Insurmountable opportunities? Canada's energy efficiency resources

We review the potential for increased energy efficiency in Canada. Following discussion of the theoretical and conceptual basis for treating energy efficiency as a resource, the potential for increased efficiency is assessed in three categories: resource base (the maximum physical potential), ultimate recoverable resources (the maximum technical potential), and proven resources (cost-effective and technically available efficiency increases). The resulting estimates are compared with estimates from a companion paper, in which we assess energy-supply resources using the same set of categories. The policy implications of both sets of estimates are discussed.     

Do manufacturing firms react to energy prices? Evidence from Italy

The reaction of energy demand to price changes is a key policy issue as it describes the economy's response to changes in market conditions or to policy interventions. The issue is even more important for the Italian economy, highly exposed to energy price changes, given its almost complete fossil fuel-related energy dependence, environmental sensitivity and highly fragmented industrial structure. Besides the policy issue, there is also an important methodological debate, concerning the best way to evaluate energy demand elasticities, looking at alternative models, data and elasticity definitions. After a discussion of the main methodological issues and the related empirical literature, this paper presents an estimation of factor and fuel demand elasticities for Italian industrial firms, by using a microeconomic panel in a two-stage translog model. Using cross-price and Morishima elasticities, we obtain information on the magnitude and asymmetry of firms' responses to price changes. Moreover, the use of a micro-dataset allows the high heterogeneity of Italian firms to be considered: the results are discussed according to technology intensity, sector and firm size. Our findings show that energy is the most elastic input for all sectors and that capital and energy are substitutes in the low technology sector and weak complements in all others. Estimated interfuel elasticities show a high degree of demand sensitivity to fuel price changes and the vast majority of cross-price elasticities exhibit substitutability. Appropriate fiscal policies can thus be identified to give an effective impulse in influencing the industrial energy mix by changing relative prices. These findings constitute an important foundation for analysing energy demand by Italian industrial firms, given that empirical literature is particularly rare on the Italian case study.     

Do all clean energy stocks respond homogeneously to oil price?

This paper investigates whether the relationship between oil price and clean energy stock is homogeneous across sub-sectors of the clean energy stock market and its implications for portfolio diversification and clean energy finance policy. We contribute to the literature by being the first empirical paper to document the oil price-clean energy stock relationship at a disaggregate level, thereby providing a more detailed picture of the clean energy stock market. Our findings show that the relationship between oil price and clean energy stock varies largely across clean energy stock sub-sectors. Specifically, biofuel and energy management stocks are the most connected to oil price, while wind, geothermal, fuel cell stocks are among the least connected to oil price. This implies that the hedging cost and effectiveness of a clean energy investment portfolio is dependent on the type of clean energy stock included, therefore, active portfolio management at a disaggregate level is of particular importance. Additionally, policy should take into account the specific characteristics of individual clean energy sub-sectors in order to effectively promote clean energy investment.     

Do energy efficiency measures really reduce household energy consumption? A difference-in-difference analysis

This study investigates the impact of energy efficiency measures installed through the Carbon Emission Reduction Target (CERT) and the Community Energy Saving Programme (CESP) on domestic gas and total energy consumptions. The recently released National Energy Efficiency Data-Framework (NEED) database is used to examine the changes in domestic gas and total energy consumptions for the dwellings in the sample relative to the changes in gas and total energy consumptions for a comparable control group in the year after installation. The results obtained from this difference-in-difference analysis confirm that observed energy consumption decreases significantly in dwellings following upgrades such as cavity wall insulation, loft insulation and a new efficient boiler. The single most effective energy efficiency measure when installed alone is found to be cavity wall insulation, reducing annual gas consumption by 10.5 % and annual total energy consumption by 8.0 % in the year following installation. Comparing bundles of different energy efficiency measures, we find that dwellings retrofitted with both cavity wall insulation and a new efficient boiler experience the largest reductions in annual gas and total energy consumptions of 13.3 and 13.5 %, respectively. This is followed by a mean annual reduction of 11.9 and 10.5 % in gas and total energy consumptions for dwellings with all three energy efficiency measures installed in the same year. Contrary to expectations, installing cavity wall insulation on its own is found to be more effective in reducing measured energy consumption than combining loft insulation and a new efficient boiler.     

