China, and provides some analysis of these energy price reforms, in order to have the market to play a decisive role in allocating resources and help China’s transition to a low-carbon economy. Keywords: Energy Prices, Tiered Prices, Differentiated Tariffs, Coal, Electricity, Natural Gas, Petroleum Products, Renewable Power, Desulfurization and Denitrification, State-owned Enterprises, China Classification-JEL: H23, H71, O13, O53, P22, Q41, Q43, Q48, Q53, Q58 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.19 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-019.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.19 Title: Recalculating the Social Cost of Carbon Author-Name: Soheil Shayegh Author-X-Name-First: Soheil Author-X-Name-Last: Shayegh Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) and Bocconi University Author-Name: Simon Dietz Author-X-Name-First: Simon Author-X-Name-Last: Dietz Author-WorkPlace-Name: London School of Economics Author-Name: Johannes Emmerling Author-X-Name-First: Johannes Author-X-Name-Last: Emmerling Author-WorkPlace-Name: Fondazione Eni Enrico Mattei (FEEM) Author-Name: Christoph Hambel Author-X-Name-First: Christoph Author-X-Name-Last: Hambel Author-WorkPlace-Name: Goethe University Frankfurt Author-Name: Svenn Jensen Author-X-Name-First: Svenn Author-X-Name-Last: Jensen Author-WorkPlace-Name: Oslo Metropolitan University Author-Name: Holger Kraft Author-X-Name-First: Holger Author-X-Name-Last: Kraft Author-WorkPlace-Name: Goethe University Frankfurt 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 Author-Name: Christian Traeger Author-X-Name-First: Christian Author-X-Name-Last: Traeger Author-WorkPlace-Name: University of Oslo and University of California Berkeley Author-Name: Rick Van der Ploeg Author-X-Name-First: Rick Author-X-Name-Last: Van der Ploeg Author-WorkPlace-Name: University of Oxford Abstract: Over the last few decades, integrated assessment models (IAM) have provided insight into the relationship between climate change, economy, and climate policies. The limitations of these models in capturing uncertainty in climate parameters, heterogeneity in damages and policies, have given rise to skepticism about the relevance of these models for policy making. IAM community needs to respond to these critics and to the new challenges posed by developments in the policy arena. New climate targets emerging from the Paris Agreement and the uncertainty about the signatories’ commitment to Nationally Determined Contributions (NDCs) are prime examples of challenges that need to be addressed in the next generation of IAMs. Given these challenges, calculating the social cost of carbon requires a new framework. This can be done by computing marginal abatement cost in cost-effective settings which provides different results than those calculated using constrained cost-benefit analysis. Here we focus on the areas where IAMs can be deployed to asses uncertainty and risk management, learning, and regional heterogeneity in climate change impacts. Keywords: Integrated Assessment Models, Climate Policy, Carbon, Uncertainty Classification-JEL: Q54 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.20 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-020.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.20 Title: International Environmental Agreements - Stability with Transfers among Countries Author-Name: Effrosyni Diamantoudi Author-X-Name-First: Effrosyni Author-X-Name-Last: Diamantoudi Author-WorkPlace-Name: Concordia University Author-Name: Eftichios Sartzetakis Author-X-Name-First: Eftichios Author-X-Name-Last: Sartzetakis Author-WorkPlace-Name: University of Macedonia Author-Name: Stefania Strantza Author-X-Name-First: Stefania Author-X-Name-Last: Strantza Author-WorkPlace-Name: Concordia University Abstract: The paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries, allowing for transfers. We employ a two-stage, non-cooperative model of coalition formation. In the first stage each country decides whether or not to join the agreement, while in the second stage countries choose their emissions simultaneously. Coalition members agree also to share the gains from cooperation in the first stage. We use quadratic benefit and environmental damage functions and assume two types of countries differing in their sensitivity to the global pollutant. In examining the impact of transfers on the coalition size, we apply the notion of Potential Internal Stability (PIS). Results show that transfers can increase cooperation among heterogeneous countries. However, the increase in the coalition size, relative to the case without transfers, comes only from countries belonging to the type with the lower environmental damages, which are drawn into the coalition by the transfers offered. Furthermore, the level of cooperation increases with the degree of heterogeneity. However, the reduction in aggregate emissions achieved by the enlarged coalition is very small leading to dismal improvement in welfare, which confirms the "paradox of cooperation". Keywords: International Environmental Agreements, Heterogeneous Countries, Transfers Classification-JEL: Q5, Q54 Creation-Date: 201805 Template-Type: ReDIF-Paper 1.0 Number: 2018.21 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-021.