Energy prices,labour productivity and causality: An empirical examination

This paper is directed at examining the impact of changing energy prices on productivity in the USA. By using a cross correlation test for unidirectional causality, it is clearly demonstrated that for the period 1947–1980, the rate of change of productivity was adversely affected by changing energy prices. Furthermore, there is at least a four to five year lag before the entire impact is exhausted.     

Energy prices and investment over the business cycle

This paper develops a theoretical investment equation for the firm which explicitly includes the relationship between investment and the price of energy. Using intertemporal comparative statics, we investigate how economic conditions affect that relationship. In a two-period model, the net present value of the firm's cash inflows is maximized subject to constraints. The resulting investment equation for the firm is summed over all firms to produce an aggregate investment equation. By assuming that aggregate shocks do not affect every firm simultaneously, we could investigate the effects of varying economic conditions on the relationship under study. We find that energy price increases will retard aggregate real investment. Also, this restraining impact will be greatest during boom periods and least during recessions. Further, the impact of an energy price increase on aggregate investment diminishes as the level of energy prices increases. We show that simple OLS techniques are not appropriate for empirical estimation of the relationship between aggregate investment and energy price; they could produce inconsistent results depending on the time period studied because of the business cycle effects. A survey of corporations along product lines would be useful to test for such non-linearity.     

Energy planning and investment for increased earnings The case of Nigeria's oil and gas resources

In view of Nigeria's limited reserves of oil and the high growth rate of oil consumption, and in the wake of the developments in the world oil market since 1981 which have resulted in a drastic shortfall in Nigeria's revenues, the main objective of this article is to highlight some important issues that would spur policymakers towards improved energy planning and increased energy investment in Nigeria so as to assist her in the rationalization of the energy production-mix and consumption, as well as in earning increased revenues from her oil and gas resources. Policymakers in Nigeria are called upon to put an end to further procrastination concerning the LNG investment project so that the bulk of the country's gas, which is presently being flared, can be re-injected, consumed locally and exported to supplement dwindling oil revenues.     

Financing alternative energy projects: An examination of challenges and opportunities for local government

Local government in Australia has a strong collective capacity to reduce GHG emissions through policies, funding allocation to renewable energy projects and the delivery of programs and services. This study examines the institutional capacity of councils in Sydney and how this impacts on decisions to invest in alternative energy projects. We find greenhouse gas emission targets of councils are strongly aligned to national targets but do not reflect the local council's institutional capacity, political leadership or strategic priorities. Energy reduction projects are often identified and undertaken by environmental staff without support from financial staff or financial-evaluation tools. An absence of national guidelines to provide consistency in tracking and reporting limits cross-sector benchmarking. Street lighting contributes to a significant proportion of council's total electricity expenditure and GHG emission profile. Being highly regulated, existing contracts and the current practice of street lighting services limits the councils’ ability to reduce emissions. Based on our analysis we recommend a number of measures to overcome these constraints including the use of financial evaluation tools for small-scale renewable energy projects, a standardised national tracking and reporting platform to facilitate progress-reporting and meaningful comparative analysis between councils and policy reform to the regulation of street lighting.     

Energy performance ratings and house prices in Wales: An empirical study

This paper investigates the effect of Energy Performance Certificate (EPC) ratings on residential prices in Wales. Drawing on a sample of approximately 192,000 transactions, the capitalisation of energy efficiency ratings into house prices is investigated using two approaches. The first adopts a cross-sectional framework to investigate the effect of EPC rating on price. The second approach applies a repeat-sales methodology to investigate the impact of EPC rating on house price appreciation. Statistically significant positive price premiums are estimated for dwellings in EPC bands A/B (12.8%) and C (3.5%) compared to houses in band D. For dwellings in band E (−3.6%) and F (−6.5%) there are statistically significant discounts. Such effects may not be the result of energy performance alone. In addition to energy cost differences, the price effect may be due to additional benefits of energy efficient features. An analysis of the private rental segment reveals that, in contrast to the general market, low-EPC rated dwellings were not traded at a significant discount. This suggests different implicit prices of potential energy savings for landlords and owner-occupiers.     