Do vehicle efficiency improvements lead to energy savings? The rebound effect in Great Britain

Fuel efficiency improvements in vehicles reduce the cost of travel, which could stimulate drivers to travel further limiting energy savings. Estimates of this effect, known as the rebound effect, have varied widely, partly due to data constraints and a reliance upon highly aggregated government statistics. This paper instead uses a dataset of over 275 million vehicle roadworthiness tests. The high level of detail in our dataset can reveal, for the first time, how the response to changes in travel costs may differ across types of vehicles and socio-economic areas in Great Britain.We find that the rebound effect in Great Britain is just 4.6%, meaning efficiency improvements are unlikely to stimulate increased mileage in the short-run. We find that larger, less fuel efficient vehicles are more responsive to fuel price changes than smaller vehicles and that drivers in urban areas are more responsive to fuel price changes than drivers in rural areas. Our findings shed light on the effects that policies such as fuel taxation and fuel economy standards may have on vehicle mileage. This has implications for both CO₂ emissions savings and social equity.     

Do household energy expenditures affect mortgage delinquency rates?

We postulate a direct role for energy prices in the 2008 financial crisis. Rising energy prices constrain consumer budgets and thereby raise mortgage delinquency rates. This hypothesis is tested by estimating a quarterly cointegrating vector autoregressive (CVAR) model that seeks to quantify the factors that influence the percentage of US mortgages that are 30 to 89 days past due and those that enter foreclosure. Results identify a long-run relationship for the percentage of US mortgages that are 30 to 89 days past due that includes the interest rate on one-year adjustable mortgages, household expenditures on energy, nominal home prices, rates of home ownership, and the fraction of mortgages 90 days or more past due that enter foreclosure—unemployment rates have a short-run effect. Together, these variables account for much of the historical variation in the percentage of US mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices, an increase in household expenditures on energy, and rising unemployment.     

Predicting the oil prices: Do technical indicators help?

This paper aims to investigate the predictability of technical indicators to directly forecast oil prices and compare their performances with macroeconomic variables. We find that technical indicators do exhibit statistically and economically significant in-sample and out-of-sample forecasting power under OLS regressions and forecast combinations, clearly exceeding that of well-known macroeconomic variables and state-of-the-art oil-macro forecasting variables. Moreover, the strength of the predictive evidence is substantial during recessions and expansions and can detect the typical decline in the oil returns near business-cycle peaks effectively. Furthermore, technical indicators reveal substantial economic value for investors, in terms of superior oil risk premium forecasts and sizable utility gains. The technical indicators' ability to predict the oil price stems in part from its ability to predict changes in sentiment, suggesting the financialization of oil markets.     

Transforming shortcomings into opportunities: Can market incentives solve Lebanon's energy crisis?

Over the past decades Lebanon's energy sector has been largely ignored and this has led to high economic and environmental costs. The sector is characterized by electricity poverty, an expanding and mainly unregulated transport sector and a lack of energy savings spanning through all sectors of the economy. Recently, the Government of Lebanon has committed to increase the share of renewable energy to 10% of the total energy supply by 2013 and to 12% by the year 2020; it also aims at reducing energy consumption by 6% by the year 2013. This paper aims at contributing to the formulation of a more comprehensive energy strategy for Lebanon by analyzing the recent changes in policy direction and by recommending legal, regulatory and policy measures in order to transform current shortcomings into opportunities allowing the country to become a regional ‘success story’ in the deployment of renewable energy and energy efficiency.     

City size and energy conservation: Do large cities in China consume more energy?

Although the nexus between urbanization and energy consumption has been widely discussed at the macro level or in specific areas such as in relation to residents and transport, how the expansion of city size affects energy consumption in the process of urbanization is still unknown. Clarifying this impact mechanism is necessary for China to achieve its energy conservation goals. In this context, based on a systematic theoretical elaboration, this study constructs an econometric model of the nexus between city size and energy use and performs a series of robust empirical analyses through the endogenous control of instrumental variables. The results show that the current expansion of China's city size tends to positively affect energy consumption; however, as city size continues to expand, energy consumption will exceed the critical value and change from increasing to decreasing. In this process, it is easier to achieve a decline in energy intensity than a decline in per capita energy consumption. Cities with a population exceeding 1 million in their urban districts are more conducive to reducing energy use. Compared with the expansion of urban built-up areas, an increasing population agglomeration can more effectively promote the decline of urban energy consumption. This study provides policy makers with new ideas about urban planning and energy conservation.     

Agriculture's contribution to the renewable energy sector: Policy and economics – Do they add up?

This paper reviews on-farm renewable energy (RE) production and the associated feed-in tariff (FIT) policies in Germany, USA, Canada, Denmark and the Netherlands and the impact these policies have on Renewable energy implementation with particular focus on agricultural lands. A recent FIT policy implemented in Nova Scotia is examined and used as a case study to assess the potential affect these policies might be expected to have on RE implementation within the province. Several scenarios are developed based on the existing policy structure to provide a critical review of the policy and to identify potential modifications that might provide an increase in the implementation of RE.     