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.21 Title: The Effect of Forest Access on the Market for Fuelwood in India Author-Name: Branko Boškovic Author-X-Name-First: Branko Author-X-Name-Last: Boškovic Author-WorkPlace-Name: School of Business, University of Alberta Author-Name: Ujjayant Chakravorty Author-X-Name-First: Ujjayant Author-X-Name-Last: Chakravorty Author-WorkPlace-Name: Tufts University and Toulouse School of Economics Author-Name: Martino Pelli Author-X-Name-First: Martino Author-X-Name-Last: Pelli Author-WorkPlace-Name: Department of Economics, University of Sherbrooke Author-Name: Anna Risch Author-X-Name-First: Anna Author-X-Name-Last: Risch Author-WorkPlace-Name: GAEL, University Grenoble Alpes Abstract: Fuelwood collection is often cited as the most important cause of deforestation in developing countries. Use of fuelwood in cooking is a leading cause of indoor air pollution. Using household data from India, we show that households located farther away from the forest spend more time collecting. Distant households are likely to sell more fuelwood and buy less. That is, lower access to forests increases fuelwood collection and sale. This counter-intuitive behavior is triggered by two factors: lower access to forests (a) increases the fixed costs of collecting, which in turn leads to more collection; and (b) drives up local fuelwood prices, which makes collection and sale more profitable. We quantify both these effects. Using our estimates we show that a fifth of the fuelwood collected is consumed outside of rural areas, in nearby towns and cities. Our results imply that at the margin, fuelwood scarcity may lead to increased collection and sale, and exacerbate forest degradation. Keywords: Energy Access, Cooking Fuels, Deforestation, Forest Cover, Fuelwood Collection Classification-JEL: D10, O13, Q42 Creation-Date: 201807 Template-Type: ReDIF-Paper 1.0 Number: 2018.22 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-022.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.22 Title: International Environmental Agreements - The Impact of Heterogeneity among Countries on Stability Author-Name: Effrosyni Diamantoudi Author-X-Name-First: Effrosyni Author-X-Name-Last: Diamantoudi Author-WorkPlace-Name: Department of Economics, Concordia University Author-Name: Eftichios Sartzetakis Author-X-Name-First: Eftichios Author-X-Name-Last: Sartzetakis Author-WorkPlace-Name: Department of Economics, University of Macedonia Author-Name: Stefania Strantza Author-X-Name-First: Stefania Author-X-Name-Last: Strantza Author-WorkPlace-Name: Department of Economics, Concordia University Abstract: The present paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries in a twostage emission game. In the first stage each country decides whether or not to join the agreement, while in the second stage the quantity of emissions is chosen simultaneously by all countries. We use quadratic benefit and environmental damage functions and assume k types of countries that differ in their sensitivity to the global pollutant. We find that the introduction of heterogeneity does not yield larger stable coalitions. In particular, we show that, in the case of two types, when stable coalitions exist their size is very small, and, if the asymmetry is strong enough, they include only one type of countries. Moreover, heterogeneity can reduce the scope of cooperation relative to the homogeneous case. We demonstrated that introducing asymmetry into a stable, under symmetry, agreement can disturb stability. Keywords: Environmental Agreements Classification-JEL: D6, Q5, C7 Creation-Date: 201807 Template-Type: ReDIF-Paper 1.0 Number: 2018.23 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-023.