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This doctoral thesis, organized in three self-contained chapters, provides an analysis of the economic effects associated with the extraction of natural resources and the transition from an economy based on fossil fuel use to an economy relying primarily on renewable energy sources. Chapter 1 assesses the question of a potential resource curse in Colombia by analyzing the effect of oil production on different indicators of the development level of municipalities: school enrollment rates, infant mortality rates, and average results of the nationwide school-leaving examination. Moreover, it considers the role that local institutions play in this context. Chapter 2 analyzes how greenhouse gas emissions of companies in OECD and BRICS countries have developed in response to policies aiming at reducing fossil fuel use by providing financial incentives to expand renewable energy adoption and to improve energy efficiency. Chapter 3 provides an extended Input-Output approach to study the economic effects of increased investments in renewable energies and energy efficiency measures. The methodology is tailored to make it applicable to subnational regions and accounts for the scarcity of financial resources and factors of production. Furthermore, Chapter 3 applies the methodology to quantify the effects of an intended energy transition in three German districts. Diese aus drei eigenständigen Kapiteln bestehende Dissertation bietet eine Analyse der wirtschaftlichen Auswirkungen der Extraktion natürlicher Ressourcen und des Übergangs von einer auf fossilen Brennstoffen basierenden Wirtschaft zu einer Wirtschaft, die hauptsächlich auf erneuerbaren Energiequellen beruht. Kapitel 1 beschäftigt sich mit der Frage, ob in Kolumbien ein Ressourcenfluch vorliegt. Zu diesem Zweck werden die Auswirkungen der Ölförderung auf verschiedene Indikatoren für das Entwicklungsniveau der Kommunen analysiert: Schuleinschreibungsraten, Kindersterblichkeitsraten und durchschnittliche Ergebnisse der landesweiten Schulabschlussprüfungen. Darüber hinaus wird die Rolle lokaler Institutionen in diesem Zusammenhang betrachtet. Kapitel 2 untersucht, wie sich die Treibhausgasemissionen von Unternehmen in OECD- und BRICS-Ländern als Reaktion auf Politikmaßnahmen zur Reduktion des Verbrauchs fossiler Brennstoffe entwickelt haben. Die betrachteten Politikmaßnahmen umfassen finanzielle Anreize zur verstärkten Anwendung erneuerbarer Energien und zur Verbesserung der Energieeffizienz in Unternehmen. Kapitel 3 bietet einen erweiterten Input-Output-Ansatz zur Untersuchung der Wertschöpfungs- und Beschäftigungseffekte von Investitionen in erneuerbare Energien und Energieeffizienzmaßnahmen. Der Ansatz wurde so weiterentwickelt, dass er auf subnationale Regionen anwendbar ist, und berücksichtigt die Knappheit an finanziellen Ressourcen und Produktionsfaktoren. Darüber hinaus wendet Kapitel 3 die Methodik zur Quantifizierung der Auswirkungen einer beabsichtigten Energiewende in drei deutschen Landkreisen an.

The existing studies on Green Paradox and stranded assets focus on dirty exhaustible assets (fossil fuel reserves) and show that environmental regulations, by changing the costs of dirty inputs relative to clean ones, lead to replacements of the former by the latter and stranding of dirty assets due to perfect substitution. It, in turn, induces acceleration of dirty resource extractions and pollution emissions for fear of dirty assets becoming stranded - the Green Paradox effect. This paper uses an endogenous growth framework to revisit the problem of Green Paradox and stranded assets by taking a new perspective that focuses on capital accumulation with investment irreversibility. We show that if 1) direct irreversibility of investment does not rule out the indirect channel of converting dirty capital goods into clean ones through final goods allocations, and 2) interactions between dirty and clean capital as imperfect substitutes can generate reciprocal effects, then environmental regulation, through directing investment towards clean capital, does not necessarily leads to asset stranding of dirty capital. Accumulation of clean capital with a pollution-saving effect offsets the polluting impact of dirty one and leads to reversed Green Paradox. We further propose an endogenous growth mechanism through which the accumulation of both dirty and clean capital, as well as environmental improvement, can be sustained in the long run without converging to the steady state.

