Economics: Research Guide

The war in Ukraine and the associated 2022 energy crisis has had far-reaching effects with seaborne prices for coal and gas reaching multiples (5-6x) of their historic averages. While Europe was the epicentre, countries as far away as Australia were impacted. As a major exporter of coal and gas, domestic markets are linked to seaborne prices. Consequently, forward prices for 2023 delivery in Australia’s National Electricity Market surged from ~$48 in 2021 to $156/MWh in 2022 at one point peaking at $247/MWh. Household electricity tariffs were set to in-crease by 11% in 2023 and 35% in 2024. In late-2022, the Commonwealth Government intervened by setting fuel price caps of $125/t and $..

Due to surges in gas and electricity prices in Europe, many households will struggle to heat their homes this winter. This paper provides high-level guidance on designing a relief policy in a way that optimally trades off equity and efficiency. We argue that, contrary to conventional economic intuitions, an optimal policy may involve directly controlling prices. Because governments do not have perfect information about households' needs, price controls could improve the targeting of relief through screening out the most vulnerable by offering them discounts for reducing consumption. This could be achieved by “threshold price caps" that lower the price of all energy units below some con..

The energy transition toward decarbonization is expected to impact producers of fossil fuels. However, oil-exporting countries are currently key players in the modern economy. Thus, the energy transition will not be successful if state revenues in these countries are not stably maintained. These countries can protect themselves against revenue volatility and mitigate carbon risk by diversifying their economies. However, export diversification appears to be particularly challenging for many oil-producing countries.

To tackle the threat of climate change, countries worldwide have signed the Paris Agreement. This agreement aims to limit the global average temperature increase to below 2 degrees Celsius and potentially below 1.5 degrees Celsius above pre-industrial levels (UNFCCC 2015). Parties to the Paris Agreement are required to submit domestic climate plans detailing their mitigation measures, known as nationally determined contributions (NDCs). These plans detail countries’ ambitions and efforts to combat and respond to climate change. NDCs are communicated at five-year intervals, and each successive NDC must represent an increase in ambition over the previous one.

Can voluntary carbon emission reduction pledges, such as the nationally determined contributions under the Paris Agreement, result in significant emission reductions? According to prominent experts such as Nordhaus (2015), Barrett (2005), and Weitzman (2019), free-riding is unavoidable in cooperative situations based on voluntary agreements. If their assessments are correct, each country’s nationally determined contribution is unreliable. Countries will strategically promise large cuts while making only minor emission reductions.

The growing prevalence and potential impact of artificial intelligence (AI) on society rises the need for regulation. In return, the shape of regulations will affect the application potential of AI across all economic sectors. This study compares the approaches to regulate AI in the European Union (EU), the United States (US) and China (CN). We then apply the findings of our comparative analysis on the energy sector, assessing the effects of each regulatory approach on the operation of a AI-based short-term electricity demand forecasting application. Our findings show that operationalizing AI applications will face very different challenges across geographies, with important implications for..

Macroeconomic and sectoral assessment of the energy price reform (EPR) can provide policymakers with useful insights regarding price deregulation options. A key feature of this research that differentiates it from many other studies is its modeling framework. The framework first estimates how theoretically articulated determinants (e.g., income and price) historically shaped natural gas demand. Then, this estimated equation is integrated into a macroeconometric model called KGEMM to simulate the impact of natural gas prices on key macroeconomic and sectoral indicators that are of policy interest for the coming years.

This article examines the relationship between presence of vertical and horizontal inequalities and the emergence of social, distributive and civil conflicts in Belarus, Latvia, Kazakhstan, Kyrgyzstan, Lithuania, Russian Federation, Tajikistan and Ukraine. Are ethnic, religious or linguistic conflict related reasons alone responsible for the emergence of social, distributive and civil conflicts? If not, what other factors play an equally determinant role (e.g. structure of the economy, regime type, welfare institutions, public policies) in structuring and determining in-groups and out-groups related tensions? These are the key quest this article addresses. In this article I show unstable tre..

