Search

This paper seeks to bring to the attention of regulatory economists and policymakers the existence of some approaches to utility regulation that have hitherto received little or no attention in the economics literature. It begins by noting that regulatory actions have discouraged certain kinds of retail contracts in the UK that are offered in Nordic countries, almost extinguished retail competition in Ohio, and distorted the market for merchant interconnectors in Australia. In contrast, Argentina secured an efficient appraisal and implementation of transmission expansions by empowering users and severely limiting the role for regulation. Some US and Canadian jurisdictions have fostered the emergence of negotiated settlements that exhibit considerable innovation, and greater benefits for all parties than would have been possible with the conventional regulatory approach. These examples of the actual regulatory world can inform the work of theorists and policymakers. [ABSTRACT FROM AUTHOR]

This paper uses data from the 2015 Residential Energy Consumption Survey to explore the extent to which renters' electricity use in the United States exceeds that of otherwise similar non-renters. Renting households are found to use approximately 9% more electricity than non-renters when controlling for location, socioeconomic, and many appliance-quantity controls. There are multiple factors that explain this extra electricity use, including inferior energy efficiency of appliances, behavioral factors, differences in bill payment responsibilities, and additional reliance by renters on electric space and water heaters. The paper finds that none of these factors are dominant. The phenomenon of renters' (conditionally) higher electricity use is thus best understood as one that emerges from multiple sources. [ABSTRACT FROM AUTHOR]

This paper investigates the causal effects of oil price fluctuations on United States' financial markets using daily oil price and financial market data from 2011 to 2016. To address endogeneity, we follow the heteroscedasticity-based identification strategy by Rigobon (2003) and instrument for changes in oil prices with exogenous shocks on current and future oil supply. We find that a decline in oil price negatively affected markets after 2014 when oil price was very low, but not before 2014 when the price was relatively high. These novel findings suggest oil price level could affect the impact of a decrease in oil prices on financial markets. [ABSTRACT FROM AUTHOR]

This paper investigates the interaction between energy consumption and oil shocks in the U.S. from 1974 to 2018 using monthly data. Its contributions rely on the double disaggregation of energy consumption and oil shocks in a time-varying context. Oil shocks are disaggregated into oil supply, oil demand and aggregated demand shocks following the method of Kilian (2009). Energy consumption is disaggregated according to the production source in distinguishing between renewable and non-renewable energy consumption (hydropower, geothermal, wood, waste, coal, natural gas and petroleum). The impulse response function results show that renewable energy consumption responds the most to aggregate demand and oil supply shocks while for non-renewable energy consumption, it is oil demand shocks. The dynamic connectedness results show that oil supply and demand shocks spillover the most to hydropower consumption while aggregate demand shocks spillover the less. However, these relationships change over time and recommend the flexibility of energy policies. [ABSTRACT FROM AUTHOR]

The U.S. Clean Power Plan stipulates a state-specific performance-based CO2 emission standard, delegating states with considerable flexibility for using either a tradable performance-based or a mass-based permit program. This paper analyzes these two standards under imperfect competitive. We limit our attention to (1) short-run analyses and (2) a situation in which all states are subject to the same type of standard. We show that while the cross-subsidy inherent in the performance- based standard might effectively reduce power prices, it could also inflate energy consumption. A dominant firm with a relatively clean endowment under the performance-based standard would be able to manipulate the electricity market as well as to elevate permit prices, which might worsen market outcomes compared to its mass-based counterpart. On the other hand, the "cross-subsidy" could be the dominant force leading to a higher social welfare if the leader has a relatively dirty endowment. [ABSTRACT FROM AUTHOR]

This paper studies the effect of oil price shocks on U.S. state-level unemployment rates. First, using a test of symmetry, I evaluate whether the relationship between oil prices and state unemployment rates is symmetric. I find no evidence against the null of symmetry after accounting for data mining. Second, I use a symmetric structural VAR model to analyze the effect of oil supply shocks, aggregate demand shocks and oil-specific demand shocks on state unemployment. I find that an adverse supply shock triggers increases in unemployment, whereas a positive aggregate demand shock reduces the unemployment rate across most U.S. states. I also show that oil-specific demand shocks have little effect on state unemployment. Finally, I dig into the historical contribution of the various oil shocks to the changes in state unemployment rates during the shale boom period. I find that aggregate demand shocks contributed the most to the change of unemployment. [ABSTRACT FROM AUTHOR]