In the context of the recent slump in global oil prices, the paper investigates the effect of oil price shocks on the economic performance of 51 individual OECD and OPEC economies. We propose an error correction model which allows us to differentiate between short- and longrun price effects. For robustness, structural breaks and potential asymmetries are incorporated. Our approach is particularly interesting, since economic performance is not only measured by GDP, but also by equity indices from the MSCI family. The equity indices provide valuable insights into financial transmission mechanisms, in addition to macroeconomic channels, at much higher frequency than conventional GDP data. We are able to present robust estimates for the severity of oil price shocks for individual economies and thereby identify winners and losers under the current oil price regime.

To help explain the common failure of oil or other natural resource exporting countries to diversify into industry, it has been common to trace this failure to real exchange rate appreciation. This has also been done in Azerbaijan. However, because Azerbaijan has devoted so much of its oil revenues to government investment, Azerbaijan provides a suitable case for examining an alternative link through government investment. This study applies the ARDL cointegration method to quarterly time series data on oil prices, government capital formation, non-oil exports and non-oil GDP to estimate the long run relationships linking oil prices to government investment expenditures and further to generation of non-oil GDP. The results show that despite the massive government investment expenditures, extremely little non-oil production of the tradable type has been generated, calling attention to the need for policy reform.

Starting from the crisis on the real economy in 2008 it has been developed an intense discussion, supported by a number of declarations on the global scale, about the need for changes in the economy. A huge impact on this state of affairs was the analysis of the causes and effects of the economic downturn and the challenges of the future. As a result, some states have taken action to remedy the situation. Many of them were aimed at structural changes in production, consumption and environmental friendly investment. At the same time gained in importance the concept of "low carbon economy" and "green economy". The aim of this paper is to present the role of the state in the economy in terms of creating conditions for a green economy. The thesis of publication is: implementation of structural changes connected with creating a green economy requires the involvement of the state.

WWWforEurope Working Paper No. 55, 65 pages This paper takes a historical perspective in analysing past systemic social-ecological transition processes. The research paper explores two major energy transitions of the past: the transition to the use of fossil fuels (e.g. starting with coal in the UK in the 17th century, and continuing in the rest of the world with coal and oil since). How was this transition linked to major institutional transformations, frequently paved by revolutions? We statistically demonstrate how similar processes occurred in many countries, and accellerated over time. In contrast to more common approaches, we do not focus on the introduction of particular technologies, but on the gradual substitution of biomass as the key source of energy by fossil fuels, and also on the increase in the amount of economically available energy. Beyond the common indicator TPES (total primary energy supply) we use and expand our historical database that countains the indicator DEC (domestic energy consumption). DEC encompasses, beyond TPES, also the energy converted by human and animal nutritional intake. We analyse the role of revolutions for the respective energy transition statistically and are able to identify statistical breaks in population growth, energy consumption and economic growth linked to the occurrence of revolutions. We compare trajectories of European and Non-European countries, and we compare countries in which the transition to the use of fossil fuels was marked by revolutionary processes with countries where this was not the case. Particular attention is paid to the phase of the transition in which revolutions have occurred, and the impact this shock had on the further course of the energy transition and on economic growth. The second marked transition analyzed occurred in the mature industrial economies in the early 1970s, in association with the first and second oil price shocks. In practically all mature industrial countries, there was triggered a termination of the steep incline of metabolic rates in favour of a fairly stable per capita level of energy and materials consumption, while economic growth continued. We investigate the policy responses in key policy areas coping with these "shocks" and achieving a reduction of biophysical growth while maintaining growth in the economy and employment. We employ a number of different methods for this analysis: we investigate long time series data statistically to explore at what time and in what sequence certain trends changed. On the other hand, we explore policy analysis literature for a number of countries qualitatively. Finally, we synthesize what can be learned from such macro societal transitions: what role do external shocks, structural change and energy policies play? Which lessons are to be learnt from past transitions in order to be in a better position to manage the transition ahead of us?

Resource-rich economies and ethnically divided societies are linked to higher income inequality at the macro level. Our goal is to empirically examine the income inequality and welfare effects of the direct distribution of resource rents and subsequent taxation in Iran. We use rich micro survey data covering 140,000 individuals from more than 36,000 Iranian urban and rural households in 2009. Our micro-simulations show that the direct distribution of resource rents among all citizens and the imposition of an additional direct income tax have a significant negative effect on the household GINI index and on poverty. We also examine three alternative policies to the resource dividend (RD) policy. The results indicate that the RD policy is the most successful policy for addressing rents-induced inequality in Iran compared with the alternative policies.