Investment in solar generation is essential to achieve EU climate neutrality by 2050. Using stochastic programming, we study the management of solar power plants considering trading in the spot and future markets, weather derivatives based on solar radiation, storage, and risk management. We provide a comparative study of two technologies: a concentrated solar power plant with thermal storage and a photovoltaic power plant with electrical batteries. The significant managerial contributions can be classified into four levels. First, regarding trading and generation decisions, we proved that: a) plants sell energy in the spot market during the night and store energy in the morning; b) storage ..

This work sheds new light on the Photovoltaic Supply Chain (PVSC), providing fresh evidence on structural dependencies (SDs) and (asymmetrically distributed) technological capabilities. Bridging the perspectives of 'technological sovereignty' and 'strategic autonomy', a number of contributions are provided. First, we carry out a fine-grained mapping of the PVSC, combining trade and patent data. Second, we assess the long-term evolution of trade and technological hierarchies, documenting processes of polarization and growing SDs. Third, we zoom-in on critical PV areas (i.e. products and related technologies), providing a 'strategic intelligence' activity which may prove useful for tailoring t..

The shipping industry is essential for international trade, but it is also an important source of CO2 emissions. To make progress towards climate targets, countries need to monitor CO2 emissions from vessels owned by their ship operator companies. However, most shipping activity takes place outside national borders, making it more difficult to monitor than activity taking place within countries. The OECD’s experimental database on OECD.stat provides a new source of data for CO2 emissions from global shipping, which is available monthly in near real time. This data will help national statistics producers to compile their Air Emission Accounts (AEAs) for the System of Environmental Economic ..

This paper is a teaching case study written for educational purposes. The case brings forward a real-life situation of an organization that is engaged in the exciting but also risky journey of implementing a green innovation at a large scale. The case is written in a way that allows students to reflect and think about the organizational and leadership challenges and opportunities involved. The teacher can activate these reflections in the context of various possible theoretical and analytical frameworks, in a number of possible different courses. The case is about Exergi, the main utility company producing district heating in Stockholm. After successfully transitioning from coal to bio-energ..

Africa is undergoing an unprecedented urban and climate transition; yet, given the right conditions, compact urban forms can encourage greater sustainability, resilience and liveability in the coming decades. Using novel techniques and newly available data, this report fills in existing data gaps by producing measures of compactness for 5 625 urban agglomerations, along with other urban form attributes. Even though urbanisation is often unplanned and uncoordinated, a promising trend has emerged: very large cities (of over 4 million inhabitants) are more compact, discounting the population effect, on average, than larger (1 million to 4 million inhabitants) and intermediate cities (50 000 to ..

This paper presents a simulation model of the markets for light-duty electric vehicles (EVs) and the associated public charging infrastructure, as well as the network interactions between them. It illustrates the model’s attributes by simulating the effects of federal subsidies for public electric vehicle chargers and of an extension of tax credits for electric vehicles. I project that by the early 2030s the charger subsidies, which were signed into law in 2021 as part of the Infrastructure Investment and Jobs Act, will have increased the size of the charger network enough

Solar geoengineering can cool our planet and counteract the warming caused by greenhouse gas emissions. Given current emission trajectories, solar geoengineering has the potential to save lives, reduce severe impacts on economic production, and save ecosystems and island states. Deterministic integrated assessment models tend to show major benefits from solar geoengineering, but are highly sensitive to the assumed and highly uncertain damages from solar geoengineering as well as the effectiveness of cooling the planet. We analyze how uncertainties and the anticipation of learning change the case for solar geoengineering in a world with an uncertain temperature response to carbon dioxide emis..

The possibility of overshooting global emissions targets has triggered a public debate about the role solar geoengineering (SGE) - using technologies to reflect solar radiation away from Earth - may play in managing climate change. One major concern is that SGE technologies are relatively cheap, and could potentially be deployed by a single nation (the “free driver”) that could effectively control the global climate. Another concern is that SGE opportunities may alter countries’ incentives to cooperate on abatement. Here we develop a game-theoretic model to analyze how opportunities to deploy SGE impact global abatement and the effectiveness of international environmental agreements (I..

