Energy efficiency, rebound effects and the environmental Kuznets Curve

Technological change is one factor used to justify the existence of an Environmental Kuznets Curve, and technological improvements have been argued to be a key factor in mitigating the impacts of economic growth on environmental quality. In this paper we use a CGE model of the Scottish economy to consider the factors influencing the impacts of one form of technological change–improvements in energy efficiency–on absolute levels of CO2 emissions, on the carbon intensity of the economy (CO2 emissions relative to real GDP), and the per capita EKC relationship. These factors include the elasticity of substitution between energy and non-energy inputs, responses in the labour market and the structure of the economy. Our results demonstrate the key role played by the general equilibrium price elasticity of demand for energy, and the relative influence of different factors on this parameter.     

Testing the transport energy-environmental Kuznets curve hypothesis in the EU27 countries

Transport activities are essential for economic and social development. Nevertheless, the transport sector has also shown the fastest growth in energy consumption in the European Union and its contribution to increasing greenhouse gas emissions merits the thorough attention of academics and policy makers. In this paper we analyze the relationship of economic growth and transport activities with transport final energy consumption. Energy Kuznets curves are estimated for a panel data set covering the EU27 countries in the period 1995–2009 for total transport energy use, household transport energy use, and productive transport energy use (all three in absolute and per capita energy use terms). The productive transport energy use and gross value added relationship are further considered as per hour worked. Finally, the control variables of energy prices and differences in the economic structures are tested. Empirical results show that the elasticity of transport energy use with respect to gross value added in per capita terms decreases from a threshold for the three transport energy consumption variables, but the turning point of improved environmental quality is not reached in any instance.     

Multifractal features of spot rates in the Liquid Petroleum Gas shipping market

We investigate for the first time the spot rate dynamics of Very Large Gas Carriers (VLGCs) by means of multifractal detrended fluctuation analysis (MF-DFA) and rescaled range (R/S) analysis. Both non-parametric methods allow for a rigorous statistical analysis of the freight process by detecting correlation, scaling and fluctuation behavior regardless of nonlinearity issues. By applying different data-frequencies and a temporal framework, the Hurst exponents indicate that freight rates exhibit trend-reinforcement and persistence subject to limited time-dependency and controlled volatility. The found long-range dependence corroborates that a predictive freight model can be built undermining the efficient market hypothesis. Memory effects seem to each time build up until they are interrupted by seasonal transitions, stochastic events or cycles which all spark a sudden loss in correlations or increase in nonlinearities. The surrogate and shuffling data procedures demonstrate that, dependent on the data-frequency used, memory effects and fat-tail distributions should be contained differently in freight rate models.     

Forecasting petroleum futures markets volatility: The role of regimes and market conditions

In this paper we employ regime volatility models to describe time dependency in petroleum markets. Using a sample of NYMEX and ICE futures contracts, we establish the existence of a regime process and link this process to market fundamentals. This formulation results in two distinct states: a highly persistent conditional volatility process, characterised by long memory and low sensitivity to market shocks, and a relatively short-lived nonstationary process with less memory but higher sensitivity to shocks. Moreover, to investigate the relationship between disequilibrium and volatility of oil futures across high and low volatility regimes we use augmented regime GARCH models to address in a realistic way the potential diverse response of volatility to forward curve shocks. The performance of these models is compared to benchmarks, using both statistical tests and risk management loss functions. To test the robustness of the forecasting strategies, we also perform a reality check employing the stationary bootstrap approach. The findings of this paper have important implications for decision making concerning trading and risk management, as well as energy market operations, such as refining and budget planning, by providing valuable information on the oil price volatility dynamics and the ability to predict risk.     

Fuel tax incidence in developing countries: The case of Costa Rica

Although fuel taxes are a practical means of curbing vehicular air pollution, congestion, and accidents in developing countries—all of which are typically major problems—they are often opposed on distributional grounds. Yet few studies have investigated fuel tax incidence in a developing country context. We use household survey data and income–outcome coefficients to analyze fuel tax incidence in Costa Rica. We find that the effect of a 10% fuel price hike through direct spending on gasoline would be progressive, its effect through spending on diesel—both directly and via bus transportation—would be regressive (mainly because poorer households rely heavily on buses), and its effect through spending on goods other than fuel and bus transportation would be relatively small, albeit regressive. Finally, we find that the overall effect of a 10% fuel price hike through all types of direct and indirect spending would be neutral and the magnitude of this combined effect would be modest. We conclude that distributional concerns need not rule out using fuel taxes to address pressing public health and safety problems, particularly if gasoline and diesel taxes can be differentiated.     

