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Three Essays in Energy and Environmental Economics Author: Mgr. Lukáš Rečka Supervisor: Mgr. Milan Ščasný, Ph.D. Academic Year: 2018/2019 Abstract This thesis consists of three articles that share the main theme - energy and environment. The dissertation aims mainly at the Czech energy system and analyses it development after the Velvet Revolution and its possible future development. The first article applies Logarithmic Mean Divisia Index decomposition to analyses the main driving forces of significant reduction in air quality pollutants during the transition of the Czech economy towards market economy in the 1990s. It continues then to investigate how the driving forces affected the emissions volumes during succeeding the post-transition period up to 2016. The second article reacts on the 2015 governmental decision to lift brown coal mining limits in the North Bohemia coal basin. The paper analyses the impacts of maintaining the ban on mining coal reserves and compares them with three alternative options that would each weaken the environmental protections of the ban. The impacts of each of these alternative governmental propostions are analysed on the Czech energy system, the fuel- and the technology-mix, the costs of generating energy, related emissions and external costs associated with the emissions....

In 2015, a 24-year-long prohibition of coal mining within some territories in the North Bohemia coal basin was lifted and as a consequence mining a part of the brown coal reserves might well be resumed. This paper analyses the impacts of maintaining the ban versus three options for a less environmentally stringent policy on the Czech energy system; fuel- and technology-mix, the costs of generating energy, emissions and related external costs up to 2050. We find that overall the effect of lifting the ban, on coal usage, air pollutant emissions and hence externalities is rather small, up to 1–2% compared to the level of keeping the ban. The small difference in the impacts remains even if changes in the prices of fossil fuels and European Emission Allowances or different development in nuclear power usage are assumed. In fact, changing these assumptions will result in more pronounced differences in the impacts than the four policy options might deliver. Maintaining the ban would not achieve the European Energy Roadmap 2050 target and the newly adopted policy and the other two counter-environmental proposals would miss the 80% reduction target to an even greater degree. The environmental and external health costs attributable to emissions of local air pollutants stemming from power generation are in a range of €26–32 billion over the whole period and decline from about 0.5% of gross domestic product in 2015 to 0.1% in 2050.

We assess the impacts of more strict regulation than the EU-wide 20% CO2 reduction target in 2020 on Slovak energy sector. Linear dynamic optimisation model MESSAGE with very detailed structure of Slovak energy sector is used for the assessment of impacts of imposing a carbon tax of €17 per tonne of CO2 and for two emission caps on CO2 emission that follow the EU policy to tighten the GHG target at the EU. The impacts on the fuel-mix and the technology-mix of energy sector in Slovakia, air quality and GHG emission, economic costs are assessed. Environmental benefits attributable to air pollutants and greenhouse gasses are quantified by using the ExternE impact pathway analysis. The impacts of 17€ scenario are similar to the baseline scenario. The Slovak public electricity sector achieves CO2 emission intensity of 0.465 t CO2 per MWh that is lower than the EC benchmark already in 2009. Maximal feasible CO2 emission reduction in the Slovak electricity sector is 24.6 % compared to the year 2005. The average carbon intensity will decline to 0.057 tCO2 per MWh in 2020 and result in 15.4 % reduction of CO2 in 2020 compared to the 17€ scenario level. Total production costs are €481 million higher (18.6%) in Cap24.6 scenario. As a consequence of the emission reduction, the externality costs are €190 million smaller in CAP24.6 scenario than in the 17€ scenario in 2020. Our results indicate that it is feasible to reduce CO2 emissions in the power sector in Slovakia more than the 20% reduction target set at the EU level.

This thesis employs a parametric input distance function that incorporates both desirable and undesirable outputs to provide a more complete representation of the production technology. Based on the Shephard (1970) theory of duality, we derive the shadow prices of undesirable outputs in the Czech energy sector on the data over the period 2002 - 2007. The medians of our shadow prices estimates are 8374, 1198, 2805, 6051 and 8549 € per ton of PM, SO2, NOx, CO and VOC, respectively. We decompose shadow prices estimates and test the hypotheses that the marginal abatement cost decline over time; that marginal abatement cost rice with the declining emission level; and that marginal abatement cost rice with declining emission rate. Key Words: shadow prices, distance function, undesirable outputs, marginal abatement cost JEL classification: C61, D24, Q53

The aim of this bachelor thesis was to analyze the choice of transport modes depending on the value of travel time. For the purpose of this work, I limited the choice of travel modes to trains, buses and cars, as these modes of transport contribute to the transport of the population in the Czech Republic the most. This is a topic that can contribute to the optimization of transport at the national level. Through a robust literature search, I obtained data describing the value of travel time and then used it for modelling in the TIMES software. The model optimized people's use of various modes of transport based on their demands and the value of travel time.