In the context of sub-global participation in greenhouse gas mitigation efforts, this paper investigates the effectiveness of a Canada-U.S. emissions bubble under their existing regional trade agreement. It also explores the potential economic impact of carbon tariff harmonization through the implementation of a common Canada-U.S. external border tariff adjustment as a mean to address competitiveness issues. Using a multi-region, multi-sector computable general equilibrium model the paper finds that the creation of an emission bubble between the two countries could improve efficiency. The findings also suggest that a carbon tariff harmonization policy could give rise to distributional issues among Annex I regions and could fail to mitigate the negative competitiveness impacts of carbon abatement policies. [ABSTRACT FROM AUTHOR]

Using a multi-regional input-output (MRIO) framework, we estimate the direct and indirect carbon dioxide (CO2) content of consumption across regions of the United States. We improve on existing estimates by accounting for emissions attributable to domestically and internationally imported goods using data describing bilateral trade between U.S. states and with international countries and regions. This paper presents two major findings. First, attributing emissions to states on a consumption basis leads to very different state-level emissions responsibilities than when attributed on a production basis; for example, California's emissions are over 25 percent higher. Second, heterogeneity of emissions across trading partners significantly affects the indirect emissions intensity of consumption (kg of carbon per $ of consumption), so regional differences in intensity across the U.S. go well beyond direct energy consumption. These findings have implications for evaluating the distributional impacts of national climate policies and for understanding differing incentives to implement state-level policies. [ABSTRACT FROM AUTHOR]

Residential weatherization programs have become a major component of U.S. energy policy. Through these programs, households receive heavily subsidized energy efficiency upgrades as well as informational and behavioral treatments designed to encourage conservation. While previous work demonstrates that weatherization programs provide sizable energy savings, all have measured the composite effect of efficiency upgrades and behavioral treatments. In this paper, we present the first estimates which disentangle the energy savings provided by each of the individual interventions. Our results reveal that the actual energy savings achieved by the efficiency upgrades are substantially smaller than exante, engineering predictions. Moreover, we present evidence that the energy savings provided by the simple behavioral interventions can exceed the savings resulting from the much more costly efficiency upgrades. [ABSTRACT FROM AUTHOR]

Buildings are the dominant driver of daily and seasonal electric load cycles, and account for 40 percent of U.S. final energy use. They account for roughly 10 percent of direct U.S. CO2 emissions and roughly 40 percent once indirect emissions from electricity generation are included. This paper explores possible evolution of this sector over the coming century, its potential role climate action and response to climate policies, and the potential benefits advances in building technologies for addressing climate change. The paper presents a set of scenarios based on a detailed, service-based model of the buildings sector that is embedded within a long-term, global, integrated assessment model, MiniCAM. Eight scenarios are created in total, combining sets of assumptions regarding U.S. building service demand growth, two assumptions regarding the improvements in building energy technologies, two assumptions regarding long-term U.S. climate action --- a no-climate-action assumption and an assumption of market-based policies to reduce U.S. emissions consistent with a 450 ppmv global target. Through these eight scenarios, the paper comments on the implications of continued growth in building service demands, the ability of efficiency measures to reduce emissions, the strong link between decarbonization of electricity generation and building sector emissions. [ABSTRACT FROM AUTHOR]

This paper considers the design, incentives and effectiveness of U.S. demand side management (DSM)programs and tries to explain why this ambitious, almost unanimously embraced initiative failed. Problems on the demand side result from consumers' private information that implies that substantial principal-agent slippage must accompany any conservation incentive the utility offers to the consumer. Moreover, the regulatory incentives induce the American utility to select inefficient programs. Therefore, the utility has little to gain from deterring such strategic reactions and cheating by consumers. As a consequence, the reported conservation exists largely on paper but not in reality. This ex-post assessment is important for two reasons. First, European countries (Scandinavia, Germany, Austria and others) have been eager to repeat this American regulatory 'success'. Second, the problems addressed in this paper would apply to another round of conservation programs induced by the concern about global warming. [ABSTRACT FROM AUTHOR]