Stocks and energy shocks: The impact of energy accidents on stock market value

We investigate how financial market participants value energy accidents. We employ an event study to look into the response of stock markets to 209 accidents. These accidents were derived from Sovacool’s (2008) database on major energy accidents from 1907 to 2007. It appears that the stock market in general does not show a significant reaction with respect to these accidents. This would suggest that financial market participants perceive energy accidents as being ‘part of the game’ and discount for most energy accidents already in the valuation of the energy industry.     

Energy prices,volatility, and the stock market: Evidence from the Eurozone

This paper constitutes a first analysis on stock returns of energy corporations from the Eurozone. It focuses on the relationship between energy market developments and the pricing of European energy stocks. According to our results, oil price hikes negatively impact on stock returns of European utilities. However, they lead to an appreciation of oil and gas stocks. Interestingly, forecastable oil market volatility negatively affects European oil and gas stocks, implying profit opportunities for strategic investors. In contrast, the gas market does not play a role for the pricing of Eurozone energy stocks. Coal price developments affect the stock returns of European utilities. However, this effect is small compared to oil price impacts, although oil is barely used for electricity generation in Europe. This suggests that for the European stock market, the oil price is the main indicator for energy price developments as a whole.     

Oil exploitation and the environmental Kuznets curve

This study refers to a panel estimation of an environmental Kuznets curve (EKC) for oil to determine the factors most affecting oil exploitation in 38 oil-producing countries during 1990–2000. Control variables such as oil reserves, oil price, population, political rights, and the Gini index were used to determine its contribution to the main EKC model. The empirical results fully support the existence of an EKC for oil exploitation. Furthermore, the result indicates that the proved oil reserves has a significant and positive role in oil production, but oil price and population do not significantly affect crude oil production. Also, increased freedoms and a better income distribution will reduce the rate of oil exploitation. Thus, policies aiming at enhancing democratic society and better income distribution would be more compatible with sustainability.     

The effectiveness of environmental authoritarianism: Evidence from China's administrative inquiry for environmental protection

In order to improve China's environmental quality, the central government has strengthened the environmental responsibility of local governments, and adopted supervision tools such as environmental protection inquiries and inspections to promote local governments to be more proactive in environmental issues. In this paper, the global non-radial direction distance function (NDDF) and difference-in-difference (DID) method are used to analyze the impact of the environmental protection inquiry on energy-environmental efficiency. Specifically, taking energy, capital, and labor as input factors, regional GDP as desirable output, and sulfur dioxide, dust, and wastewater emissions as undesirable outputs, the unified energy-environmental efficiency index (UEEI) of each city has been estimated with the global NDDF method. The results show that UEEI in the eastern and central regions are relatively high, while that in the north and northeast regions are relatively low. On this basis, the impact of environmental protection inquiry on UEEI of each city is analyzed with the DID method. The results show that the environmental protection inquiry can significantly improve the energy-environmental efficiency of atmospheric pollutants, but the effect on energy-environmental efficiency of wastewater emission is not significant.     

Extracting the resource rent from the CDM projects: Can the Chinese Government do better?

The revenue generated from a CDM project in China will be shared by the government and the project owner, and is also subject to the corporate income tax. This paper studies the impacts of the revenue sharing policy and income tax on the CDM market. The economic model presented in this paper shows that higher-cost CDM projects will be more affected by the CDM policies than lower-cost projects. In addition, the majority of CERs will be generated from lower-cost projects. This kind of distribution of CERs across different types of CDM projects, which is in line with the current picture of the CDM market in China, is not consistent with the goal of sustainable development. A simulation shows that a type-by-type tax/fee scheme would be more effective in assisting sustainable development than the current CDM policies. The study also suggests the government use negative tax/fee with the type-by-type scheme to subsidize the CDM projects that generate large sustainability benefits but would otherwise not be developed due to high costs. If all of the revenue from the CDM is recycled, it is estimated that CERs generation will increase by 98.28 MtC, mainly from the CDM projects that have substantial sustainability benefits for the host country.     