One of the main elements of economic sanctions against Iran due to its nuclear and military programs is crude oil exportation restrictions in addition to investment in Iranian energy related projects. Senders of such sanction are interested in understanding the impacts of such embargos on international oil prices. We apply unrestricted Vector Autoregressive (VAR) model, using impulse response (IRF) and variance decomposition (VDA) tools with annual data from 1965 to 2012 to analyze the dynamic response of international oil prices to Iranian oil export sanction. Controlling for the supply of non-Iranian oil and the world GDP per capita, we show that international oil prices respond positively to negative changes of the Iranian oil exports, our proxy of Iran oil sanctions. However, the increasing response of oil prices to the Iranian oil sanction is only significant in the first year after negative shock in Iran oil exports. Beyond the first year following shock, we do not observe a statistically significant response of oil prices.

Bangladesh today faces a different future than it did decades ago when relatively abundant natural gas seemed to be the key to prosperity. To support more evidence-based dialogue on energy development, allocation, and pricing reform, this study uses a computable general equilibrium model to evaluate major energy policy issues facing Bangladesh. A relatively small negative growth impact of increased energy prices can be easily counteracted by an economy-wide increase in energy efficiency or subsidized gas for fertilizer production. A gas price increase does not lead to significant inflationary pressures in the country's economy. Diversification of the power sector fuel mix by introducing coal provides good macroeconomic indicators but results in higher carbon emissions. Investing the gas revenue in physical and social infrastructure provides the best macroeconomic indicators. This best policy option, however, further increases carbon emissions. Impacts of these different policies in terms of increased household income are more or less equally distributed among different household groups. Most of the attractive policy options have the drawback of higher carbon emissions, and supplementary policies and suitable technology adoption should play a balancing role.

China is appraised to have the world's largest exploitable reserves of shale gas, although several legal, regulatory, environmental and investment-related issues will likely restrain its scope. China's capacity to successfully face these hurdles and produce commercial shale gas will have a crucial impact on the regional gas market and on China’s energy mix, as Beijing strives to decrease reliance on imported oil and coal, while attempting to meet growing energy demand and maintain a certain level of resource autonomy. The development of the unconventional natural gas extractive industry will also endow China with further negotiating power to obtain more advantageous prices from Russia and future liquefied natural gas (LNG) suppliers. This paper, adopting a comparative perspective, underlines the trends learned from unconventional fuel development in the United States, emphasizing their potential application to the Chinese context in light of recently signed production-sharing contracts between qualified foreign investors and China. The wide range of regulatory and enforcement problems in this matter are accrued by an extremely limited liberalization of gas prices, lack of technological development, and political hurdles curbing the opening of resource extraction to private investors. These issues are exacerbated by concerns related to the risk of water pollution deriving from mismanaged drilling and fracturing, absence of adequate regulation framework and industry standards, entailing consequences on social stability and environmental degradation.

This paper studies the dynamic effect of oil rents on industrial added value in a sample of countries with different levels of development. Using a SVAR model, we tested the effect of a real shock and a nominal shock on the variables of the model. The main obtained results are three. First, we confirmed that the Dutch disease (DD) problem is a short-term phenomenon that takes place each time there is a shock on oil rents. Second, the ephemeral nature of the phenomenon confirms the neoclassical assumption stating that the effect of nominal shocks on real variables is only short term. Third, the effect of long-term real shock on oil rents is positive for all countries which score interdependence between industry on the one hand and oil rents on the other.

There is an increasing tension between the Iranian Government and the west on an increasingly likely European oil embargo and the Iranian threat to close the Strait of Hormuz. The main question is: What will happen to the international oil prices in the case of shocks in the flow of Iranian oil to the international markets? In this study, we analyze the dynamic relationship between the Iranian oil supply and international oil prices from January 1973 - September 2011, using a modified version of the Granger causality test introduced by Toda and Yamamoto (1995). Our results show that there is no Granger causality between the Iranian oil production and international oil prices. Historical data on the Iranian oil production do not provide any useful information to explain the current and future values of international oil prices. Thus, global oil prices do not follow shocks in the Iranian oil production.