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.23 Title: International Environmental Agreements and Trading Blocks - Can Issue Linkage Enhance Cooperation? Author-Name: Effrosyni Diamantoudi Author-X-Name-First: Effrosyni Author-X-Name-Last: Diamantoudi Author-WorkPlace-Name: Concordia University Author-Name: Eftichios Sartzetakis Author-X-Name-First: Eftichios Author-X-Name-Last: Sartzetakis Author-WorkPlace-Name: University of Macedonia Author-Name: Stefania Strantza Author-X-Name-First: Stefania Author-X-Name-Last: Strantza Author-WorkPlace-Name: Concordia University Abstract: This paper examines the stability of International Environmental Agreements (IEAs) in an economy with trade. We extent the basic model of the IEAs by letting countries choose emission taxes and import tariffs as their policy instruments in order to manage climate change and control trade. We define the equilibrium of a three-stage emission game. In the first stage, each country decides whether or not to join the agreement. In the second stage, countries choose simultaneously - cooperatively or non-cooperatively - tariff and tax levels. In the third stage, taking countries’ decisions as given, firms compete a la Cournot in the product markets. Numerical analysis illustrates that the interaction between trade and environment policies is essential in enhancing cooperation. Contrary to the IEA model, stable agreements are larger and more efficient in reducing aggregate emissions and improving welfare. Moreover, the analysis shows that the size of a stable agreement increases in the number of countries affected by the externalities. Keywords: Environmental Agreements Classification-JEL: D6, Q5, C7 Creation-Date: 201807 Template-Type: ReDIF-Paper 1.0 Number: 2018.24 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-024.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.24 Title: Three Layers of Uncertainty: an Experiment Author-Name: Ilke Aydogan Author-X-Name-First: Ilke Author-X-Name-Last: Aydogan Author-WorkPlace-Name: Department of Economics, Bocconi University Author-Name: Lo?c Berger Author-X-Name-First: Lo?c Author-X-Name-Last: Berger Author-WorkPlace-Name: IESEG School of Management and Bocconi University Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Department of Economics, Bocconi University and Fondazione Eni Enrico Mattei (FEEM) Author-Name: Ning Liu Author-X-Name-First: Ning Author-X-Name-Last: Liu Author-WorkPlace-Name: Department of Economics, Bocconi University Abstract: We experimentally explore decision-making under uncertainty using a framework that decomposes uncertainty into three distinct layers: (1) physical uncertainty, entailing inherent randomness within a given probability model, (2) model uncertainty, entailing subjective uncertainty about the probability model to be used and (3) model misspecification, entailing uncertainty about the presence of the true probability model among the set of models considered. Using a new experimental design, we measure individual attitudes towards these different layers of uncertainty and study the distinct role of each of them in characterizing ambiguity attitudes. In addition to providing new insights into the underlying processes behind ambiguity aversion -failure to reduce compound probabilities or distinct attitudes towards unknown probabilities- our study provides the first empirical evidence for the intermediate role of model misspecification between model uncertainty and Ellsberg in decision-making under uncertainty. Keywords: Ambiguity Aversion, Reduction of Compound Lotteries, Non-expected Utility, Model Uncertainty, Model Misspecification Classification-JEL: D81 Creation-Date: 201807 Template-Type: ReDIF-Paper 1.0 Number: 2018.25 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-025.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.25 Title: Do Global Financial Markets Capitalise Sustainability? Evidence of a Quick Reversal Author-Name: Fabio Moliterni Author-X-Name-First: Fabio Author-X-Name-Last: Moliterni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: This study investigates the growing importance of sustainability in equity markets by estimating whether company commitment to sustainability matters in corporate valuation. The spreading concern for social and environmental issues, and especially for the material risks of climate change, induces policy to encourage companies to prioritise sustainability in their decision making. There is growing evidence that points to a rationale for a profit-driven response to social and environmental problems, uncovering the role of sustainability in investors’ decisions. Exploring a panel of 3,311 listed companies in 58 countries for the period 2010-2016, this study reveals that sustainability contributes to the creation of market value for listed companies, over the considered period. Furthermore, it investigates how this relationship changes according to environmental policy stringency and sector sensitivity to climate policies. Keywords: Corporate Sustainability, Sustainable Investing, Climate-change, ESG Disclosures Classification-JEL: O16, Q54, Q56, G32 Creation-Date: 201807 Template-Type: ReDIF-Paper 1.0 Number: 2018.26 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-026.