Does the use of renewable energy sources mitigate CO2 emissions? A reassessment of the US evidence

Previous research on the determinants of CO₂ emissions has concluded that, although increasing nuclear energy consumption can help to mitigate emissions, increasing use of renewable energy sources is not effective in this regard. These studies, however, do not consider energy prices as a possible driver of energy demand (and hence of emissions) and we find that this omission and the choice of functional form materially alters the outcome in the US case. Specifically, our cointegration and Granger-causality test results indicate that CO₂ emission levels are negatively related to the use of renewable energy, but are unrelated to nuclear energy consumption.     

What proportion of renewable energy supplies is needed to initially mitigate CO2 emissions in OECD member countries?

In spite of increasing numbers of countries having established renewable energy development mechanisms for carbon dioxide (CO₂) emissions reduction, the CO₂ emissions problem continues to worsen along with the growth of the world economy. This leads us to examine the threshold effect of the proportion of renewable energy supply for CO₂ emissions reduction by means of the panel threshold regression model (PTR). Economic growth and the price of energy are also both taken into account in the model in measuring the specific influence that each of them has on CO₂ emissions. The empirical panel data encompass all 30 member countries of the OECD and cover a period of about a decade in length from 1996 to 2005. Our empirical results provide clear evidence of the existence of a single threshold effect that may be divided into lower and higher regimes. Based on the specific estimates of the slope coefficients in each regime distinguished, we find that a renewable energy supply accounting for at least 8.3889% of total energy supply would mean that CO₂ emissions would start to be mitigated. Furthermore, real GDP and the CPI of energy are significantly and positively and insignificantly and negatively correlated with CO₂ emissions, respectively. These findings lead us to conclude that the authorities ought to enhance the proportion of renewable energy supply to more than 8.3889% of all energy supplied, which might help resolve the dilemma between economic growth and CO₂ emissions. Realizing the effects of CO₂ emissions reduction via energy price reforms or the levying of a carbon tax levy may, however, still remain a puzzle.     

Estimating the public’s value of implementing the CO2 emissions trading scheme in Korea

The Korean government set out the carbon dioxide (CO₂) emissions reduction target as 30% below business-as-usual by 2020. The CO₂ emissions trading scheme (ETS) was initiated in January 2015 to meet this target. We attempt to estimate the public's value of implementing the ETS for CO₂ emissions reduction. We apply the contingent valuation (CV) method using the willingness to pay (WTP) data obtained from a national CV survey of 1000 randomly selected households. The survey was conducted via in-person interviews. Value judgments required of the respondents were within their abilities. The mean WTP to achieve the stated target of CO₂ emissions reduction using ETS is estimated to be KRW 1873 (USD 1.66) per household per month, which is statistically significant at the 1% level. The aggregate national value amounts to KRW 409.2 billion (USD 363.4 million) per year. Thus, even though Korea has no obligations to cut emissions under the Kyoto protocol, the public is willing to bear a financial burden to implement the ETS. If its cost is less than this value, implementing the ETS can be socially profitable. The results of this study can serve as a basis for further policy discussions and decisions.     

How does the new-type urbanisation affect CO2 emissions in China? An empirical analysis from the perspective of technological progress

The development of traditional urbanisation has generated environmental problems, so the Chinese Government has proposed a new-type of urbanisation path with uniquely Chinese characteristics. How does this new-type of urbanisation affect CO₂ emissions? Based on panel data from 29 provinces in China (2005 to 2016), we apply an exploratory spatial data analysis model, a spatial econometric model, and a threshold model to analyse the spatial autocorrelation of CO₂ emissions, the direct and indirect effects of new-type urbanisation on CO₂ emissions, and the threshold characteristics produced by technological progress, respectively. The key results are: (1) CO₂ emissions show significant positive autocorrelation in China, and the spatial distribution of CO₂ emissions is HH (High-High) or LL (Low-Low) clustered in most provinces; (2) new-type urbanisation has a paradoxical effect on CO₂ emissions. Energy-saving technology has a rebound effect on CO₂ emissions, but environmental technology inhibits CO₂ emissions; (3) by eliminating the rebound effect of energy-saving technology on CO₂ emissions and promoting environmental technology, new-type urbanisation indirectly inhibits CO₂ emissions; (4) new-type urbanisation exhibits a threshold effect on CO₂ emissions due to the different levels of energy-saving technology and environmental technology. Finally, policy recommendations for CO₂ emissions reduction are proposed from the perspective of new-type urbanisation, energy-saving technology, and environmental technology.     