While fossil energy dependency has declined and energy supply has grown in the postwar world economy, future resource scarcity could cast its shadow on world economic growth soon if energy markets are forward looking. We develop an endogenous growth model that reconciles the current aggregate trends in energy use and productivity growth with the intertemporal dynamics of forward looking resource markets. Combining scarcity-rent driven energy supply (in the spirit of Hotelling) with profit-driven Directed Technical Change (in the spirit of Romer/Acemoglu), we generate transitional dynamics that can be qualitatively calibrated to current trends. The long-run properties of the model are studied to examine whether current trends are sustainable. We highlight the role of extraction costs in mining.

The empirical literature is very far from any consensus about the appropriate model for oil price forecasting that should be implemented. Relative to the previous literature, this paper is novel in several respects. First of all, we test and systematically evaluate the ability of several alternative econometric specifications proposed in the literature to capture the dynamics of oil prices. Second, we analyse the effects of different data frequencies on the coefficient estimates and forecasts obtained using each selected econometric specification. Third, we compare different models at different data frequencies on a common sample and common data. Fourth, we evaluate the forecasting performance of each selected model using static forecasts, as well as different measures of forecast errors. Finally, we propose a new class of models which combine the relevant aspects of the financial and structural specifications proposed in the literature (mixed models). Our empirical findings suggest that, irrespective of the shape of the loss function, the class of financial models is to be preferred to time series models. Both financial and time series models are better than mixed and structural models. Results of the Diebold and Mariano test are not conclusive, for the loss differential seems to be statistically insignificant in the large majority of cases. Although the random walk model is not statistically outperformed by any of the alternative models, the empirical findings seem to suggest that theoretically well-grounded financial models are valid instruments for producing accurate forecasts of the WTI spot price.

We introduce endogenous investments for increasing conventional and non-conventional oil extraction capacity in the integrated assessment model WITCH. The international price of oil emerges as the Nash equilibrium of a non-cooperative game. When carbon emissions are not constrained, oil is used throughout the century, with unconventional oil taking over conventional oil from mid-century onward. When carbon emissions are constrained, oil consumption drops dramatically and the oil price is lower than in the BaU. Unconventional oil is not extracted. Regional imbalances in the distribution of stabilisation costs are magnified and the oil-exporting countries bear, on average, costs three times larger than in previous estimates.

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of technical progress in the energy sector. We evaluate a range of innovation policies, both as a stand-alone instrument and in combination with other mitigation policies. Even under fairly optimistic assumptions about the funding available for, and the returns to R&D, our analysis indicates that innovation policies alone are unlikely to stabilise global concentration and temperature. The efficiency gains of combining innovation and carbon pricing policies are found to reach about 10% for a stabilisation target of 535 ppm CO2eq. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

We study a two-phase endogenous growth model in which the adoption of a backstop technology (e.g. solar) yields a sustained supply of essential energy inputs previously obtained from exhaustible resources (e.g. oil). Growth is knowledge-driven and the optimal timing of technology switching is determined by welfare maximization. The optimal path exhibits discrete jumps in endogenous variables: technology switching implies sudden reductions in consumption and output, an increase in the growth rate, and instantaneous adjustments in saving rates. Due to the positive growth e¤ect, it is optimal to implement the new technology when its current consumption bene.ts are substantially lower than those generated by old technologies.

This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful - especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters for stabilisation costs more than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required.

This study attempts a numerical simulation of potential CCS (carbon dioxide capture and storage) use by using a modified version of the DICE (Dynamic Integrated model on Climate and Economy) model (Nordhaus, 1994; Nordhaus and Boyer, 2000). In DICE, CO2 emissions are controlled to the extent in which a hypothetical optimal carbon tax justifies CO2 reduction by firms: in our analysis, CCS is used when the optimal tax level is higher than the price of CCS. The analysis assesses the economic optimality of CCS use with a range of different assumptions. The simulation particularly focuses on the difference of results originating from two sets of general assumptions on climate change modeling, reflecting the current debate on the economics of climate change (see for example, Heal, 2008): (1) Parameterization of the standard DICE; (2) Alternative assumptions whose hints are drawn from Stern (2007). In the standard DICE cases, the model calculation shows that at the price level of $25/tCO2 ($92/tC), CCS is introduced around in the middle of the twenty-first century. With the alternative assumptions (e.g., near-zero discount rate), CCS begins to be utilized massively earlier in the century. The two sets of results lead to contrasting policy implications on the future CCS use; this is particularly problematic in the CCS context since its benefits are not always clear-cut (e.g., limitedness of secondary benefits besides CO2 reduction, uncertainties about the validity of technology itself). Settlement of the current intellectual debate on the economics of climate change would greatly benefit the debate on the role of CCS as well.