Long-term energy systems often simplify temporal detail resolution. However, this simplification is not appropriate for systems with an increasing share of intermittent renewable energy sources (IRES). The low temporal resolution causes a systemic bias in the model's outputs. The model overpredicts the share of the IRES on the total generation. This entails an underprediction of the total system costs, underprediction of the amount of greenhouse gas emissions and a bias in the energy mix. This could lead to an ill-informed energy policy and eventually cause a failure in the decarbonization of the energy sector. This thesis increases the temporal resolution of the TIMES-CZ model from 12 seasonal times slices and 3 daynite time slices to 24 daynite time slices and compares 8 scenarios with 1, 4 and 12 seasonal time slices. This thesis compares three representative days selection methods - simple heuristics, hierarchical clustering centroid selection method and historical day closest to the centroid selection method. The electricity generation of IRES and the total production in base year (2012) is the most accurately approximated by the 12 seasonal time slices selected by the hierarchical clustering centroid method.

Almost 4 years of low oil prices and excess supply call the relevance of OPEC for current oil market into question. Therefore to investigate its role, this thesis examines the optimum oil production of individual OPEC countries accenting the consequent profit. Firstly, Cournot's model is employed to find equilibrium price and output on the oligopolistic market. Secondly, model considering OPEC and Russia as the Stackelberg leader with competitors forming oligopolistic fringe helps to uncover the potential of the recent car- tel of OPEC and Russia. In both models, data from the year 2016 with different levels of elasticity ranging from -0.1 to -0.2 are utilized. Our re- search suggests that all OPEC members could have increased their profits by forming a non-cooperative oligopolistic market, where prices would reach up to 81.7 USD/bbl. Moreover, as a part of the cartel with Russia, OPEC could increase its joint profits by almost 27 % compared to the oligopolistic market, benefiting from coordinated output cuts followed by a steep growth in price. Thus we can conclude that either OPEC lost its power over the oil market or attempted to maintain its market share and drive higher-cost producers out of the market.

The goal of this thesis is to develop a DSGE model that accounts for the key business cycle properties of the Czech labor market. We used standard New Keynesian framework for monetary policy analysis and incorporated an elaborated labor market setup with equi- librium wage derived via an alternating offer bargaining protocol originally proposed by Rubinstein (1982) and follow the work of Christiano, Eichenbaum and Trabandt (2013) in the following steps. Firstly, we calibrated the closed economy model according to values suited for the Czech economy and found that the model can not only account for higher volatility of the real wage and unemployment, but can also explain the contemporaneous rise of both wages and employment after an expansionary shock in the economy, so called Shimer puzzle (Shimer, 2005a). Secondly, we demonstrated that the alternating offer bar- gaining sharing rule outperforms the Nash sharing rule under assumption of using the hiring costs in our framework (more so while using search costs) and therefore is better suited for use in larger scale models. Thirdly, we concluded that after estimating the labor market parameters using the Czech data, our model disproved the relatively low values linked to the probabilities of unsuccessful bargaining and job destruction. JEL...

This master thesis is focused on analysis and forecasting of hourly and daily electricity price on the deregulated Czech daily electricity market. The methods used for estimating and forecasting hourly and daily prices are picked from the ARIMA-GARCH family of models and Neural Networks. For daily price data, the Redundant Haar Wavelet Transform decomposition of the time series is used in combination with ARIMA and Neural Networks models for forecasting. For hourly data, ARIMA and Neural Network models are considered. The forecasting results of daily data indicate that simpler models such as seasonal ARIMA outperform all other methods. Also the wavelet decomposi- tion of the daily series didn't prove useful in enhancing the forecast precision. For hourly data, the Multilayer Perceptron architecture of the neural network outperformed the ARIMA forecast. JEL Classification C20, C22, C45, C53, C65 Keywords Forecasting, Time Series, ARIMA, GARCH, Neural Net- works, Wavelet Transform Author's e-mail krystof.cerny@gmail.com Supervisor's e-mail lebovicm@gmail.com 1