Can expanding natural gas consumption reduce China's CO2 emissions?

China is now the world's largest emitter of carbon dioxide (CO₂), thus leading to China facing enormous pressure on CO₂ emission reduction. Natural gas is a high thermal and low-emission energy. Expanding natural gas consumption cannot only meet the growing demand for energy consumption but also optimize energy consumption structure. Therefore, many scholars have investigated the effect of natural gas consumption on CO₂ emissions. However, ignoring a large number of nonlinear relationships between economic variables, the vast majority of existing studies use traditional linear models to explore the relationships between natural gas consumption and CO₂ emissions. In order to make up for the gap in existing research, this paper uses the nonparametric additive regression model with data-driven features to investigate the relationships between the two. The results show that natural gas consumption has an inverted “U-shaped” nonlinear effect on CO₂ emissions in the eastern region, but a positive “U-shaped” nonlinear effect in the central and western regions. The linear impact of natural gas consumption on CO₂ emissions in the eastern and central regions is higher than that in the western region, due to the differences in resource availability and energy prices, as well as natural gas consumption. Therefore, during the process of promoting natural gas consumption, the central and local governments should adopt heterogeneous measures at different stages of development.     

What are the categories of geopolitical risks that could drive oil prices higher? Acts or threats?

This study characterizes the oil market as a nonlinear-switching phenomenon and examines its dynamics in response to changes in geopolitical risks over low- and high-risk scenarios. We separate the shocks due to geopolitical acts from those due to geopolitical threats to address whether the serious effects of geopolitical risks are mostly due to increased threats of adverse events or to their realization as acts. While we find the acts to generate a positive and strong impact on oil price dynamics, the effect of threats appears to be moderate or non-significant. Imperfect information in the oil price determination, the history of oil supply disruptions emanating from geopolitical events, the continued rise in populism in the world, oil market volatility, multifractility and the time-varying degree of weak-form efficiency have been advanced to explain the unforeseen responses of oil prices to geopolitical threats. To accommodate recent oil-related events, we construct a composite geopolitical risk indicator by accounting for contemporaneous sources of geopolitical risks, namely global trade tensions, US-China relation risks, US-Iran tensions, Saudi Arabia’s uncertainty and Venezuela’s crisis. The combined effects have an outsized impact on oil prices.     

What drives volatility in natural gas prices?

We examine the primary drivers of U.S. natural gas price volatility. To do so, we apply a structural heterogeneous autoregressive VAR (SHVAR) model, accommodating structural breaks in both the coefficient and volatility, to monthly time series data on natural gas supply, demand and price between January 1978 and July 2018. We detect several structural changes in coefficients and shock volatility in the natural gas market. Our findings indicate that the response of natural gas prices differs significantly depending on the regime and type of shock in the natural gas market. While demand shocks specific to the natural gas market are the primary drivers of natural gas price volatility, structural supply shocks also play a significant role in explaining movements in natural gas prices. Our results suggest that failure to consider structural breaks in the coefficient and volatility may result in biased estimates and distorted impulse responses of the impact of shocks on natural gas price volatility.     

On the income–nuclear energy–CO2 emissions nexus revisited

This paper seeks to contribute to the debate over the income–nuclear enery–CO₂ emissions nexus by taking specific account of the possible endogeneity of income, which has been largely ignored by early studies. A multivariate cointegrated vector autoregression (CVAR) is applied to top six nuclear generating countries. We find that nuclear energy tends to reduce CO₂ emission for all countries. It is also found that income has a beneficial effect on the environment only in some countries. Finally, we find that CO₂ emissions and income are indeed determined simultaneously, while nuclear energy acts exogenously, indicating that nuclear energy is the driving variable, which significantly influences the long-run movements of CO₂ emissions and income, but is not affected by CO₂ emissions and income in the model.     