An empirical analysis of lumpy investment: the case of US petroleum refining industry

This paper employs five econometric models to examine lumpy investment and investigates the investment behavior of the US petroleum refining industry. Firms in the industry are classified into three groups by their size. All three groups show zero investment, disinvestment and investment in accordance with economic conditions. The analysis finds the minimum amount of investment and disinvestment for each group, which suggests that the size of fixed costs of investment is substantial, regardless of firm size. However, small firms adjust capital stock more slowly than medium or large firms. The analysis also suggests the existence of a convex adjustment cost.     

Space and time: Wind in an investment planning model

Investment planning models inform investment decisions and government policies. Current models do not capture the intermittent nature of renewable energy sources, restricting the applicability of the models for high penetrations of renewables. We provide a methodology to capture spatial variation in wind output in combination with transmission constraints. The representation of wind distributions using stochastic approaches or using extensive historic data sets exceeds computational constraints for real world application. Hence we restrict the amount of input data, and use bootstrapping to illustrate the robustness of the results. For the UK power system we model wind deployment and the value of transmission capacity.     

Energy structure,marginal efficiency and substitution rate: An empirical study of China

Energy efficiency is an important factor in developing energy policies as it represents the extent to which resources support economic output. In recent literature, relevant studies have mainly focused on aggregate energy efficiency, but rarely touched on the marginal efficiency of diverse energy resources and their comparative substitution rate. During 1978–2003, China's energy efficiency continually increased; and consequently became a hot topic in contemporary literature. However, there is no empirical study on the relationship between energy structure and energy efficiency. In order to close the gap, this paper reports the empirical study of the impact of China's energy structure on its energy efficiency from 1978 to 2003. The work covered primary estimation of the marginal efficiency of coal and petroleum in China, as well as the comparative substitution rate. Results indicate that the substitution rate between petroleum and coal is a factor of 5.38.     

Energy efficiency barriers in commercial and industrial firms in Ukraine: An empirical analysis

Improvement in energy efficiency is one of the main options to reduce energy demand and greenhouse gas emissions. However, large-scale deployment of energy-efficient technologies is constrained by several factors. Employing a survey of 509 industrial and commercial firms throughout Ukraine and a generalized ordered logit model, we quantified the economic, behavioral, and institutional barriers that may impede the deployment of energy-efficient technologies. Our analysis shows that behavioral barriers resulted from lack of information, knowledge, and awareness are major impediments to the adoption of energy-efficient technologies in Ukraine, and that financial barriers may further impede investments in these technologies especially for small firms. This suggests that carefully targeted information provisions and energy audits will enhance Ukrainian firms' investments in energy-efficient technologies to save energy consumption, improve productivity, and reduce carbon emissions from the productive sectors.     

Sustainable thermal technologies and care homes: Productive alignment or risky investment?

The use of more sustainable thermal technologies is a policy imperative across the UK building stock. However, not all building uses provide the same opportunities for technology uptake as others. Care homes for older people have characteristics which in technical and economic terms suggest that they might be particularly appropriate for the implementation of more sustainable thermal technologies. They have comparatively high demands for space heating and hot water often sustained on a 24/7 basis. However there are many considerations, both generic and contextual, that will typically play into processes of technology uptake. Through qualitative research in six case study homes, focused on management and staff perspectives and experiences, we explore the degree to which there might be a productive alignment between care home operation and the use of sustainable thermal technologies. Two key themes emerge focused on business considerations and the importance of avoiding risk and damage to reputation; and the ways in which different thermal technologies are relevant to and can potentially impact on care practices. We conclude that despite potential benefits the sector could remain rather resistant to sustainability innovations. We suggest therefore areas in which productive action and further research could be undertaken.     

Energy saving by firms: decision-making, barriers and policies

Promoting investments in energy-saving technologies is an important means for achieving environmental goals. Empirical evidence on success conditions of associated policies, however, is scarce. Based on a survey among Dutch firms, this paper sets out to identify the factors that determine the investment behaviour of firms, their attitude towards various types of energy policy, and their responsiveness to changes in environmental policy in the Netherlands. On the basis of discrete choice models, this paper aims to investigate empirically, whether (and how) these strategic features vary over firm characteristics and over sectors.     