Solar photovoltaic (PV) system prices in the United States display considerable heterogeneity both across geographic locations and within a given location. Such heterogeneity may arise due to state and federal policies, differences in market structure, and other factors that influence demand and costs. This paper examines the relative importance of such factors on equilibrium solar PV system prices in the United States using a detailed dataset of roughly 100,000 recent residential and small commercial installations. As expected, we find that PV system prices differ based on characteristics of the systems. More interestingly, we find evidence suggesting that search costs and imperfect competition affect solar PV pricing. Installer density substantially lowers prices, while regions with relatively generous financial incentives for solar PV are associated with higher prices. [ABSTRACT FROM AUTHOR]

Electricity industry restructuring is only now beginning to focus on the role of utilities in distributed generation (DG). This paper examines whether, as restructuring unfolds, regulators may permit investor-owned distribution companies to own DG, and if so, under what terms. Concomitantly, the paper explores how ownership of DG by distribution companies impacts electricity restructuring. The paper concludes that regulated utilities should readily obtain approval to install DG on utility sites as long as the utility remains vertically integrated. Approval is also possible for vertically integrated or restructured utilities to provide DG at customer sites if it is shareholder-funded and connected on the customer's side of the meter. However, distribution company ownership of DG at utility sites or on the utility's side of the meter conflicts with electricity industry restructuring. Regulatory approval under restructuring is therefore highly problematical. Should regulatory approval be granted, the need to mitigate vertical market power is likely to precipitate the disaggregation of the distribution company. [ABSTRACT FROM AUTHOR]

This paper briefly surveys the history of natural gas use and describes the main features of current gas consumption. The share of gas in total energy consumption, and the sectoral distribution of its use in major consuming regions are discussed. The main changes in the pattern of gas consumption since 1980 are reviewed and explained. I analyze the likely implications of (a) the emergence of the combined cycle gas power generation; (b) the rising environmental premium of gas; and (c) the transformation of the West European gas market structure. The paper concludes that natural gas will substantially increase its share of global energy consumption in the next 15-20 years. [ABSTRACT FROM AUTHOR]

This paper studies the development of renewable energy (RE) in the U.S. by examining the capacity to generate electricity from renewable sources. RE capacity exhibits a U-shaped relationship with per capita income, similar to other metrics for environmental quality (EQ). To explain this phenomenon, I consider several of the environmental Kuznets curve theories that describe the relationship between income and environmental quality (Y-EQ), including evolving property rights, increased demand for improved EQ, and changing economic composition. The results fail to provide support for the Y-EQ theories. I further consider the alternative hypothesis that increases in unemployment lead to increases in relative RE capacity, suggesting that promoting RE projects as a potential job creator is one of the main drivers of RE projects. The results imply that lagged unemployment is a significant predictor of relative RE capacity, particularly for states with a large manufacturing share of GDP. [ABSTRACT FROM AUTHOR]

Energy from biomass is potentially an important contributor to U.S. climate change mitigation efforts. However, large-scale implementation of bioenergy competes with other uses of land, including agriculture and forest production and terrestrial carbon storage in non-commercial lands. And with trade, bioenergy could mean greater reliance on imported energy. Based on EMF-24 policy specifications, this paper explores these dimensions of bioenergy's role in U.S. climate policy and the relationship to alternative measures for ameliorating the trade and land use consequences. It shows how widespread use of biomass in the U.S. could lead to imports; and it highlights that the relative stringency of domestic and international carbon mitigation policy will heavily influence the amount of imports. It demonstrates that limiting biomass imports could alter the balance of trade in other agricultural products. Finally, it shows that increasing efforts to protect both U.S. and international forests could also affect the balance of trade in other agricultural products. [ABSTRACT FROM AUTHOR]

Regulatory measures have proven the favored approach to climate change mitigation in the U.S., while market-based policies have gained little traction. Using a model that resolves the U.S. economy by region, income category, and sectorspecific technology deployment opportunities, this paper studies the magnitude and distribution of economic impacts under regulatory versus market-based approaches. We quantify heterogeneity in the national response to regulatory policies, including a fuel economy standard and a clean or renewable electricity standard, and compare these to a cap-and-trade system targeting carbon dioxide or all greenhouse gases. We find that the regulatory policies substantially exceed the cost of a cap-and-trade system at the national level. We further show that the regulatory policies yield large cost disparities across regions and income groups, which are exaggerated by the difficulty of implementing revenue recycling provisions under regulatory policy designs. [ABSTRACT FROM AUTHOR]

