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In absence of joint global climate action, several jurisdictions unilaterally restrict their domestic demand for fossil fuels. Another policy option for fossil fuel producing countries, not much analysed, is to reduce own supply of fossil fuels. We explore analytically and numerically how domestic demand and supply side policies affect global emissions, contingent on market behaviour. Next, in the case of Norway, we find the cost-effective combination of the two types of policies. Our numerical results indicate that given a care for global emissions, and a desire for domestic action, about 2/3 of the emission reductions should come through supply side measures. Keywords: Climate policies, Carbon leakages, Oil extraction, Supply side climate policies, Demand side climate policies https://doi.org/10.5547/01956574.38.1.tfae, 1. INTRODUCTION In the context of a global climate agreement, a cap on fossil fuel consumption would have the same effects on global emissions as a cap on fossil fuel [...]

In a non-renewable resource market with imperfect competition, both the resource rent and the current market influence large resource owners' optimal supply. New information regarding future market conditions that affect the resource rent will consequently impact current supply. Bleaker demand prospects tend to accelerate resource extraction. We show, however, that it may slow down early extraction by producers with sufficiently large reserves and thus small resource rents. The reason is that the supply from such producers is driven more by current market considerations than concern about resource scarcity. As producers with relatively smaller reserves accelerate their supply in response to bleaker demand prospects, producers with sufficiently large reserves will reduce their current supply. The surge in shale gas production will reduce residual demand facing suppliers to the European gas market. We demonstrate the effects of this in a numerical model. Most gas producers accelerate their supply while Russia reduces its supply slightly and thus loses market shares even before the additional gas enters the market. Keywords: Resource extraction, Cournot competition, European gas market., 1. INTRODUCTION For decades the dominating suppliers to the European natural gas market have been Russia, Norway, the United Kingdom (UK), the Netherlands, and Algeria. Since the early 1980's these [...]

The Russian gas market is highly regulated with low user prices of natural gas. In this paper we examine possible impacts of regulatory changes on the demand side of this market. In particular, we consider the effects on Russian energy consumers of increasing the regulated prices of natural gas, and how changes in Russian gas consumption may affect its gas export to Europe. We also examine the importance of Russian pipeline capacity to Europe, as well as impacts of hypothetical changes in Russian gas export behavior. For this purpose we use a detailed numerical model for the energy markets in Europe and Russia--LIBEMOD. Our results suggest that increasing the regulated natural gas prices will have substantial impacts on total consumption of gas in Russia, especially in the electricity sector. The magnitude of gas export to Europe will be significantly affected because more gas becomes available for export. Removal of other market imperfections in the Russian energy markets has smaller impacts on prices and quantities than imposing competitive natural gas prices. More competitive Russian gas export behavior would lead to much higher gas export to Europe, but our results suggest that Russian welfare would drop due to lower gas export prices. Keywords: Russian gas prices, Russian gas export, European energy market, 1. INTRODUCTION Russia is the biggest supplier of natural gas to the European market--it is accounting for 25-30% of total gas use in the European Union. Hence, changes in the [...]

In the absence of a global agreement to reduce greenhouse gas emissions, individual countries have introduced national climate policies. Unilateral action involves the risk of relocating emissions to regions without climate regulations, i.e., emission leakage. A major channel for leakage are price changes in the international oil market. Previous studies on leakage have assumed competitive behavior in this market. Here, we consider alternative assumptions about OPEC's behavior in order to assess how these affect leakage and costs of unilateral climate policies. Our results based on simulations with a large-scale computable general equilibrium model of the global economy suggest that assumptions on OPEC's behavior are crucial to the impact assessment of unilateral climate policy measures. We find that leakage through the oil market may become negative when OPEC is perceived as a dominant producer, thereby reducing overall leakage drastically compared to a setting where the oil market is perceived competitive. Keywords: Carbon Leakage, Oil Market, OPEC Behavior, 1. INTRODUCTION In the absence of an effective global agreement to mitigate climate change, individual countries lead the way with unilateral greenhouse gas (GHG) emission reductions. The most prominent example [...]

The Clean Development Mechanism (CDM) is an offset mechanism designed to reduce the overall cost of implementing a given target for greenhouse gas (GHG) emissions in industrialized Annex B countries [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.reseneeco.2009.04.001 Byline: Christoph Bohringer (a), Knut Einar Rosendahl (b) Keywords: Emissions trading; Allocation of quotas; Strategic behavior Abstract: The EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced. In turn, our analysis implicitly indicates significant political economy forces behind EU climate policy, as both cost-effective and strategically motivated partitioning of national emission budgets are far off from the actual break-down between trading and non-trading sectors. Author Affiliation: (a) University of Oldenburg, Department of Economics, and Centre for European Economic Research (ZEW), Germany (b) Statistics Norway, Research Department, Pob. 8131 Dep., N-0033 Oslo, Norway Article History: Received 7 April 2008; Revised 23 March 2009; Accepted 2 April 2009

The regional natural gas markets are expected to gradually become more integrated. The major driving forces are lower LNG costs, more spot trade, and increased need for imports into the US and other key markets. In this paper we examine various scenarios for a future global gas market, particularly focusing on natural gas prices and trade patterns. We use a numerical model of the international energy markets, with detailed modelling of regional gas production and international gas transport. Scenarios with different assumptions about future demand and supply conditions are simulated. Our results suggest that trade between continents will grow considerably over the next couple of decades, and that prices in the main import regions will remain around current levels. However, significant constraints on exports from the Middle East may alter this picture., 1. INTRODUCTION The natural gas markets in different regions are gradually becoming more integrated. This globalisation process is due to several reasons. First, the costs of transport (especially LNG--Liquefied Natural [...]