Energy consumption,prices and economic growth in three SSA countries: A comparative study

In this paper we examine the causal relationship between energy consumption and economic growth in three sub-Saharan African countries, namely South Africa, Kenya and Congo (DRC). We incorporate prices as an intermittent variable in a bivariate setting between energy consumption and economic growth—thereby creating a simple trivariate framework. Using the ARDL-bounds testing procedure, we find that the causality between energy consumption and economic growth varies significantly across the countries under study. The results show that for South Africa and Kenya there is a unidirectional causal flow from energy consumption to economic growth. However, for Congo (DRC) it is economic growth that drives energy consumption. These findings have important policy implications insofar as energy conservation policies are concerned. In the case of Congo (DRC), for example, the implementation of energy conservation policies may not significantly affect economic growth because the country's economy is not entirely energy dependent. However, for South Africa and Kenya there is a need for more energy supply augmentations in order to cope with the long-run energy demand. In the short-run, however, the two countries should explore more efficient and cost-effective sources of energy in order to address the energy dependency problem.     

Can Markov regime-switching models improve power-price forecasts? Evidence from German daily power prices

Non-linear autoregressive Markov regime-switching models are intuitive. Time-series approaches for the modelling of electricity spot prices are frequently proposed. In this paper, such models are compared with an ordinary linear autoregressive model with regard to their forecast performances. The study is carried out using German daily spot-prices from the European Energy Exchange in Leipzig. Four non-linear models are used for the forecast study. The results of the study suggest that Markov regime-switching models provide better forecasts than linear models.     

Environmental efficiency of the Indian cement industry: An interstate analysis

Coal combustion, for the production of cement, generates considerable amount of environmentally detrimental carbon dioxide as an undesirable by-product. Thus, this paper aims at measuring environmental efficiency within a joint production framework of both desirable and undesirable output using Data Envelopment Analysis and Directional Distance Function. Carbon dioxide is considered as an input in one context and as an undesirable output in the other with the environmental efficiency being defined accordingly. Using 3 digit sate level data from the Annual Survey of Industries for the years 2000–2001 through 2004–2005, the proposed models are applied to estimate environmental efficiency of Indian cement industry. Empirical results show that there is enough potential for the industry to improve its environmental efficiency with efficiency being varied across states. Results also show that Indian cement industry, if faced with environmental regulation, has the potential to expand desirable output and contract undesirable output with the given inputs. However, regulation has a potential cost in terms of lower feasible expansion of desirable output as compared to unregulated scenario.     

Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand

The ability of wind power to reliably contribute energy to electricity networks is directly related to the characteristics of the wind resource. An analysis of the characteristics of the wind power resource of the United Kingdom has been carried out, based on modelling of hourly observed wind speed data from 66 onshore weather recording sites for the period 1970–2003. Patterns of wind power availability are presented, with the data demonstrating that the output from large-scale wind power development in the UK has distinct patterns of monthly and hourly variability. The extent and frequency of high and low wind power events is assessed, and wind power data are matched with electricity demand data to examine the relationship between wind power output and electricity demand. It is demonstrated that wind power output in the UK has a weak, positive correlation to current electricity demand patterns; during peak demand periods, the capacity factor of wind power in the UK is around 30% higher than the annual average capacity factor. Comments on the relevance of these findings to modelling the impact of wind-generated electricity on existing electricity networks are given.     

Simultaneity modeling analysis of the environmental Kuznets curve hypothesis

The environmental Kuznets curve (EKC) hypothesis has been recognized in the environmental economics literature since the 1990's. Various statistical tests have been used on time series, cross section and panel data related to single and groups of countries to validate this hypothesis. In the literature, the validation has always been conducted by using a single equation. However, since both the environment and income variables are endogenous, the estimation of a single equation model when simultaneity exists produces inconsistent and biased estimates. Therefore, we formulate simultaneous two-equation models to investigate the EKC hypothesis for fifty-six countries, using annual panel data from 1990 to 2012, with the end year is determined by data availability for the panel. To make the panel data analysis more homogeneous, we investigate this issue for a three income-based panels (namely, high-, middle-, and low-income panels) given several explanatory variables. Our results indicate that there exists a bidirectional causality between economic growth and pollution emissions in the overall panels. We also find that the relationship is nonlinear and has an inverted U-shape for all the considered panels. Policy implications are provided.     