This paper presents an overview of the study design and the results of the EMF 24 U.S. Technology Scenarios. The EMF 24 U.S. Technology Scenarios engaged nine top energy-environment-economy models to examine the implications of technological improvements and technological availability for reducing U.S. greenhouse gas emissions by 50% and 80% by 2050. The study confirms that mitigation at the 50% or 80% level will require a dramatic transformation of the energy system over the next 40 years. The study also corroborates the result of previous studies that there is a large variation among models in terms of which energy strategy is considered most cost-effective. Technology assumptions are found to have a large influence on carbon prices and economic costs of mitigation. [ABSTRACT FROM AUTHOR]

The Energy Modeling Forum 24 study included a set of policy scenarios designed to compare economy wide market-based and sectoral regulatory approaches of potential U.S. climate policy. Models from seven teams participated in this part of the study assessing economy-wide cap-and-trade climate policy and sectoral policies in the transportation and electric sector in terms of potential greenhouse gas emissions reductions, economic cost, and energy systems implications. This paper presents an overview of the results from the U.S. policy scenarios, and provides insights into the comparison of results from the participating models. In particular, various metrics were used to compare the model results including allowance price, the efficient frontier, consumption loss, GDP loss, and equivalent variation. We find that the choice of economic metric is an important factor in the comparison of model results. Among the insights, we note that the carbon price should cautiously be considered when other non-cap sectoral policies affecting emissions are assumed in tandem. We also find that a transportation sector policy is consistently shown to be inefficient compared to an economy-wide capand-trade policy with a comparable level of emissions reductions. [ABSTRACT FROM AUTHOR]

Beginning in early 2011, crude oil production in the U.S. Midwest and Canada surpassed the pipeline capacity to transport it to the Gulf Coast where it could access the world oil market. As a result, the U.S. "benchmark" crude oil price in Cushing, Oklahoma, declined substantially relative to internationally traded oil. In this paper, we study how this development affected prices for refined products, focusing on the markets for motor gasoline and diesel. We find that the relative decrease in Midwest crude oil prices did not pass through to wholesale gasoline and diesel prices. This result is consistent with evidence that the marginal gallon of fuel in the Midwest is still imported from coastal locations. Our findings imply that investments in new pipeline infrastructure between the Midwest and the Gulf Coast, such as the southern segment of the controversial Keystone XL pipeline, will not raise gasoline prices in the Midwest. [ABSTRACT FROM AUTHOR]

In recent years, many households around the world have experienced reductions in real incomes and higher energy prices, both of which have important demand and welfare implications. A better understanding of the socio-economic determinants of household energy demand and spending is therefore important from a welfare perspective. This is particularly useful in the case of liberalised energy markets where there is a need to devise new and innovative energy policies for the residential sector. This paper explores British household spending on energy in total and on electricity and gas separately. As the relative importance of essential or luxury services of energy varies with income, we focus our analysis on this driver of energy spending and estimate Engel spending curves using static and dynamic models for a panel dataset comprising over 77,000 observations for the 1991-2007 period. The lack of household level price data is common in liberalized retail energy markets. This issue is addressed by a new modeling approach based on within and between differences in regional energy prices. We find that the Engel spending curves are S-shaped. Income elasticities for energy spending are, however, U-shaped and smaller than unity, suggesting that energy services are a necessity for households. [ABSTRACT FROM AUTHOR]

This paper examines both the intended and unintended consequences of current U.S. ethanol policy. Originally, the 2007 legislation was intended to benefit consumers with lower gasoline prices, to reduce carbon emissions, and to promote oil security by displacing imported oil with domestically produced ethanol. While well-intentioned, the realized benefits have been minimal to consumers, the environment, and oil security. Alternatively, the unintended consequences on corn and other food commodity prices are having severe repercussions particularly in developing countries where consumers have more limited substitution possibilities. The extreme drought of 2012 illustrated the folly of mandating fixed quantities of ethanol use in gasoline, while allowing the residual to be left for food uses. It is time to reconsider and rescind the ethanol mandates. [ABSTRACT FROM AUTHOR]

As financial firms have increased their positions in the oil futures market during the past ten years, oil prices have increased dramatically as well. The coincidence of these two events has led some observers to argue that financial speculation caused the oil-price increases. Yet several arguments cast doubt on the validity of this claim. For example, although the quantity of oil implied by the number of open futures contracts is much larger than U.S. daily oil consumption, comparing these two statistics is misleading because not all paper oil is immediately deliverable. In addition, changes in financial firms' positions do not predict oil-price changes, but oil-price changes predict changes in positions. Other explanations for the oil-price increases include macroeconomic fundamentals such as increased demand from emerging Asia. Of these explanations, the most consistent with the facts relates the oil-price increases to a series of positive demand shocks emanating from emerging Asia. [ABSTRACT FROM AUTHOR]