Are car manufacturers on the way to reduce CO2 emissions?: A DEA approach

One of the pillars of the fight against climate change is reducing the amount of greenhouse gases that are emitted into the atmosphere. In that regard, curtailing CO₂ emissions from transport activities is a major objective. In its attempts of “decarbonising” transport, the European Commission set in 2009 different emission limits on the vehicles sold in Europe. With this background, this paper aims to test the ability of the major car manufacturers to meet these present and future targets with the existing technological trends. To that end, we provide an in-depth analysis on the temporal evolution of emission efficiencies in the Spanish car market. The well-known DEA-Malmquist method is applied over a large sample of car models sold in Spain between 2004 and 2010. A second-stage regression allows us to identify the main drivers of efficiency, catch-up and technical change over the period. Finally, the estimated trends are extrapolated to predict future emission levels for the car manufacturers. Using post-regulation rates of technical change, results show that the vast majority of companies would meet the 2015 target, 27% of the current market would meet the 2020 target, and around 3% would be able to comply with the 2025 target. Thus, since all targets are technologically feasible, stricter regulation is the recommended approach to encourage manufacturers to meet the goals set by the European Commission.     

Does the volatility of commodity prices reflect macroeconomic uncertainty?

While there exists numerous studies on the macroeconomic effects of oil and commodity shocks, the literature is quite silent on the impact of macroeconomic uncertainty on oil and commodity prices and, especially, on their volatility. This paper tackles this issue through the estimation of a structural threshold vector autoregressive (TVAR) model on a sample of 19 commodity markets. We aim at (i) assessing whether the effect of macroeconomic uncertainty shocks on commodity price returns depends on the degree of uncertainty, and (ii) investigating the transfer from macroeconomic uncertainty to price uncertainty using a newly developed measure of commodity price uncertainty. Our findings show that both agricultural and industrial markets are highly sensitive to the variability and the level of macroeconomic uncertainty, while the impact on precious metals is more parsimonious given their well-identified safe-haven role in time of economic turmoil. In addition, we find evidence that the recent 2007–09 recession has generated an unprecedented episode of high uncertainty in numerous commodity prices. Interestingly, our analysis further reveals that volatility and uncertainty in prices can be disconnected. This is especially true for the oil market as most important shocks in the 1990s and the beginning of the 2000s that lead to price volatility do not generate price uncertainty, highlighting the relevance of our uncertainty measure in linking uncertainty to predictability rather than to volatility.     

Learning curves for harnessing biomass power: What could explain the reduction of its cost during the expansion of China?

To explain the factors influencing the cost of biomass power in China, we applied an improved model of learning curves in this paper. The impact of cumulative installed capacity of biomass power and other factors on the cost of biomass technology were investigated. The results showed that installed capacity expansion has led to significant cost reduction. Meanwhile, the effect of economies of scale was observed in the analysis of generation cost. The ownership structure of the firm and the size of the developer had no influence on the learning effects and stronger policy support may, ironically, produce negative incentive effects on technology improvement.     

Slowing down of globalization and global CO2 emissions – A causal or casual association?

In recent years we have witnessed slowdowns of both globalization and global CO₂ emissions. Not only have Organization for Economic Co-operation and Development (OECD) economies, such as the US and the UK, tried to bring manufacturing back to their home countries but non-OECD economies, such as China and India, have also increased their shares of domestic products at both intermediate and final goods. In this paper, we employ the annual global multi-regional input–output tables compiled by the Asian Development Bank to explore the linkage of the recent slowdown in globalization and global CO₂ emissions for the period 2012–2016. Our results suggest that there are indeed some clues indicating a slowdown of globalization in several leading OECD and non-OECD economies. However, the changes of consumption in non-OECD economies are much larger than are those in OECD economies. At the aggregate level, the effects of globalization on emissions have been dominated by non-OECD economies (in particular China and India), showing a negative linkage. More specifically, the changing pattern of globalization has contributed a net increase of 202 Mt. in global CO₂ emissions. The recent slowdown of global CO₂ emissions cannot, in general, be attributed to the slowdown of globalization.     