According to the latest IPCC Working Group I report (2021), changes in the climate in recent decades are widespread, rapid, intensifying, and unprecedented in at least the last 2, 000 years. The global mitigation efforts under the Paris Agreement have been inadequate to reach the target of stabilizing warming below 1.5°C. Thus, it is likely that interest in solar geoengineering (SG) as an additional option to address climate change may increase in coming years. The latest IPCC Working Group II report (2022) concludes that SG could offset some of the effects of increasing greenhouse gases (GHGs) on global and regional climate but also notes large uncertainties and risks involved in large-sca..

In this work we update the regionalization and the calibration of the Regional dynamic Integrated model of Climate and the Economy (RICE) in its 1999 version developed by Nordhaus and Boyer (2000), with a focus on the Mediterranean countries. Our aim is to assess the impact of climate change damages on their main macroeconomic variables in a context where all economies are fossil fuel based. In addition, we extend the model by introducing the uncertainty associated with a possible future catastrophic event, triggered by the temperature increase and variation over time, following the approach of Castelnuovo et al. (2003). We then develop an empirical exercise to asses the impact of climate ch..

This paper studies the environmental performance of electric vehicle subsidy programs in Canada. I leverage changes in the provincial-level subsidies to study their short-run impact on sales and charging station deployment using a natural experiment setting. My findings suggest that subsidies are very effective at increasing electric vehicle adoption, but failed to induce additional charging station installations in the short-run. I rely on a structural estimation of the demand for cars and the supply of charging stations to evaluate the environmental impact of subsidies. My results suggests that Canadian rebate programs led to an increase in adoption of 93%, and an increase in the size of t..

본 연구에서는 러시아-우크라이나 전쟁 이후 유럽의 에너지 위기 대응 정책을 살펴보고, 산업 생산과 에너지 위기 대응 정책의 관련성을 분석하였다. 러시아-우크라이나 전쟁 이후 유럽 내 에너지 위기의 배경, 에너지 가격 상승과 인플레이션의 연관성을 살펴보고, 유럽 주요국 정부가 에너지 위기의 충격을 완화하고자 집행한 다양한 정책들을 통해 정책적 함의를 도출하였다. 또한 유럽 주요국의 에너지 위기 대응 정책 도입 시점에 대한 정보를 이용하여 이러한 정책들과 산업 생산에 유의미한 관계가 있었는지 분석하였다. ..

Transition to a carbon-neutral economy is necessary to limit the negative impact of climate change and has become one of the world’s most urgent priorities. This paper assesses the impact of three potential transition pathways, differing in the timing and level of ambition of emissions’ reduction, and quantifies the associated investment needs, economic costs and financial risks for corporates, households and financial institutions in the euro area. Building on the first ECB top-down, economy-wide climate stress test, this paper contributes to the field of climate stress testing by introducing three key innovations. First, the design of three short-term transition scenarios that combine ..

For most of human history, the economic system has operated according to the environment’s support capacity, but this relationship changed radically after the Industrial Revolution. Since then, the economy has achieved sufficiently great scale and scope to make the rate of natural resource and energy consumption as well as waste generation rival the environment’s support capacity. Hence, sustainable development requires the economy to expand at diminishing rates of natural resource consumption and pollutant emissions, including GHGs, as well as allow the long-term restoration of natural capital stocks. This purpose is only achieved through an Ecological Structural Change, which doesn’t..

Climate change poses serious economic, financial, and social challenges to humanity, and green transition policies are now actively implemented in many industrialized countries. Whether financial markets price climate risks is critical to ensuring that the necessary funding flows into environmentally sound projects and that stranded assets risk is adequately managed. In this paper, we assess climate risks for the European stock market within the context of Alessi et al. (2023) greenness and transparency factor. We show that measures of returns spreads of green vs. brown investment might reflect climate risks and assets' exposition to systematic macro-financial risk factors. These latter fact..