Title IV of the 1990 Clean Air Act Amendments implemented a pollution permit system for sulfur dioxide (SO2) emissions that departs from state command-and- control regulations that were in place prior to and during its implementation. This paper develops a technology diffusion model relying on rank effects or firm heterogeneity, to explain the adoption of scrubbers, a SO2 abatement technology. Using survival analysis, empirical results show that generating units regulated under Phase I of Title IV, units facing more stringent state regulations, and units with low expected installation costs are much more likely to install a scrubber. In addition, there is evidence of positive scale effects of adoption, meaning larger units are more likely to adopt because expected installation costs are lower Tradable permit systems should give firms more flexibility in choosing abatement technologies, but results show that when command-and-control regulations overlap with a market-based system, the technology choice is restricted. [ABSTRACT FROM AUTHOR]

This paper examines the effects of market restructuring initiatives that introduced competition into the United States electricity industry on the thermal efficiency of electricity generation. An empirical model is estimated on annual data for over 950 plants from 1996 to 2006. Model estimates show that access to wholesale electricity markets and retail choice together increased the efficiency of investor-owned plants by about nine percent and that these gains stem from organizational and technological changes within the plant. Although not directly targeted by restructuring initiatives, similar efficiency gains are also found for municipality-owned plants. This result suggests that the potential benefits from competition have spilled over to public electricity generation. [ABSTRACT FROM AUTHOR]

This paper investigates the role of extreme oil price increases in empirical studies of the macroeconomics of oil prices. The innovative approach of rolling impulse responses is applied and data on both the aggregate and the industry-level is considered. The results show that the first oil crisis drives long-run results and superimposes both subsample and industry-specifics. Furthermore, there is evidence that the non-occurrence of large oil shocks after the mid-1980s is an important explanation for the Great Moderation. [ABSTRACT FROM AUTHOR]

Motivated by the European movement towards a separation of electricity networks from the competitive functions generation and supply this paper reviews theoretical and empirical literature on vertical synergies in electricity supply. In the analysis a clear distinction is made between four different unbundling options leading to different forms and magnitudes of synergy losses. Apart from coordination economies a main source of scope economies seems to result from a market risk effect if generation and retail are separated. Accordingly, the European policy of network unbundling (either transmission or distribution) results in synergy losses between 2 and 8 percent due to coordination losses, while an unbundling option that includes a separation between retail and generation, as observed in some U.S. states, may lead to a permanent cost increase of 20 percent or more due to a significant risk increase. [ABSTRACT FROM AUTHOR]

This paper studies the impacts of state level residential building codes on per capita residential electricity consumption. We construct a timeline of when individual states first implemented residential building codes. Using panel data for 48 US states from 1970-2006, we exploit the temporal and spatial variation of building code implementation and issuance of building permits to identify the effect of the regulation on residential electricity consumption. Controlling for the effect of prices, income, and weather, we show that states that adopted building codes followed by a significant amount of new construction have experienced detectable decreases in per capita residential electricity consumption--ranging from 0.3-5% in the year 2006. Estimates are larger in states where codes are more stringent and more strictly enforced. [ABSTRACT FROM AUTHOR]

The coincident rise in crude oil prices and increased number of financial participants in the crude oil futures market from 2000-2008 has led to allegations that "speculators" drive crude oil prices. As crude oil futures peaked at $147/ bbl in July 2008, the role of speculators came under heated debate. In this paper, we employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. We employ Granger Causality tests to analyze lead and lag relations between price and position data at daily and multiple day intervals. We find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes; the results instead suggest that price changes precede their position changes. [ABSTRACT FROM AUTHOR]

This paper briefly reviews some key aspects of U.S. energy policy history and policy-making complexity, considers the issues and pressures that growing international economic interdependency may bring, and suggests some approaches and tools for improvement. [ABSTRACT FROM AUTHOR]