Quantitative models for climate policy modeling differ in the production structure used and in the sizes of the elasticities of substitution. The empirical foundation for both is generally lacking. This paper estimates the parameters of two-level CES production functions with capital, labour and energy as inputs, and is the first to systematically compare all nesting structures. Using industry-level data from 12 OECD countries, we find that the nesting structure where capital and labour are combined first, fits the data best, but for most countries and industries we cannot reject that all three inputs can be put into one single nest. These two nesting structures are used by most climate models. However, while several climate policy models use a Cobb-Douglas function for (part of the) production function, we reject elasticities equal to one, in favour of considerably smaller values. Finally we find evidence for factor-specific technological change. With lower elasticities and with factor-specific technological change, some climate policy models may find a bigger effect of endogenous technological change on mitigating the costs of climate policy.

The relevance of oil in the world economy explains why considerable effort has been devoted to the development of different types of econometric models for oil price forecasting. Several specifications have been proposed in the economic literature. Some are based on financial theory and concentrate on the relationship between spot and futures prices (“financial” models). Others assign a key role to variables explaining the characteristics of the physical oil market (“structural” models). The empirical literature is very far from any consensus about the appropriate model for oil price forecasting that should be implemented. Relative to the previous literature, this paper is novel in several respects. First of all, we test and systematically evaluate the ability of several alternative econometric specifications proposed in the literature to capture the dynamics of oil prices. Second, we analyse the effects of different data frequencies on the coefficient estimates and forecasts obtained using each selected econometric specification. Third, we compare different models at different data frequencies on a common sample and common data. Fourth, we evaluate the forecasting performance of each selected model using static and dynamic forecasts, as well as different measures of forecast errors. Finally, we propose a new class of models which combine the relevant aspects of the financial and structural specifications proposed in the literature (“mixed” models). Our empirical findings can be summarized as follows. Financial models in levels do not produce satisfactory forecasts for the WTI spot price. The financial error correction model yields accurate in-sample forecasts. Real and strategic variables alone are insufficient to capture the oil spot price dynamics in the forecasting sample. Our proposed mixed models are statistically adequate and exhibit accurate forecasts. Different data frequencies seem to affect the forecasting ability of the models under analysis.

Russia has greatly benefited both from exporting more energy commodities in volume terms and from the improvement of it’s terms of trade due to the rise in oil and other commodity prices in the 2000’s. To study the impacts, the counterfactual simulation for the years 2001-2006 and the “usual” oil price rise simulations for the future were made. According to the counterfactual simulations, the role of oil has been a key driver in the recent Russian economic development in the 2000’s. The average GDP growth in 2001-6 would have been around 4 per cent, around 2.5 percentage points lower than in the actual case. The effect was strongest in the last years of the period bringing the growth even below one per cent in 2006 instead of more than 6 per cent. The strong effect is due to large and rising price difference between the actual and counterfactual oil prices especially in the years 2003-6, which would have meant pronouncedly smaller oil income into the economy than actually took place. In the other simulations, the effects of the permanent 20 USD price rise to the baseline was compared. The economy reacted initially strongly to the shocks with e.g. raising GDP growth and current account strongly. The effect was, however, quickly vanishing after the rise. The temporary end of the current commodity boom would cause serious difficulties in the Russian economic development as the fuel for the engine would dry. The more robust growth would necessitate drastic changes in the economic structure from resource based economy towards more normal economic structure. Given the short and rather undeveloped Russia time series and from this reason also rather undeveloped models, the results contain large uncertainty. However, simulations provide one useful benchmark on the size of the effects of the energy price rise on the Russian economy.

The nature of energy and material resources in an endogenous growththeory framework isclarified. This involves three modifications of the conventionaltheory. Firstly, multiple feedbackmechanisms or “growth engines” are identified. Secondly, a productionfunction distinguishesbetween resource use, technical efficiency and value creation.Thirdly, the impact of the cost ofproduction through demand on growth is accounted for. A formal modelis analytically solvedunder a condition of a constant growth rate. Given model complexity,numerical experiments areperformed as well, providing relevant insights to the academic andpolitical debates on‘environmental Kuznets curves’ and ‘dematerialization’.