Energy taxes as a signaling device: An empirical analysis of consumer preferences

This paper presents an econometric study dealing with household demand in Sweden. The main objective is to empirically examine the differences in consumer reaction to the introduction of, or the change, in environmental taxes. Main focus is on environmental taxes as a signaling device. The hypothesis is that the introduction of an environmental tax provides new information about the properties of the directly taxed goods. This in turn may affect consumer preferences for these goods, hence altering the consumption choice. The result from the econometric analysis shows that all goods have negative own-price elasticities, and positive income elasticities. Concerning the signalling effect of environmental taxes the results are somewhat ambiguous. The tax elasticity for energy goods used for heating seems to be significantly higher than the traditional price elasticity, whereas the opposite seems to be the case for energy goods used for transportation.     

Energy investment and economic growth : A simplified approach

A model is developed to investigate the effect of energy investment on economic growth under a set of simplifying assumptions. The economy is treated as a two sector aggregate; the energy sector and the rest of the economy, whereas the model describing the energy-economy interaction is linear to the differential changes of the variables, adaptable to structural evolution and requires a modest amount of data for initialization. It can be used in a single stage or an iterative mode to produce outcomes for the short and medium run. The analysis reveals that energy productive investment has had an impact on the rate of formation of the non-energy capital stock and subsequently on economic growth. These effects appear amplified under a regime of increasing energy price.     

Carbon prices and CCS investment: A comparative study between the European Union and China

Carbon Capture and Storage is considered as a key option for climate change mitigation; policy makers and investors need to know when CCS becomes economically attractive. Integrating CCS in a power plant adds significant costs which can be offset by a sufficient CO₂ price. However, most markets have failed: currently, the weak carbon price threatens CCS deployment in the European Union (EU). In China, a carbon regulation is appearing and CCS encounters a rising interest. This study investigates two questions: how much is the extra-cost of a CCS plant in the EU in comparison with China? Second, what is the CO₂ price beyond which CCS plants become more profitable than reference plants in the EU and in China? To address these issues, I conducted a literature review on public studies about CCS costs. To objectively assess the profitability of CCS plants, I constructed a net present value model to calculate the Levelised Cost of Electricity and the breakeven CO₂ price. CCS plants become the most profitable plant type beyond 115 €/tCO₂ in the EU vs. 45 €/tCO₂ in China (offshore transport and storage costs). I advise on the optimal plant type choice depending on the CO₂ price in both countries.     

The driving forces of China׳s energy use from 1992 to 2010: An empirical study of input–output and structural decomposition analysis

The energy consumption in China has accelerated since the early 2000s, and China became the largest energy consumer in the world by 2010. To examine the driving forces of China׳s energy use, this paper conducts a structural decomposition analysis based on hybrid input–output tables. In addition, we describe the framework of China׳s energy system by using two energy flow charts. The results show that China׳s current energy use is investment-led demand. Between 1992 and 2007, the three main final-demand categories – gross fixed capital formation, household consumption and exports – contributed approximately one-third each to the changes of total energy use in China. Between 2007 and 2010, however, three-quarters of energy consumption changes came from investment activity only. Technological improvement saved approximately five percent of the total energy use annually during the periods of 1992–1997, 1997–2002 and 2007–2010. In the period of 2002–2007, however, its contribution dropped to only three percent p.a. due to the rise of the indirect energy requirement coefficient in the construction sector. These results suggest that adjusting the final demand structure and improving energy efficiency further will meet China׳s energy challenges in the future.     

Testing for stability: Motor gasoline demand and distillate fuel oil demand

The structural stability of energy demand relationships is an important question in light of the events of the 1970s. This paper looks at this issue for two energy types, motor gasoline and distillate fuel oil (home heating oil). From the results of a statistical test developed by Brown, Durbin and Evans, it appears that the demand for motor gasoline destabilized following the 1979 Iranian revolution while the demand for distillate fuel oil destabilized following the very severe winter of 1976–1977. Once destabilized, neither of the demand relationships returned to their prior form.     