During the last decades the production of electrical energy has been liberalized. This paper studies the effect of using a market mechanism to allocate scarce transmission capacity when the incumbent producers remain dominant. We show that granting exclusive use to an incumbent producer is preferred to trading access to this essential facility if interregional production-cost differences are significant and transmission capacity is scarce. This result counters the intuition on third degree price-discrimination, that arbitrage will improve the social surplus when there is no output contraction. The reason is that with arbitrage the incumbent can still charge different regional prices as long as it creates congestion on the transmission lines. As a consequence, welfare will be lower, since the incumbent distorts production decisions to congest the lines. We recommend that a market-oriented access to scarce transmission capacity should be accompanied by additional regulatory or structural measures to address market power. [ABSTRACT FROM AUTHOR]

Allaz and Vila (1993) have shown that forward markets could mitigate market power and improve efficiency. This paper shows that efficiency-improving effect of forward markets is sensitive to the assumption that market participants behave like rational expectations agents when forecasting prices. The existence of forward contracts could increase spot prices and hurt efficiency if buyers engage in bilateral forward contracts and forward rates are influenced by historic prices. These findings have important policy implications for the electricity industry. [ABSTRACT FROM AUTHOR]

The rise in world oil prices, coupled with heightened interest in the abatement of greenhouse gas emissions, led to a sharp increase in biofuels production around the world. Previous authors have devoted considerable attention to the impacts of these policies on a country-by-country basis. However, there are also strong interactions among these programs, as they compete in world markets for feedstocks and ultimately for a limited supply of global land. In this paper, we offer the first global assessment of biofuel programs -focusing particularly on the EU and US. We begin with an historical analysis of the period 2001-2006, which also permits us to validate the model. We then conduct an ex ante analysis of mandates in the year 2015. We find that if these mandates are indeed fulfilled the impact on global land use could be substantial, with potentially significant implications for greenhouse gas emissions. [ABSTRACT FROM AUTHOR]

Fuel demand elasticities to determine consumer responses to tax increases or price shocks are typically based on aggregate data. The literature generally provides one elasticity estimate for each country, assuming similar response for all households. However, it is possible that different households can have different responses to the same stimuli depending on the household characteristics. Assuming a single elasticity for all households may fail to capture the detailed distributional effect on different socio-economic groups, which is often needed to fully understand the impact of fuel tax measures. This paper presents results from a household level gasoline demand model which accommodates variation in price and income elasticity with increasing income as well as for different socio-economic characteristics in the USA. We find substantial heterogeneity in price and income elasticities based on demographic groupings and income groups. Results of a distributional analysis for a gasoline tax are also presented using the heterogeneous responses. [ABSTRACT FROM AUTHOR]

The extent to which future United States demand for natural gas is satisfied by imports of LNG is contingent on the adequacy and cost competitiveness of North American supplies. One of the cheaper and more important sources of natural gas supply is accounted for by reserve appreciation, i.e., reserve growth, in known fields. Based on an extensively applied methodology developed by Arrington (1960), the increase in proved ultimate recovery is presumed to increase at a diminishing rate with the age of the field. In this paper, a single equation model of natural gas reserve growth in the Gulf of Mexico is developed and estimated. The results strongly suggest that the annual growth rate in the reserves of afield is significantly affected by initial discovery size, price, water depth, and unobserved field-specific effects. Hence, estimating oil and gas reserve growth using an Arrington based approach may underestimate the response of reserve growth to changes in economic fundamentals. [ABSTRACT FROM AUTHOR]

This paper uses a structural vector autoregression model to investigate the inflationary effects of oil prices. Rather than simply infer the oil price changes as oil supply shocks, we identify three different shocks in the crude oil market: the oil supply shock, the global aggregate demand shock, and the oil-market specific demand shock. We then use impulse response functions to compute the conditional oil price pass-through ratios. It is found that the largest oil price pass-through is caused by oil supply shocks. However, evidence from historical decompositions suggests that the oil price movements have been driven by shocks from strong global aggregate demand and oil demand while only minor contributions come from oil supply shocks. Disentangling demand and supply shocks in the crude oil market helps to uncover the fact that a recent decline in unconditional oil price pass-through may come from the low conditional pass-through caused by global demand shocks. [ABSTRACT FROM AUTHOR]

This paper presents evidence of a non-linear relationship between real GDP growth and oil price changes for the US economy. We also argue that this non-linearity is not merely due to the use of data from the mid-1980s onwards, as most authors, so far, seem to believe. In fact, we find the existence of non-linearity with the use of data earlier than 1984, and even before 1977. Furthermore, we question that the non-linear transformations of oil prices proposed in the literature are the most appropriate ones for reflecting such non-linearity. [ABSTRACT FROM AUTHOR]