The main focus of this thesis is to estimate the fuel demand elasticity on excise tax levied on gasoline and diesel. This work utilizes and subsequently develops the model and data set already published in the literature devoted to fuel taxation. The main contribution is the close analysis of the data from the Czech Republic and following comparison with the results from other countries. Furthermore, this paper extends the model by allowing it to filter out interstate shifts in purchases induced by different fuel price levels in neighboring countries. The relationship between interstate price differences and domestic fuel demand is consequently analyzed. JEL Classificiation C23, H23, L91, Q31 Keywords fuel, demand elasticity, car fuel tax, Europe, price Author's email dalibor.vagner@gmail.com Supervisor's email lukasrecka@gmail.com

The study compares FIT (Feed-in tariff) and RPS (Renewable Portfolio Standard) as the two most commonly used support schemes for renewable energy sources (RES) in the EU. It examines a relationship of an Environmental Kuznets Curve (EKC) and by a practical experiment for public lighting in Prague the study proposes an ecological functioning of electricity grids in the EU with CO2 emissions reduction effect. The main contribution lies in the recency and originality of the econometric analysis and practical experiment. FIT and RPS analysis demonstrates that both schemes affect demand for electricity and increase its price. The econometric model was tested for 28 EU countries for 1990-2013. The results say that the EU is currently located on the downslope of the inverted U-shaped EKC with a turning point, after which the dependence begins to grow. Nevertheless, for the most of observations the turning point is too far to be a source of concern. Practical experiment has shown that installation of energy saving devices for electricity grids in the EU can bring satisfactory results in reducing CO2 emissions independently of state aid. More efficient use of existing energy sources, however, should rather serve as a complement to conventional support, phasing out with the development of RES technologies....

Climate change studies repeatedly report the present value damage from global warming in the realms of trillion USD. To adopt an efficient climate policy, precise estimates of the costs and damages are essential. This thesis aims to review the most influential social cost of carbon models and to propose for the first time a best practice approach to constructing the damage function. Based on the reliability of the key estimates, two alternative approaches are proposed. The first consists of deriving a highly universal damage function and conse- quent calibration by multiple point estimates. The latter is based on damage disaggregation to different sectors and subsequent single-point calibration of each contribution separately. Both approaches address the current challenges for the damage function - a flexible functional form and treatment of intangible damages. JEL Classification D62, D90, Q51, Q54 Keywords Social cost of carbon, SCC, damage function 1

The Swedish form of the welfare state has a long history and is known especially for its generous social policy financed mainly from exceptionally high tax levies. At the beginning the Bachelor Thesis Family economics in Sweden shows the general relation between family and economics, and then it focuses on family policy in Sweden and puts it into the context of the development and the present form of the welfare state. It also explores the important sub-components of the Swedish system, which affect family policy and other family trends. The work among other things illustrates how high fertility combined with high rates of labour market participation and knowledge-based economy can be supported in Europe. At the same time, however, it stresses that the differences in social policy in various European countries are caused by many cultural, social and economic factors, and therefore their mutual comparison and unification is limited. Yet, while considering new reforms, we can at least learn from experience of other countries or take them as an example. This thesis also highlights the disadvantages of the Swedish model.

This bachelor thesis explores labour supply on the example of small and medium enterprises in the Czech Republic. It contrasts two basic hypoteses - the hypothesis of daily targeting and the intertemporal substitution hypothesis. The hypothesis of daily targeting is based on determination of income which workers try to achieve. On the other hand, the intertemporal substitution hypotesis assumes that hours worked depend on wage rate. I have used the survey to obtain monthly data of work hours and earned wage by Czech entrepreneurs. Based on the obtained data I have tested two hypotheses. Wage elasticities have positive values which lead to rejection the hypothesis of daily targeting. I have offered several possible explanations of obtained conclusions. One of them is the focus of entrepreneurs on accumulation of capital and wealth as the main motivation for business. This is related to recent economic transition in the Czech Republic.