North African oil and foreign investment in changing market conditions

Since the 1960s, the experiences of the North African oil producers of Libya, Algeria, Egypt and Sudan within the oil industry have followed separate paths, which have led them into different relations with foreign oil companies. While reflecting broader trends of “resource nationalism”, these relations have also been affected by a number of factors specific to these countries. In tracing the evolution of the oil investment frameworks of these countries, as well as their concomitant relations with IOCs, this paper probes the roles played by these factors and argues that the type and size of remaining reserves as well as the capability of NOCs are likely to determine the most future developments in the region's oil industry.     

Nuclear energy consumption, oil prices, and economic growth: Evidence from highly industrialized countries

This study utilizes the Johansen cointegration technique, the Granger non-causality test of Toda and Yamamoto (1995), the generalized impulse response function, and the generalized forecast error variance decomposition to examine the dynamic interrelationship among nuclear energy consumption, real oil price, oil consumption, and real income in six highly industrialized countries for the period 1965-2008. Our empirical results indicate that the relationships between nuclear energy consumption and oil are as substitutes in the U.S. and Canada, while they are complementary in France, Japan, and the U.K. Second, the long-run income elasticity of nuclear energy is larger than one, indicating that nuclear energy is a luxury good. Third, the results of the Granger causality test find evidence of unidirectional causality running from real income to nuclear energy consumption in Japan. A bidirectional relationship appears in Canada, Germany and the U.K., while no causality exists in France and the U.S. We also find evidence of causality running from real oil price to nuclear energy consumption, except for the U.S., and causality running from oil consumption to nuclear energy consumption in Canada, Japan, and the U.K., suggesting that changes in price and consumption of oil influence nuclear energy consumption. Finally, the results observe transitory initial impacts of innovations in real income and oil consumption on nuclear energy consumption. In the long run the impact of real oil price is relatively larger compared with that of real income on nuclear energy consumption in Canada, Germany, Japan, and the U.S.     

The impact of the European Union emission trading scheme on the electricity-generation sector

In order to comply with their commitments under the Kyoto Protocol, France and Germany participate in the European Union Emission Trading Scheme (EU ETS) which predominantly concerns the electricity-generation sectors. In this paper we ask whether the EU ETS provides the appropriate economic incentives to produce an efficient system in line with the Kyoto commitments. If so, electricity producers in the countries concerned should include the price of carbon in their cost functions. After identifying different sub-periods of the EU ETS during its pilot phase (2005–2007), we model the prices of various electricity contracts in France and Germany and look at the volatility of electricity prices around their fundamentals while evaluating the correlation between electricity prices in the two countries. We find that electricity producers in both countries were constrained to include the carbon price in their cost functions during the first two years of the EU ETS. Over this period, German electricity producers were more constrained than their French counterparts, and the inclusion of the carbon price in the electricity-generation cost function was much more stable in Germany than in France. We also find evidence of fuel switching in electricity generation in Germany after the collapse of the carbon market. Furthermore, the European market for emission allowances has greatly contributed to the partial alignment of the wholesale price of electricity in France to that in Germany.     

Analysis of tax incentives for energy-efficient durables in the EU

Climate change is one of the most significant challenges faced by societies this century. Energy consumption is directly associated with CO₂ emissions and climate change. The European Commission has set out emission reduction targets that require a great deal of energy consumption savings in the next 10 years in European countries. This paper presents the results of an analysis of the potential cost-effectiveness of different policy options aimed to foster the production and consumption of energy-efficient appliances in different European countries. Our results suggest that incentives to promote the use of energy-efficient appliances can be cost-effective, but whether or not they are depends on the particular country and the options under consideration. From the cases considered, tax credits on boilers appear to be a cost-effective option in Denmark and Italy, while subsidies on CFLi bulbs in France and Poland are cost-effective in terms of €/ton of CO₂ abated. Comparing the subsidies against the energy tax options, we find that the subsidies are in most cases less cost-effective than the energy tax.     

Risk factors in oil and gas industry returns: International evidence

The recent boom in oil prices has attracted many investors to oil companies in search of both returns and diversification benefits. This analysis of the risk factors of investing in the oil and gas industry in 34 countries finds evidence that oil price is a globally priced factor for the oil industry. The oil and gas sector in developed countries responds more strongly to oil price changes than in emerging markets. Oil and gas industry returns also respond asymmetrically to changes in oil prices; oil price rises have a greater impact than oil price drops. There is no parallel to the asymmetry of oil price changes in other industries related to commodities. If there is any asymmetry, it is in the opposite direction from oil. Negative commodity price changes have a greater impact than positive ones. The results seem to indicate that the oil and gas industry is distinguished by a pass-through effect.