Tradable permit programs allow firms greater flexibility in reducing emissions than command-and-control regulations and encourage firms to use cost abatement options, including small-scale modifications to capital equipment. This paper shows that firms have extensively modified capital equipment in the Nitrogen Oxides Budget Trading Program, which covers power in the eastern United States. The empirical strategy uses geographic and temporal features of the program to estimate counterfactual emissions, finding modifications have reduced emission rates by approximately 10-15 percent. modifications would not have occurred under command-and-control regulation and have reduced regulatory costs. [ABSTRACT FROM AUTHOR]

This paper compares electricity wholesale markets in the United States and Europe. The Standard Market Design in the US involves an independent system operator, nodal pricing with financial transmission rights, and integrated markets for capacity and ancillary services. In Europe, there are national, or occasionally zonal, spot markets run by companies independent of the transmission operator, and of the latter's purchases of ancillary services. As the amount of flow-carbon generation increases, prices and transmission constraints are likely to become more volatile, increasing the need to adopt an efficient market design. In most respects, the US standard market design is likely to give better results than the European models. [ABSTRACT FROM AUTHOR]

This paper considers the macroeconomics of the oil price for the United States. It investigates the impact of large oil price hikes in a standard VAR framework by introducing a new Markov switching based oil price specification. The explanatory power of this new specification is compared to that of a number of prominent non-linear specifications. The key findings are: (1) the new oil price specification is appropriate in both empirical and theoretical terms and allows for a well-founded distinction between "large" and "normal" oil price increases. (2) The observed impact of oil price shocks on real GDP growth is largely attributable to no fewer than three large oil price increases, namely those of 1973-74, 1979 and 1991, while variables such as consumer and import prices are also affected by normal oil price increases. [ABSTRACT FROM AUTHOR]

This paper provides an empirical evaluation of the efficiency of allowance banking in the nationwide market Jbr sulfur dioxide (S02) emission allowances that was created by the U.S. Acid Rain Program. We develop a model of efficient banking, select appropriate parameter values, and evaluate the efficiency of observed temporal pattern of abatement based on aggregate data from the first eight years of the Acid Rain Program. Contrary to the general opinion that banking in this program has been excessive, we find that it has been reasonably efficient. We also identify the erroneous assumptions underlying the earlier view and the conditions required for efficient banking to exist independently of changes in the counterfactual, an attribute we call robustness. These results show that firms use banking provisions in a rational and predictable way and that, at least in the US Acid Rain Program, there is no support for the often expressed concern that banked permits will be used all at once to create emissions spikes. [ABSTRACT FROM AUTHOR]

Restructuring efforts in the U.S. electric power sector have tried to encourage transmission investment by independent (non-utility) transmission companies, and have promoted various levels of market-based transmission investment. Underlying this shift to "merchant" transmission investment is an assumption that new transmission infrastructure can be classified as providing a congestion-relief benefit or a reliability benefit. In this paper, we demonstrate that this assumption is largely incorrect for meshed interconnections such as electric power networks. We focus on a particular network topology known as the Wheatstone network to show how congestion and reliability can represent tradeoffs. Lines that cause congestion may be justified on reliability grounds. We decompose the congestion and reliability effects of a given network alteration, and demonstrate their dependence through simulations on a 118- bus test network. The true relationship between congestion and reliability depends critically on identifying the relevant range of demand for evaluating any network externalities. [ABSTRACT FROM AUTHOR]

Federal clean air regulations have spawned a proliferation of motor fuel types that have created differentiated markets for motor fuels, increased the cost of supplying these fuels, and reduced the capacity of the supply infrastructure. In this paper we examine wholesale gasoline prices in 99 US cities over a time horizon of 204 weeks using a panel data regression model to explain fuel prices as a function of fuel attributes, the price of crude oil, and seasonal and city market- specific effects. Our results show that fuel prices are related to the use of a special blend not widely available in the region and more costly to make, and the situation of the particular city market in relation to major refining centers or other sources of supply. [ABSTRACT FROM AUTHOR]