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.26 Title: Natural Resources, Economic Growth and Geography 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 (IEB) Author-Name: Fernando Pueyo Author-X-Name-First: Fernando Author-X-Name-Last: Pueyo Author-WorkPlace-Name: Universidad de Zaragoza Abstract: In this paper we discuss the relationship between economic growth and natural resources at a global level, taking into account geography. With this aim, our model integrates elements of the theories of endogenous growth, natural resources and new economic geography. We find that an increase in the world growth rate can lead to a higher depletion of the natural resources following an increase in the world demand due to expansion in population. However, the consideration of geography and growth mechanisms make the relationship between growth and natural resources more complex, and can even lead to the opposite conclusion when the forces behind growth are different from world demand. Indeed, either a reduction in transport costs or an increase in R&D productivity appears to be able to generate a faster growth compatible with a lower depletion of natural resources. Keywords: Industrial Location, Endogenous Growth, Renewable Resource, Geography Classification-JEL: F43, O30, Q20, R12 Creation-Date: 201808 Template-Type: ReDIF-Paper 1.0 Number: 2018.27 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-027.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.27 Title: China’s Energy Policy & Investments and their Impact on the Sub-Saharan African Region Author-Name: Valentin Grimoux Author-X-Name-First: Valentin Author-X-Name-Last: Grimoux Author-WorkPlace-Name: Johns Hopkins University Abstract: This research provides a grasp of China’s energy needs and their implications for SSA countries in order to give a balanced and better understanding of its role on the continent. More specifically, the aim is to understand why and how China is involved in the SSA energy sector and what are the benefits and the costs of its engagement. On the one hand, a clearer knowledge of how the Chinese investment system works will help to assess the scope of the Chinese strategy and the role of the government for the set of actors that are committed in Africa. On the other hand, by digging deeper into Chinese energy projects in Africa, one will be able to appreciate to what extent this relationship can be considered a win-win, whereby each party is equally benefitting from cooperation by ensuring the smooth development of the African and Chinese economies. Keywords: Economic Development, Energy Security, International Cooperation, Investments Classification-JEL: O13, Q4 Creation-Date: 201808 Template-Type: ReDIF-Paper 1.0 Number: 2018.28 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-028.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.28 Title: Are Renewables Profitable in 2030? A Comparison between Wind and Solar across Europe Author-Name: Valentin Bertsch Author-X-Name-First: Valentin Author-X-Name-Last: Bertsch Author-WorkPlace-Name: Economic and Social Research Institute (ESRI), Dublin, Trinity College Dublin, German Aerospace Center (DLR), University of Stuttgart Author-Name: Valeria Di Cosmo Author-X-Name-First: Valeria Author-X-Name-Last: Di Cosmo Author-WorkPlace-Name: Fondazione Enrico Mattei, Milan, Economic and Social Research Institute (ESRI) Dublin Abstract: The European Union has set ambitious targets for emission reduction and the penetration of renewable energy, including the electricity generation sector as one of the major emitters of CO2. After a period of subsidy-driven investments, the costs of renewables decreased strongly making investments more attractive. Since European countries differ strongly in terms of natural resources, we analyse the profitability of wind onshore and offshore and solar PV across Europe to determine where it is optimal to invest in the future and to understand which factors drive the profitability of the investments. We use a power systems model to simulate the whole European electricity market in 2030. Using the renewable revenues determined by the model, we calculate the