Do urbanization and industrialization affect energy intensity in developing countries?

Against a backdrop of concerns about climate change, peak oil, and energy security issues, reducing energy intensity is often advocated as a way to at least partially mitigate these impacts. This study uses recently developed heterogeneous panel regression techniques like mean group estimators and common correlated effects estimators to model the impact that income, urbanization and industrialization has on energy intensity for a panel of 76 developing countries. In the long-run, a 1% increase in income reduces energy intensity by − 0.45% to − 0.35%. Long-run industrialization elasticities are in the range 0.07 to 0.12. The impact of urbanization on energy intensity is mixed. In specifications where the estimated coefficient on urbanization is statistically significant, it is slightly larger than unity. The implications of these results for energy policy are discussed.     

Can biogas digesters help to reduce deforestation in Africa?

Biogas digesters could help to reduce deforestation in Sub-Saharan Africa by providing a source of energy that would otherwise be provided by woodfuel. However, the link between deforestation and use of woodfuel at global level is weak because fuel is often obtained from fallen wood or from sources felled for construction or land clearance. This paper examines the link between deforestation and use of woodfuel, and evaluates whether biogas digesters are likely to help reduce deforestation in Africa. Woodfuel production and consumption in Africa are increasing over time. Of the deforestation observed in 2010, we estimated that 70(±42)% can be attributed to woodfuel demand. Uncertainties in this figure arise from uncertainty in efficiency of energy use in different designs of wood-burning stoves, and the percentage of energy obtained from woodfuel in rural and urban populations. The contribution of woodfuel demand to deforestation is predicted to increase by 2030 to up to 83(±50)%. This is due to an increasing population requiring more woodfuel and so contributing to a higher proportion of total deforestation. Biogas production has the potential to reduce deforestation due to woodfuel demand by between 6 and 36% in 2010 and between 4 and 26% in 2030. This is equivalent to 10–40% of total deforestation in 2010, and 9–35% of total deforestation in 2030. The highest contribution to biogas production is likely to be from cattle manure, and the uncertainty in the potential of biogas to reduce deforestation is mainly associated with uncertainties in the amount of biogas produced per animal.     

How to measure the overall energy savings linked to policies and energy services at the national level?

The Energy End-use Efficiency and Energy Services Directive (ESD) of the European Union requires the member states to define and attain an overall target of at least 9% annual energy savings between 2008 and 2016. Even if this target is indicative, this is the first international framework mandating countries to report on their energy savings results and prove achievement of their targets. The directive thus also required the development of harmonised calculation methods that can be used by member states for this proof and reporting. Existing literature covers most of the usual issues related to energy savings evaluation, but mostly looking at single, given energy efficiency programmes or policies. The evaluation objective for the ESD implementation is different, as it aims at accounting for the whole energy savings achieved in a country. Moreover, one of the main difficulties is the diversity in history and experience on this topic among the member states. In this context, the European project EMEEES has worked out an integrated system of bottom-up and top-down methods for the measurement of energy savings. The paper presents the overview of its final results. The proposals, inter alia, include 20 bottom-up and 14 top-down case applications of general evaluation methods. They enable more than 90% of the potential energy savings to be measured and reported. They were used as a starting point by the European Commission to develop the methods recently recommended to the member states. Furthermore, the paper briefly discusses the importance of the quantity to be measured—all or additional energy savings—and the effect of measures implemented before the entering into force of the ESD (‘early action’), and what this meant for the methods to be developed. It compares the main elements of calculation needed to ensure consistent results between bottom-up and top-down methods at the overall national level. Finally, general conclusions are drawn about what could be the next steps in developing an evaluation system that enables a high degree of comparability of results between different countries.     

Saving money vs investing money: Do energy ratings influence consumer demand for energy efficient goods?

The article analyses economic barriers leading to the energy efficiency gap in the market for energy-using products by observing several million transactions in the UK over two years. The empirical exercise estimates AIDS models for refrigerators, washing machines, TVs, and light bulbs. Results indicate that market barriers are crucial in the demand for energy efficient options, and consumer response to changes in appliance prices, total expenditures, and energy prices depends on the possibility of behavioural adjustments in consumption. In contrast with the induced innovation hypothesis, current electricity prices can fail to induce innovation because of their short-term impact on disposable income, while consumers invest in energy efficiency when expecting electricity prices to rise in the future.     

Forecasting the VaR of crude oil market: Do alternative distributions help?