Gaining a better understanding of how electricity demand has changed over the past three decades, particularly in light of government involvement in influencing electricity demand, is an important step towards shaping energy policy in the U.S. and internationally. This study of U.S. electricity demand finds that those states that have moderate to strong commitment to energy efficiency programs reduce electricity intensity relative to what it would have been with weak program commitment; in the residential sector by 4.4 percent, in the commercial sector by 8.1 percent, and in the industrial sector by 11.8 percent. The findings are similar with respect to levels of electricity consumption in the commercial and industrial sectors, but not the residential sector. Moreover, the evidence in this paper indicates that energy efficiency program commitment in all three sectors of the U.S. economy has transformed electricity demand with respect to three key economic variables; electricity price, income as measured by per capita income or gross state product, and technological change. Also, this study finds that nationwide spillover from energy efficiency programs may be rapid and ubiquitous in the residential sector. Estimates of the impact of California's energy efficiency programs confirm the speculation that these efforts have dramatically reduced state electricity intensity; to date, these impacts are likely the upper bounds of the impacts of strong state-level energy efficiency program commitment. [ABSTRACT FROM AUTHOR]

This paper explores the relationships among per capita income, energy consumption, and carbon dioxide (CO2) emissions by focusing on a set of economies at advanced stages of development, the U.S. states. Energy consumption and emissions grew 50-60 percent on average over the 1960-1999 period. The states' per capita energy consumption and emissions have grown on average 2 percent annually. The energy consumption income elasticity is positive but decreasing in income, although energy production takes an inverted-U shape, reflecting the electricity imports among high income states. The standard CO2 measure, corresponding to energy production, is characterized by an inverted-U environmental Kuznets curve. Adjusting emissions for interstate electricity trade yields an emissions-income relationship that peaks and plateaus. The carbon intensity of energy declines with income for total energy consumption and the industrial, residential, and commercial sectors. [ABSTRACT FROM AUTHOR]

Economic analyses of climate change policies frequently focus on reductions of energy-related carbon dioxide emissions via market-based, economy-wide policies. The current course of environment and energy policy debate in the United States, however, suggests an alternative outcome: sector-based and/or inefficiently designed policies. This paper uses a collection of specialized, sector-based models in conjunction with a computable general equilibrium model of the economy to examine and compare these policies at an aggregate level. We examine the relative cost of different policies designed to achieve the same quantity of emission reductions. We find that excluding a limited number of sectors from an economy-wide policy does not significantly raise costs. Focusing policy solely on the electricity and transportation sectors doubles costs, however, and using non-market policies can raise cost by a factor often. These results are driven in part by, and are sensitive to, our modeling of pre-existing tax distortions. [ABSTRACT FROM AUTHOR]

This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy' markets. We .further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis. [ABSTRACT FROM AUTHOR]

This paper examines changes in the utilization rates (annual capacity factors) of coal-burning power plants in the eastern United States after 1996, when federal regulators opened the transmission system to wholesale power markets. This and other accompanying market-oriented reforms were intended to improve efficiency by encouraging regional dispatch by independent system operators. If the reforms made dispatch more efficient, then utilization rates of high-cost plants should have fallen relative to those of low-cost plants since 1996. A difference-in-difference model using plant-level panel data indicates that relative utilization rates of high-cost plants did indeed fall after 1996, but only in regions with independent system operators. Simulations indicate cost savings on the order of two to three percent. [ABSTRACT FROM AUTHOR]

The transition to competitive wholesale and retail markets for electricity in the U. S. has been a difficult and contentious process. This paper examines the progress that has been made in the evolution of wholesale and retail electricity market institutions. Various indicia of the performance of these market institutions are presented and discussed. Significant progress has been made on the wholesale competition front but major challenges must still be confronted. The framework for supporting retail competition has been less successful, especially for small customers. Empirical evidence suggests that well-designed competitive market reforms have led to performance improvements in a number of dimensions and benefited customers through lower retail prices. [ABSTRACT FROM AUTHOR]

The Kyoto agreement as originally drafted sought to mitigate anthropogenic greenhouse gas emissions through policy measures by most industrialized countries. It now seems likely that the agreement will be ratified and implemented without the participation of the United States. Any emissions abatement policies which have a measurable reduction in global emissions will induce changes in the terms of trade and comparative advantage and competitiveness To the extent that aggressive policies are undertaken to reduce CO2 emissions, there are likely to be strong calls in the Kyoto coalition for greenhouse-gas related border adjustment measures. This paper uses a multi-region, multi-commodity static general equilibrium model to quantify and assess the implications of such policies. [ABSTRACT FROM AUTHOR]