internal rate of return to analyse how profitable each technology is in each country. We find that investments in the considered technologies are not homogeneously profitable across Europe. This suggests that cooperation between European countries can be expected to achieve the overall targets at lower costs than nationally-driven approaches. We also find that in many countries, wind onshore and solar PV are profitable by 2030 in absence of any financial support. Wind offshore does not seem to be profitable without financial support. Keywords: Renewable Energy Targets, Renewable Electricity Generation, RES-E Target, EU Electricity Market, Profitability Classification-JEL: Q4, Q42 Creation-Date: 201808 Template-Type: ReDIF-Paper 1.0 Number: 2018.29 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-029.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.29 Title: Self-Enforcing International Environmental Agreements: Adaptation and Complementarity Author-Name: Santiago J. Rubio Author-X-Name-First: Santiago J. Author-X-Name-Last: Rubio Author-WorkPlace-Name: Department of Economic Analysis and ERI-CES, University of Valencia Abstract: This paper studies the impact of adaptation on the stability of an international emission agreement. To address this issue we solve a three-stage coalition formation game where in the first stage countries decide whether or not to sign the agreement. Then, in the second stage, signatories (playing together) and non-signatories (playing individually) select their levels of emissions. Finally, in the third stage, each country decides on its level of adaptation non co-operatively. We solve this game for two models. For both, it is assumed that damages are linear with respect to emissions which guarantee that emissions are strategic complements in the second stage of the game. However, for the first model adaptation reduces the marginal damages of emissions in a multiplicative way whereas for the second model the reduction occurs in an additive way. Our analysis shows that the models yield different predictions in terms of participation. In the first case, we find that the larger the gains of full cooperation, the larger the cooperation. However, in the second case, the unique stable agreement we find consists of three countries regardless of the gains of full cooperation. These results suggest that complementarity can play in favor of cooperation but that it is not a sufficient condition to obtain more participation in an emission agreement. Finally, we would like to point out that our research indicates that the way adaptation reduces damages plays a critical role over the outcome of the coalition formation game. Keywords: International Environmental Agreements, Mitigation-Adaptation Game, Strategic Complements Classification-JEL: D62, F53, H41, Q54 Creation-Date: 201808 Template-Type: ReDIF-Paper 1.0 Number: 2018.30 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-030.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.30 Title: Growing in the Womb: The Effect of Seismic Activity on Fetal Growth Author-Name: Rocío Álvarez-Aranda Author-X-Name-First: Rocío Author-X-Name-Last: Álvarez-Aranda Author-WorkPlace-Name: Universidad Central de Chile Author-Name: Serafima Chirkova Author-X-Name-First: Serafima Author-X-Name-Last: Chirkova Author-WorkPlace-Name: Universidad de Santiago de Chile Author-Name: José Gabriel Romero Author-X-Name-First: José Gabriel Author-X-Name-Last: Romero Author-WorkPlace-Name: Universidad de Santiago de Chile Abstract: We study how prenatal maternal stress, caused by sustained seismic activity, affects birth outcomes in Chile during the period 2011-2015. A mother-fixed-effect model together with the spatiotemporal variation of earthquakes in Chile allow us to deal with identification issues that have obscured previous estimates. Our findings show that prenatal maternal stress seems to affect fetal growth, because infants born to mothers exposed to earth tremors in early and/or mid gestation are more likely to be large for gestational age. The estimates suggest that relatively poorer Chilean mothers are more vulnerable to earthquakes, because their babies seem to drive the reported impacts on fetal growth. We discuss and provide evidence that suggests a possible mechanism that explains the varying results across socioeconomic status. Mothers with diabetes and/or hypertension are more likely to have large-for-gestational-age babies. Exposure to earth tremors seems to increase the incidence of these afflictions among the affected population, with the observed impact on diabetes being relatively higher among women with lower socio-economic status. Keywords: Maternal Stress, Birth Outcomes, Natural Disasters, Mother-Fixed-Effects Classification-JEL: C23, I12, J13 Creation-Date: 201812 Template-Type: ReDIF-Paper 1.0 Number: 2018.31 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-031.