A comparison of Nordic energy and CO2 intensity dynamics in the years 1960–1997

This study is a comparative analysis of energy consumption and CO₂ emission flows in the Nordic countries of Finland, Denmark, Norway and Sweden from the years 1960–1997. The comparative analyses are based on complete decomposition methodology, from which the authors provide an analysis of the dynamic changes of energy consumption and CO₂ emission flows in those Nordic economies. The comparative analysis reveals that:

• 1.The economic activity effects of the different Nordic countries were quite similar.
• 2.The structural effects varied considerably indicating differences in the relative economic activities in the analysed countries.
• 3.The intensity effects on energy use suggest that there were no significant changes in Finland and Sweden during that period. In Denmark and Norway, although intensity effects first increased in the 1960s, they had a downward sloping trend after 1970. The intensity effects of CO₂ emissions increased until the year 1970 and thereafter decreased until the year 1990. In the 1990s, only Norway's intensity effect continued to decrease. In contrast to the other Nordic countries, Finland's CO₂ emission intensity effect differs greatly. It continued to increase until the year 1980, then decreased sharply at the beginning of the 1980s and experienced considerable fluctuations after that.

     

Can expanding natural gas infrastructure mitigate CO2 emissions? Analysis of heterogeneous and mediation effects for China

To verify whether the expansion of natural gas infrastructure can effectively mitigate carbon dioxide (CO₂) emissions in China, this study first investigates the impact of natural gas infrastructure on China's CO₂ emissions by employing a balanced panel dataset for 30 Chinese provinces covering 2004–2017. Fully considering the potential heterogeneity and asymmetry, the two-step panel quantile regression approach is utilized. Also, to test the mediation impact mechanism between natural gas infrastructure and CO₂ emissions, this study then analyzes the three major mediation effects of natural gas infrastructure on China's CO₂ emissions (i.e., scale effect, technique effect, and structure effect). The empirical results indicate that expansion of the natural gas infrastructure can effectively mitigate China's CO₂ emissions; however, this impact is significantly heterogeneous and asymmetric across quantiles. Furthermore, through analyzing the mediation impact mechanism, the natural gas infrastructure can indirectly affect CO₂ emissions in China through the scale effect (i.e., gas population and economic effects) and structure effect (i.e., energy structure effect). Conversely, the technique effect (i.e., energy intensity effect) brought by natural gas infrastructure on CO₂ emissions in China has not been significant so far. Finally, policy implications are highlighted for the Chinese government with respect to reducing CO₂ emissions and promoting growth in the natural gas infrastructure.     

Food versus fuel: What do prices tell us?

Sorting out the impacts of biofuels on global agricultural commodity prices is impossible without turning to data and distinguishing between the short-run versus the long-run impacts. Using time-series prices on fuels and agricultural commodities, the aim is to investigate the long-run cointegration of these prices simultaneously with their multivariate short-run interactions. Results indicate no direct long-run price relations between fuel and agricultural commodity prices, and limited if any direct short-run relationships. In terms of short-run price movements, sugar prices are influencing all the other agricultural commodity prices except rice. With sugar the number one world input for ethanol, results indicate increased ethanol production is potentially influencing short-run agricultural commodity prices. Overall, results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibria after a demand or supply event (shock).     

Bi-lateral CO2 emissions embodied in Australia–China trade

This paper quantifies the CO₂ emissions embodied in bi-lateral trade between Australia and China using a sectoral input–output model. The results revealed: (1) that China performs lower than Australia in clean technology in the primary, manufacturing, energy sectors due to their overuse of coal and inefficient sectoral production processes, and (2) that China had a 30.94 Mt surplus of bi-lateral CO₂ emissions in 2010–2011 and (3) overall global emissions were reduced by 20.19 Mt through Australia–China trade in 2010–2011. The result indicates that the greater the energy efficient a country among the trading partners the lower will be the overall global CO₂ emissions. Global emissions decreased mainly because China consumed Australian primary products rather than producing them. Australia is an energy efficient producer of primary products relative to China. The bilateral trade compositions and trade volume played an important role in lowering global emissions and therefore one can view proposed China Australia Free trade Agreement positively in reducing global emissions. However, for the sustainable development, China should strengthen clean energy use and both countries should adopt measures to create an emission trading scheme in order to avoid protectionism in the form of future border price adjustments.     