Energy resource development and the British economy: A review

The last decade or so has seen major changes in the structure of the UK economy. There has been a continual decline in manufacturing, both relatively (not unique to the UK) as well as absolutely (unique to the UK of all the major industrialized economies), while the discovery and exploitation of oil in the North Sea has moved the UK from a position of total dependence on imported oil, through self sufficiency, to its becoming a significant net exporter. Such oil developments have occurred against the background of two major oil price increases, in 1973/74 and 1979/80, which have also had major implications not only for the UK but also for its trading partners. The accelerated decline of the traditional manufacturing industries, and the associated rise in unemployment, to many observers, is at least partly a result of the emergence of the UK as a major oil producer. The theoretical justification for such a viewpoint is identified. This paper is predominantly concerned with outlining the importance of oil and gas production to the UK economy. It also discusses the major theoretical models that have been developed to analyse both the short run and long run impact of oil on that economy. A quantitative assessment is made of the impact of oil on the UK economy, and of the role of the Government arising from such a discovery.     

Energy,industry and politics: Energy,vested interests,and long-term economic growth and development

The article seeks to explicate a link between energy and long-term economic growth and development. While in many ways intuitive, attempts at sketching theoretical frameworks explicating this link have been few and simplistic, typically limited to technology and economics. This article emphasizes the importance of politics as well, fostering a symbiosis between the dominant industries of a historical epoch and the energy system that enabled them to flourish. The framework combines Joseph Schumpeter and Mancur Olson, emphasizing 1) the importance of structural economic change for long-term growth and development and 2) vested interests. The framework yields one theoretical proposition: In order to rise, states must prevent vested interests from blocking structural change. States that are unable to do this will get locked into yesterday's technologies, industries and energy systems, effectively consigning themselves to stagnation and decline. A brief empirical section provides historical data from 6 historical epochs (including present-day renewables) over a period of 250 years to demonstrate the usefulness of the approach. While no exhaustive test, the data suggests that countries that have prevented vested interests from blocking change have been far more successful in fostering a symbiosis between energy and industry than those countries that have not.     

Climate policy and energy-intensive manufacturing: A comprehensive analysis of the effectiveness of cost mitigation provisions in the American Energy and Security Act of 2009

In response to the ongoing climate policy debates, this study examines the cost impacts of carbon-pricing legislation on selected US energy-intensive manufacturing industries. Specifically, it evaluates output-based rebate measures and the border adjustment provision specified in the bill, and tests the effectiveness of cost containment features of the policy, such as the international offsets, under various market assumptions. Results of the examination confirm that in all policy cases or industries, the output-based rebates would effectively mitigate the manufacturers' carbon-pricing costs in the short-to-medium term. However as the rebates decline after 2020, especially in a case where low-carbon electricity generation or international offsets are not readily available or implemented, these industries would suffer greater declines in profitability. At the same time, the study's findings were mixed concerning the effectiveness of the border adjustment measure in reducing cost impacts after 2020. While border adjustments could reduce costs to US manufacturing sectors, at least temporarily, they could create problems for domestic downstream producers and exports, under cost pass-along conditions. However at best, the output-based rebates, international offset, and border adjustment and measures primarily buy time for manufacturers. The only long-term solution is for EITE industries to invest in energy-saving and next-generation low-carbon technologies.     

Structural change and technology choice: Energy use in Mexican manufacturing industry, 1970–1981

This paper analyses industrial energy use in a country that has experienced falling, instead of rising, energy prices. Mexico subsidizes domestic energy consumption with the avowed purpose of stimulating industrialization. Methods are developed to distinguish the effects of technology choice from the effects of changing industrial structure, and are then used to analyse the increased energy intensity of manufacturing industry, 1970–1981. The increase is found to depend entirely on the adoption of more energy-using technology, whereas the changes in output structure have had little or no effect. There has been a slight bias in favour of the less energy-intensive sectors.