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.31 Title: From Forward to Spot Prices: Producers, Retailers and Loss Averse Consumers in Electricity Markets Author-Name: Valeria Di Cosmo Author-X-Name-First: Valeria Author-X-Name-Last: Di Cosmo Author-WorkPlace-Name: Economic and Social Research Institute and Fondazione Eni Enrico Mattei Author-Name: Elisa Trujillo-Baute Author-X-Name-First: Elisa Author-X-Name-Last: Trujillo-Baute Author-WorkPlace-Name: University of Barcelona and Barcelona Institute of Economics Abstract: The benefits of smoothing demand peaks in the electricity market has been widely recognised. European countries such Spain and some of the Scandinavian countries have recently given to the consumers the possibility to face the spot prices instead of having a fixed tariffs determined by retailers. This paper develops a theoretical model to study the relations between risk averse consumers, retailers and producers, both in the spot and in the forward markets when consumers are able to choose between fixed tariffs and the wholesale prices. The model is calibrated on a real market case - Spain - where since 2014 spot tariffs were introduced beside the flat tariffs for household consumers. Finally, simulations of agents behavior and markets performance, depending on consumers risk aversion and the number of producers, are used to analyse the implications from the model. Our results show that the quantities the retailers and the producers trade in the forward market are positively related with the loss aversion of consumers. The quantities bought by the retailers in the forward market are negatively related with the skewness of the spot prices. On the contrary, quantity sold forward by producers are positively related with the skewness of the spot prices (high probability of getting high prices increase the forward sale) and with the total market demand. In the spot market, the degree of loss aversion of consumers determine the quantity the retailers buy in the spot market but does not have a direct effect on the spot prices. Keywords: Electricity Spot Market, Electricity Forward Market, Risk Aversion Classification-JEL: D40, L11, Q41 Creation-Date: 201812 Template-Type: ReDIF-Paper 1.0 Number: 2018.32 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-032.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.32 Title: Termination Fees and Contract Design in Public-Private Partnerships Author-Name: Marco Buso Author-X-Name-First: Marco Author-X-Name-Last: Buso Author-WorkPlace-Name: Interuniversity Centre for Public Economics (CRIEP) and Interdepartmental Centre G. Levi Cases for Energy, Economics and Technology, University of Padova Author-Name: Cesare Dosi Author-X-Name-First: Cesare Author-X-Name-Last: Dosi Author-WorkPlace-Name: Department of Economics and Management, University of Padova and Interuniversity Centre for Public Economics (CRIEP) Author-Name: Michele Moretto Author-X-Name-First: Michele Author-X-Name-Last: Moretto Author-WorkPlace-Name: Department of Economics and Management, University of Padova Abstract: We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally trade-off direct subsidies for capital investment against the right of opting out the PPP. In particular, the exit option, acting as a risk-sharing device, can soften agency problems and increase the value-for-money of public spending, even while taking into account the budgetary resources needed to resume the project in the event of early termination by the contractor. Keywords: Public Projects, Public-private Partnerships, Adverse Selection, Real Options, Investment Timing, Termination Fees Classification-JEL: D81, D82, D86, H54 Creation-Date: 201812 Template-Type: ReDIF-Paper 1.0 Number: 2018.33 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-033.