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Economics of Energy & Environmental Policy
Volume 13, Number 2






Articles

Leveraging the Inflation Reduction Act to Achieve 80x30 in the US Electricity Sector

Maya Domeshek, Dallas Burtraw, Karen Palmer, Nicholas Roy, and Jhih-Shyang Shih

DOI: 10.5547/2160-5890.13.2.mdom
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Abstract:
The US Inflation Reduction Act (IRA) promises to deliver important reductions in CO2 emissions from the electricity sector along with a host of other benefits to citizens and electricity consumers, but it falls short of achieving the 80 percent reduction (below 2005 levels) by 2030 (80x30) consistent with meeting the nation's Paris goals. This paper examines the consequences of the IRA and of policies designed to hit the Paris target for generation mix, consumer costs of electricity, the federal budget, air quality, and human health. Our modeling shows that the IRA substantially reduces the allowance price necessary under an emissions trading cap to meeting the 80x30 goal in the power sector and that doing so yields savings to consumers, particularly those with lower incomes, and additional health benefits beyond those promised from the IRA.




Evaluation of the Winter Pollution Mitigation Policy in China

Mengjia Ren and Akshaya Jha

DOI: 10.5547/2160-5890.13.1.mren
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Abstract:
Rapid industrialization in China has come with substantial increases in local air pollution. This paper quantifies the health benefits of the Winter Pollution Mitigation Policy of 2017. We estimate that this policy caused an 18% reduction in fine particulate concentration levels, resulting in 19,400 deaths avoided in 2017 due to pollution exposure in Beijing, Tianjin, Hebei, and neighboring regions. Our findings suggest that the ratio of public expenditures to deaths avoided is much lower for the winter policy relative to the overall Air Pollution Prevention and Control Action Plan. This may be because the winter policy targeted the most polluted region in China during the season with highest pollution levels.




Energy Markets Under Stress: Some Reflections on Lessons From the 2021–2023 Energy Price Crisis in Europe

Michael G. Pollitt

DOI: 10.5547/01956574.45.4.mpol
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Abstract:
This paper examines the 2021–2023 energy crisis in Europe exacerbated by the energy consequences of the full-scale Russia—Ukraine war which began in February 2022. We show that this was an historically unprecedented price shock to both gas and electricity prices. We then draw on lessons from UK energy policy in World War Two to inform our analysis of European energy policy during this crisis. In light of this, we highlight four good and three bad policy responses to observed across Europe. The EU has responsibility for the European single market in electricity and gas (which also formally includes Norway and effectively includes the UK). We examine its attempts to co-ordinate EU-27 responses to the crisis. We conclude with longer-run lessons for energy and climate policy arising from this gas and electricity price shock.




Towards a Green Monetary Policy for Developing Countries: A Climate Rating Mechanism for Funding Sustainable Projects

Sahnoun Kacem, Himri Hicham, Bazzi Mehdi and El Alaoui Abdelkader

DOI: 10.5547/2160-5890.13.1.aela
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Abstract:
Even though the monetary policy first mission, has never been oriented to fight against global warming, central banks are starting to mobilize more efforts, in the financial sector, to tackle the negative impact posed by the uncontrolled climate change on the economy. In this paper, we propose a new mechanism contributing to the greening of the monetary policy for local authorities, particularly in developing countries, engaged in pro-environmental projects. Therefore, the low-carbon investments should be supported indirectly by the Central Bank and channelled to the real economy through local development banks using loans refinancing program. Analysis and illustration of the proposed mechanism show that funding sustainable projects, through an adequate climate rating mechanism, can be quite successful while central bank's primary mission of macroeconomic stabilization and inflation control, will not be altered but will be extended to encompass the climate change issues.