Reduced transportation costs are usually associated with lower import prices, increased trade and price convergence. In this paper we show that lower transport costs can actually lead to higher import prices in some regions, and price divergence between import regions. Using both a general theoretical approach and a numerical model of the global natural gas market, we demonstrate that the price effect from transport cost reductions depend on the relative distances between regional markets, the choice of transport technology, and supply and demand responsiveness in the different markets. Our numerical results suggest that European consumers would generally be better off if pipeline costs are reduced, while North American consumers would be better off if LNG costs are reduced., 1. INTRODUCTION Natural gas has traditionally been traded in regional markets, like the European, the North American, and the Asia-Pacific markets. Most of the international gas trade to and within [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeem.2008.04.001 Byline: Mads Greaker, Knut Einar Rosendahl Abstract: This paper examines how the existence of an upstream abatement technology sector affects optimal environmental policy. We explore whether the policy should be especially stringent in order to spur a successful export industry based on abatement technology. Furthermore, we investigate if a stringent policy can be used to increase competition in the upstream sector. Our point of departure is a three-stage game between a government in a country with a polluting downstream industry, and a limited number of upstream firms supplying abatement technologies. The government moves first, and may use its environmental policy strategically to influence the behavior of the upstream technology firms. We find that an especially stringent environmental policy towards the polluting downstream sector may be well founded, as it increases competition between the technology suppliers, leading to lower abatement costs. However, to our surprise, an especially stringent environmental policy is not a particularly good industrial policy with respect to developing successful new export sectors based on abatement technology. Author Affiliation: Statistics Norway, PO Box 8131 Dep, NO-0033 Oslo, Norway Article History: Received 15 November 2006

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeem.2007.12.003 Byline: Knut Einar Rosendahl Abstract: Emissions trading schemes where allocations are based on updated baseline emissions give firms less incentive to reduce emissions for a given quota (or allowance) price. Nevertheless, according to Bohringer and Lange [On the design of optimal grandfathering schemes for emission allowances, Europ. Econ. Rev. 49 (2005) 2041-2055], such allocation schemes are cost-effective if the system is closed and allocation rules are identical across firms. In this paper, we show that the cost-effective solution may be infeasible if marginal abatement costs grow too fast. Moreover, if a price cap or banking/borrowing is introduced, the abatement profile is no longer the same as in the case with an auction (or lump-sum allocation). In addition, we show that with allocation based on updated emissions, the quota price will always exceed marginal abatement costs, possibly misguiding policy makers and investors about abatement costs. Numerical simulations indicate that the quota price most likely will be several times higher than marginal abatement costs, unless a significant share of allowances is auctioned. Author Affiliation: Research Department, Statistics Norway, P.O. Box 8131 Dep., 0033 Oslo, Norway Article History: Received 9 February 2007

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.reseneeco.2006.02.007 Byline: Snorre Kverndokk (a), Knut Einar Rosendahl (b) Keywords: Climate change policies; Computable equilibrium models; Learning by doing; Subsidies; Timing Abstract: We study the role of technology subsidies in climate policies, using a simple dynamic equilibrium model with learning by doing. The optimal subsidy rate of a carbon-free technology is high when the technology is first adopted, but falls significantly over the next decades. However, the efficiency costs of uniform instead of optimal subsidies, may be low if there are adjustment costs for a new technology. Finally, supporting existing energy technologies only, may lead to technology lock-in, and the impacts of lock-in increase with the learning potential of new technologies as well as the possibilities for early entry. Author Affiliation: (a) Ragnar Frisch Centre for Economic Research, Gaustadalleen 21, 0349 Oslo, Norway (b) Research Department, Statistics Norway, P.O. Box 8131 Dep., 0033 Oslo, Norway Article History: Received 2 April 2004; Revised 15 December 2005; Accepted 23 February 2006

The study shows that emission sources with external learning effects should be faced with a higher tax than emission sources with only autonomous technological change by focusing on Learning by doing (LBD) effects in abatement activities. It is indicated that optimal taxes may be significantly higher in the industrial world than in the developing world.

An international climate treaties influence on the exploration of oil in non-OPEC countries is discussed. The international oil market is modeled with a cartel and a competitive fringe on the supply side, following a Nash-Cournot approach.

INTRODUCTION Over the last 10 years, a number of papers have discussed the impact of a liberalization of the demand side of the Western European natural gas market, see, for [...]

INTRODUCTION The natural gas industry in Western Europe is subject to a number of government regulations and controls. As of 1994, in Italy one subsidiary company of the state-owned corporation [...]