Accurate modeling of the empirical distribution of crude oil market returns is extremely important in estimating risk measures. In addition to several commonly used distributions, alternative distributions are explored in this study, some of which account for the asymmetry and heavy tails simultaneously found in distributions, and contain more tail parameters to separately depict the right and left tails when forecasting the Value-at-Risk (VaR) of crude oil markets during highly volatile periods. Seven backtests are also conducted to compare the VaR forecasting accuracy among different distributions. The empirical results indicate that a highly volatile environment challenges the commonly used distributions, and the four risk models based on commonly used distributions are rejected about 27% to 38% of the time. The alternative distributions, i.e., skewed general error distributions (SGED), generalized hyperbolic skewed Student-t distributions (GHST), and generalized asymmetric Student-t (GAST) distributions, generally produce more accurate VaR measurement, and GAST gives the best measurement accuracy. The empirical results imply that risk managers or policymakers should further consider more flexible distributions, such as SGED, GHST, or GAST in particular, when quantifying or managing the risk in turbulent market times.     

Car dieselization: A solution to China's energy security?

Recently, there is a renewed interest in car dieselization in China to address the challenge of oil security. We developed an econometric model to estimate the vehicle fuels and crude oil demands. The results indicate that if the average travel distance of cars is maintained at the level of 2010–16,000 km/yr, and if the distillation products mix of the refineries remains unchanged, China's crude oil demand in 2020 will reach 1060 million tonnes (Mt), which also results in an excess supply of 107 Mt of diesel. A new balance of diesel supply and demand can be reached and crude oil demand can be significantly reduced to 840 Mt by improving the production ratio between diesel and gasoline on the supply side and promoting passenger vehicle dieselization on the demand side. The crude oil demand will be reduced to 810 Mt in 2020, if the vehicle travel distance gradually drops to 12,000 km/yr. If so, dieselization will provide a rather limited added value—only 6% further oil saving by 2020. Dieselization is not a silver bullet but it depends on a series of key factors: growth rate of gross domestic products (GDP), vehicle sales, and vehicle annual travel distance.     

The German energy audit program for firms—a cost-effective way to improve energy efficiency?

In 2008, a program was established in Germany to provide grants for energy audits in small- and medium-sized enterprises. It aims to overcome barriers to energy efficiency, like the lack of information or a lack of capacity, and is intended to increase the adoption of energy efficiency measures. We evaluate the program's impact in terms of energy savings, CO₂ mitigation, and cost-effectiveness. We find that firms adopt 1.7?C2.9 energy efficiency measures, which they would not have adopted without the program. Taking a firm's perspective, the program shows a net present value ranging from ?0.4 to 6??/MWh saved, which very likely implies a net benefit. For the government, each ton of CO₂ mitigated costs between 1.8 and 4.1??. Each euro of public expenditure on audit grants led to 17?C33?? of private investment. The cost-effectiveness of the program for firms and the low share of public expenditure underline its value for the German energy efficiency policy mix and suggest that it should be expanded in Germany. Further, the good experiences with the program in Germany should encourage countries which have not yet established an audit program to do so.     

Do oil prices respond to real interest rates?

We show that the robustness of an inverse relationship between the real interest rate and real oil price depends crucially on how the real interest rate is calculated, and the time-frame of the sample. Consistent with earlier studies, we find that the oil price falls with an unexpected rise in either U.S. or international ex-ante real interest rates. When the ex-post real interest rate is used, the oil price only falls with rises to short-term rates (3 months or less). Additionally, the response of the oil price to long-term ex-ante real interest rates must include the period through the mid-2000s for the inverse relationship to appear. In contrast, the oil price consistently falls with unexpected rises in short-term real interest rates throughout the entire sample. We draw two conclusions from the results. The first is that the oil price is consistently responsive to short-term U.S. and international real interest rates, underlying the importance of storage. Second, oil prices have become more responsive to long-term real interest rates over time.     

How much will the energy service directive contribute to the 20% EU energy savings goal?

The Energy Service Directive (ESD) of the European Union (EU) stipulates that member states realize 9% energy savings for the period 2008–2016. A harmonized calculation approach, consisting of a combination of top-down and bottom-up methods, will be developed to determine the savings of energy efficiency improvement measures. However, it is unclear which part of all realized energy savings is eligible in meeting the ESD target. One can argue that not all savings, especially the autonomous efficiency gains, should be accounted for, but only savings due to (new) policy. An analysis is made of the way the methods can be applied, how baseline choices define the savings and whether these represent policy-induced savings. It is shown that the given target could be met with total energy savings that equal 1.0% of ESD energy use per year, hardly more than realized at present. With other choices, the target is met with total savings of 1.6% per year. The savings found are made comparable with the 2.4% yearly savings derived from the 20% savings target for 2020 formulated by the EU. Given the large gap between ESD savings and the savings target, it is concluded that the methods and baselines used should be chosen such that the ESD target leads to realized savings after 2008 at the upper side of the margin.