Regional Electricity Trade in Latin America Without Expanding Generation Capacities

Govinda Timilsina, Ilka Deluque Curiel, and Deb Chattopadhyay

DOI: 10.5547/2160-5890.13.1.gtim
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Abstract:
The current cross-border electricity trade provision in Latic America is limited, only to about 4% of the total regional generation. This study estimates the potential savings on electricity supply costs if 20 Latin American countries trade electricity between the borders without expanding their current electricity generation capacity. We simulated two scenarios on electricity trade—an unconstrained trade of electricity between the countries within the Andean, Central, and Mercosur subregions and a full regional trade involving all 20 countries using a power system model. The study shows that the volume of cross-border electricity trade would increase by 13% and 29% under the subregional and regional scenarios, respectively. The region would gain US$1.5 billion annually under the subregional scenario and almost US$2 billion under the full regional scenario. The Andean subregion would realize more than half of this gain under both scenarios. The findings of the study are expected to motivate policymakers in the region and international development partners in fostering their dialogues to enhance regional electricity trade in Latin America.




Are energy performance certificates a strong predictor of actual energy use? Evidence from high-frequency thermostat panel data

Tensay Hadush Meles, Niall Farrell, and John Curtis

DOI: 10.5547/2160-5890.13.1.tmel
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Abstract:
This paper examines the extent with which Energy Performance Certificates (EPCs) reflect observed energy used for heating. We use high-frequency smart thermostat panel data in combination with building characteristics and hourly weather information. We exploit variations in boiler operation in the neighborhood of a steady state indoor temperature to elicit the predictive power of an EPC rating on energy use for heating. We find that the implied energy saving of upgrading from the lowest to highest EPC category is more than 3.5 times greater than that identified through ex-post analysis; boiler time operation is 54% greater among the lowest EPC-rated properties relative to the highest, while the EPC rating itself suggest a 183% difference in energy requirements. The findings cast doubt on the efficacy of public energy efficiency retrofit targets aligned to specific EPC standards.




Symposium on "Sustainable Economic Growth"

Sustainable Economic Growth

Josep-Maria Arauzo-Carod and Ioannis Kostakis

DOI: 10.5547/2160-5890.13.2.jara



Total factor productivity and tax avoidance: An asymmetric micro-data analysis for European oil and gas companies

Claudiu Tiberiu Albulescu

DOI: 10.5547/2160-5890.13.2.calb
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Abstract:
This paper investigates the asymmetric relationship between corporate tax avoidance and total factor productivity (TFP) using firm-level data for 141 European oil and gas companies, covering the period 2007 to 2015. Firstly, we rely on the novel mechanism advanced by Rovigatti and Mollisi (2018) to compute firms' TFP. Secondly, we resort to Canay's (2011) panel data fixed-effect quantile approach to assess the nonlinear, asymmetric effect that tax avoidance has on a firm's productivity. As novelty, we use two proxy variables to estimate tax avoidance, namely companies' holding structures and tax haven location. We discover that the impact of tax avoidance on TFP is not straightforward. On the one hand, we report mixed empirical findings regarding the impact of firms' organization in holding structures on TFP. On the other hand, tax haven location enhances the productivity of oil and gas companies from the extractive industry. Finally, we show that the impact of tax avoidance on TFP is stronger at higher quantiles, that is, for higher levels of productivity. Our findings show that offshore profit transfers represent a quite common practice for European oil and gas firms, in particular for the large companies, which helps them to increase their productivity level. In our analysis we control for the role of ownership structure, firm size, intangibles, indebtedness and energy price dynamics. To check the robustness we use different approaches to compute the TFP.






Understanding Indicators for Circular Economy Application in Manufacturing

Anna Wozna, Aldona Kluczek, Anna Maria Kaminska, Francisco Javier Martinez Quesada, Malgorzata Rusinska, and Patrycja Zeglen

DOI: 10.5547/2160-5890.13.2.awoz
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Abstract:
This paper aims to provide manufacturing companies with a comprehensive understanding of the various indicators used to evaluate circular economy (CE) practices. Through a systematic review of existing literature, it highlights the essential role of these metrics in promoting the adoption of CE principles within the manufacturing sector. The discussion is organized around a six-step framework for assessing and developing CE indicators, intended to enhance organizational circularity. Furthermore, the paper analyses the advantages and disadvantages associated with various CE indicators and proposes a structured methodology for their selection, tailored to the specific needs of different organizations. It introduces a conceptual framework for aligning CE indicators with distinct evaluation criteria, thereby assisting companies in making informed strategic decisions. While this paper provides simplified interpretations to facilitate practical application, it should not be viewed as a comprehensive solution to the complexities involved in implementing circular economy practices.




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