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.33 Title: Capital Accumulation, Green Paradox, and Stranded Assets: An Endogenous Growth Perspective Author-Name: Wei Jin Author-X-Name-First: Wei Author-X-Name-Last: Jin Author-WorkPlace-Name: Tianjin University, China Academy of Energy, Environmental and Industrial Economics and UNSW Business School Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: Tianjin University, China Academy of Energy and Environmental and Industrial Economics Abstract: The existing studies on Green Paradox and stranded assets focus on dirty exhaustible assets (fossil fuel reserves) and show that environmental regulations, by changing the costs of dirty inputs relative to clean ones, lead to replacements of the former by the latter and stranding of dirty assets due to perfect substitution. It, in turn, induces acceleration of dirty resource extractions and pollution emissions for fear of dirty assets becoming stranded - the Green Paradox effect. This paper uses an endogenous growth framework to revisit the problem of Green Paradox and stranded assets by taking a new perspective that focuses on capital accumulation with investment irreversibility. We show that if 1) direct irreversibility of investment does not rule out the indirect channel of converting dirty capital goods into clean ones through final goods allocations, and 2) interactions between dirty and clean capital as imperfect substitutes can generate reciprocal effects, then environmental regulation, through directing investment towards clean capital, does not necessarily leads to asset stranding of dirty capital. Accumulation of clean capital with a pollution-saving effect offsets the polluting impact of dirty one and leads to reversed Green Paradox. We further propose an endogenous growth mechanism through which the accumulation of both dirty and clean capital, as well as environmental improvement, can be sustained in the long run without converging to the steady state. Keywords: Endogenous Growth, Green Paradox, Stranded Assets, Capital Accumulation, Imperfect Substitution, Investment Irreversibility Classification-JEL: Q54, Q43, Q32, O13, O44, C61 Creation-Date: 201812 Template-Type: ReDIF-Paper 1.0 Number: 2018.34 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2018-034.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2018.34 Title: Eyes on the Price: Which Power Generation Technologies Set the Market Price? Price Setting in European Electricity Markets: An Application to the Proposed Dutch Carbon Price Floor Author-Name: Eike Blume-Werry Author-X-Name-First: Eike Author-X-Name-Last: Blume-Werry Author-WorkPlace-Name: Energy Economics Group (EEG), Institute of Energy Systems and Electric Drives TU Wien and Axpo Holding AG Author-Name: Thomas Faber Author-X-Name-First: Thomas Author-X-Name-Last: Faber Author-WorkPlace-Name: Axpo Holding AG Author-Name: Lion Hirth Author-X-Name-First: Lion Author-X-Name-Last: Hirth Author-WorkPlace-Name: Neon Neue Energieökonomik GmbH (Neon) and Hertie School of Governance Author-Name: Claus Huber Author-X-Name-First: Claus Author-X-Name-Last: Huber Author-WorkPlace-Name: Axpo Holding AG Author-Name: Martin Everts Author-X-Name-First: Martin Author-X-Name-Last: Everts Author-WorkPlace-Name: Axpo Holding AG Abstract: Upon discussion of price setting on electricity wholesale markets, many refer to the so-called merit order model. Conventional wisdom holds that during most hours of the year, coal- or natural gas-fired power plants set the price on European markets. In this context, this paper analyses price setting on European power markets. We use a fundamental electricity market model of interconnected bidding zones to determine hourly price-setting technologies for the year 2020. We find a price-setting pattern that is more complex and nuanced than the conventional wisdom suggests: across all researched countries, coal- and natural gas-fired power plants set the price for only 40 per cent of all hours. Other power generation technologies such as wind, biomass, hydro and nuclear power plants as well as lignite-fired plants set the price during the rest of the year. On some markets, the price setting is characterised by a high level of interconnectivity and thus foreign influence – as illustrated by the example of the Netherlands. During some 75 per cent of hours, foreign power plants set the price on the Dutch market, whilst price setting in other more isolated markets is barely affected by foreign markets. Hence, applying the price setting analysis to the proposed Dutch carbon price floor, we show that different carbon prices have little effect on the technological structure of the price-setting units. In this respect, the impacts of the unilateral initiative are limited. There are, however, considerable changes to be observed in wholesale power prices, import/export balances as well as production volumes and subsequent CO2 outputs of lignite-, coal- and gas-fired power plants. Keywords: Price Setting, Electricity Markets, Merit Order, Generation Technologies, Carbon Price Floor Classification-JEL: O13, Q41 Creation-Date: 201812