We document majority support for policies entailing global redistribution and climate mitigation. Recent surveys on 40, 680 respondents in 20 countries covering 72% of global carbon emissions show strong support for an effective way to jointly combat climate change and poverty: a global carbon price funding a global basic income, called the “Global Climate Scheme†(GCS). Using complementary surveys on 8, 000 respondents in the U.S., France, Germany, Spain, and the UK, we test several hypotheses that could reconcile strong stated support with a lack of salience in policy circles. A list experiment shows no evidence of social desirability bias, majorities are willing to sign a real-s..

In this study, we use data on European stocks to construct a green-minus-brown portfolio hedging climate risk and to evaluate its performance in terms of cumulative expected and unexpected returns. More specifically, we estimate a Structural Panel VAR fitted to one month return and realized volatility computed for 40 constituents of a green portfolio (i.e., the low carbon emission portfolio monitored by Refinitiv) and for 41 constituents of a brown portfolio (underlying the Oil&Gas and Utilities industry sectors of the STOXX Europe 600). The common shocks underlying the cross-sectional averages, interpreted as portfolio shocks, are retrieved in a first stage of the analysis and they are used..

Urban green space (UGS) is known to provide several benefits for the local population, including regulating local climate and improving human health. The inequality hypothesis claims that these environmental amenities are unequally distributed across space and among different social groups. We propose using a continuous vegetation index derived from satellite imagery to investigate environmental inequality (EI) in UGS distribution. We used spatial autoregressive models to describe the relationship between the normalized difference vegetation index (NDVI) and socioeconomic variables in a case study on the city of Vienna at an unprecedented level of detail (250 m resolution). We show statistic..

We investigate the short- and long-term effects of a natural gas boom in an economy where energy can be produced with coal, natural gas, or clean sources and the direction of technology is endogenous. In the short run, a natural gas boom reduces carbon emissions by inducing substitution away from coal. Yet, the natural gas boom discourages innovation directed at clean energy, which delays and can even permanently prevent the energy transition to zero carbon. We formalize and quantitatively evaluate these forces using a benchmark model of directed technical change for the energy sector. Quantitatively, the technology response to the shale gas boom results in a significant increase in emission..

Climate change is generating demonstrable harm around the world. Political and legal efforts have sought to associate climate impacts with specific emissions, including in recent international policy discussion of Loss and Damage (L&D). However, no quantitative definition of L&D exists, nor does there exist a framework for linking specific emissions to specific damages. Here we develop such a framework, linking it explicitly to recent efforts to calculate the social cost of carbon dioxide (SC-CO2), and demonstrate its use in a variety of applications. We calculate that future damages from past emissions, one component of L&D, are at least an order of magnitude larger than historical damages ..

Although the war in Ukraine is far from over, currently the natural gas market in Europe is in a state of "apparent calm" as a result, mainly, of the (rather) quick and (somewhat) determined reaction of the Brussels authorities, which aimed to mitigate the consequences of the sudden and uncontrolled increase in natural gas prices. Starting from these considerations, the article aims to carry out an analysis of the causes that led to the emergence of the natural gas crisis, as well as the evolution of their prices at the European level. Thus, the paper extensively studies how natural gas prices have evolved and the effects on the market induced by these developments, on the one hand, as well ..

This paper analyses the economic impact of and the optimal policy response to energy supply shocks in a flexible price model with heterogeneous households. We introduce energy as a consumption good on the demand side and as an input to production on the supply side. A distinguishing feature is that, in line with empirical evidence, we allow households' energy demand to be non-homothetic. The model provides three main insights. First, (negative) energy supply shocks act as a (negative) demand shock, or Keynesian supply shock, when three conditions are met: (i) household income heterogeneity is intermediate, neither too high nor too low; (ii) the fraction of poor and credit-constrained househo..