Towards a worldwide integrated market? New evidence on the dynamics of U.S., European and Asian natural gas prices

Has the integration of European, North American and Asian natural gas markets been fostered over the last few years by growing LNG export capacities and an increasing market share of spot transactions? This is the key question that this article sets out to answer. For this purpose, we develop bivariate error correction models with structural breaks and asymmetric responses among gas references prices, oil prices, and coal prices. We use daily prices of all reference prices spanning from January 12, 2004, to January 12, 2018, for the North American, Asian and European areas. We show that if European and U.S. gas prices are co-integrated when multiple breaks are allowed, their respective markets cannot be considered integrated. However, our results show that the degree of interdependence between European and American prices is increasing, whereas the degree of interdependence between gas and crude oil prices is decreasing. More surprisingly, we also highlight that reversions to long-term equilibria both between the Henry Hub (HH) and the National Balancing Point (NBP) and between the HH and the Japan Korean Marker (JKM) are highly asymmetric, a pattern that could be intuitively interpreted as the consequence of market arbitrage strategies by exporting countries in a context of oversupplied markets.     

What happens to the relationship between EU allowances prices and stock market indices in Europe?

The stock market may reflect the economic conditions of an economy and a positive economic situation is expected to improve the companies' profits, which makes company shares more attractive since the expected dividends to shareholders will be larger. Theoretically, higher economic activity leads to higher energy demand and, consequently, higher carbon emissions, which give rise to higher EU allowances (EUA) prices. Therefore, the stock market and EUA prices seem to be connected, with causality going from the stock markets to EUA prices. This paper formally tests for it, showing that the causality effectively runs from the stock market to the European Climate Exchange market. Furthermore, the paper studies the effects of the evolution of European stock markets on the EUA spot prices.     

Dealing with surplus emissions in the climate negotiations after Copenhagen: What are the options for compromise?

This paper analyses the environmental and financial consequences of various strategies of dealing with surplus emission allowances in the aftermath of the Copenhagen Accord. This topic remains relevant, in particular, with respect to the Russian negotiation position, as this country is the largest holder of surplus emissions. It is concluded that not addressing the surplus problem is not a feasible negotiation option, as the sheer size of the surpluses would jeopardise the environmental integrity of any future agreement. Cancelling surpluses against Russia’s will, though viable, is not desirable, as it might well lead to this country opting out of this climate treaty. Three options for compromise have been selected and analysed here: (1) stricter targets for Annex I countries; (2) strategic reserve for Russia; (3) institutionalising optimal banking. It is concluded that, whereas option 1 is environmentally the best, in the present political context it is probably less feasible. The other two options, although environmentally suboptimal, seem politically more favourable. Our analysis suggests that maximal revenues for surplus-holding countries arise by releasing only a limited amount of surplus credits to the market. The institutionalisation of this effect could be a key lever to a politically feasible agreement on surplus emissions.     

How much can CO2 emissions be reduced if fossil fuel subsidies are removed?

This paper analyzes consumers' price elasticities of demand for fossil fuels, and how a reduction of fossil fuel subsidies can lead to important reduction in CO₂ emissions for various groups of countries that have relatively high fossil fuel subsidies and notably on diesel, including countries in the Middle East and North Africa (MENA). These countries continue to maintain significant levels of fuel subsidies, with Iran and Saudi Arabia being the largest contributors to CO₂ emissions. This paper illustrates that fuel price policy reforms by these countries would be an important instrument for both climate and economic policies. We estimate that a reduction in subsidies to both gasoline and diesel by about 20 US$ cents per liter will lead to significant decreases in CO₂ emissions, both in the MENA region and globally. In Iran, for example, the reductions could be up to 90% and 50% of current emissions generated from diesel and gasoline consumption, respectively, and for Saudi Arabia, approximately 70% and 40%, respectively.