The Unassuming Economist

A new working paper by Nida Cakir Melek, Michael Plante, Mine K. Yucel:

“We examine the implications of the U.S. shale oil boom for the U.S. economy, trade balances, and the global oil market. Using comprehensive data on different types of crude oil, and a two-country general equilibrium model with heterogenous oil and refined products, we show that the shale boom boosted U.S. real GDP by 1 percent and improved the oil trade balance as a share of GDP by more than 1 percentage points from 2010 to 2015. The boom led to a decline in oil and fuel prices, and a dramatic fall in U.S. light oil imports. In addition, we find that the crude oil export ban, which was in place during a large part of this boom, was a binding constraint, and would likely have remained a binding constraint thereafter had the policy not been removed at the end of 2015.”

Below is a preliminary list of papers that will presented at this year’s AEA Annual Meeting on January 4-6 in Atlanta, Georgia.

On energy and everything else

• United States Internal Migration Networks, Energy Use, and Emissions – Paper
• Too Much Energy: The Perverse Effect of Low Energy Price – Paper
• Are Energy Executives Rewarded For Luck? – Paper
• United States Internal Migration Networks, Energy Use, and Emissions – Paper
• Structural Approach to Dynamic Energy Pricing and Consumer Welfare – Presentation
• Smart Thermostats, Social Information, and Energy Conservation: Distributional Evidence from a Field Experiment – AEA
• Quantifying Negative Externalities of Energy Infrastructure Using Wellbeing and Hedonic Price Data: Evidence from Biogas Plants – AEA
• Air Conditioning and Global Energy Consumption – AEA
• The Internal and External Costs of Renewable Intermittency – AEA
• The Interplay between Renewables and Hydrocarbons in the Energy Transition – AEA
• Innovation, Openness, and Energy Demand – AEA

On carbon, gas, oil, and shale

• Fracking, farmers, and rural electrification in India – Paper
• Effects of Severance Tax on Economic Activity: Evidence from the Oil Sector – Paper and Presentation
• Oil for Food? Oil Spills and Agricultural Productivity – Paper
• Welfare Gains from Market Insurance: The Case of Mexican Oil Price Risk – Paper
• Business Cycles and Innovation Cycles in the Upstream Oil & Gas Industry: Surviving the Ups and Downs – Presentation
• Learning Where to Drill: Drilling Decisions and Geological Quality in the Haynesville Shale – Paper and Presentation
• Shale Gaz Extraction in the United States: Perspectives from Geo-Located Twitter Conversations and Academic Publications – Presentation
• Relinquishing Riches: Auctions Versus “Wild West” Negotiations in Texas Oil and Gas Leasing – AEA
• Nonlinear Causal Relationship between Shale Oil Price and Employment in the United States: Evidence from a Nonlinear ARDL Approach – AEA
• The Potential for Peak Oil Demand – AEA
• Station Heterogeneity and the Dynamics of Retail Gasoline Prices  – AEA
• Bidding and Drilling Under Uncertainty: Identification and Estimation of Contingent Payment Auctions – AEA

On electricity

• Imperfect Markets Versus Imperfect Regulation in United States Electricity Generation – Paper
• Does Electrification Cause Industrial Development? Grid Expansion and Firm Turnover in Indonesia – Paper
• Do Reward and Reprimand Policies Reduce Electricity Distribution Losses? – Paper
• Optimization of a Prototype Electric Power System: Legacy Assets and New Investments – Paper and Presentation
• Dynamic Competition and Arbitrage in Electricity Markets: The Role of Financial Traders – Paper
• Ramping Up Renewable Energies: The Role of Ramping Cost and Electricity Storage – AEA
• Private and Social Costs of Misallocation in Indian Electricity Supply – AEA
• Testing for Market Efficiency with Transaction Costs: An Application to Financial Trading in Wholesale Electricity Markets – AEA

On electric vehicles

• Adoption of Electric Vehicles: Manufacturers’ Incentive and Government Policy – Paper
• Long-Term Transportation Electricity Use Considering the Effect of Autonomous-Vehicles: Estimates & Policy Observations – Paper
• Electric vehicles and residential energy consumption: An indirect rebound effect – AEA

On energy and policy

• Would Energy Tax Policy Significantly Influence the Diffusion Rate of The Renewable Energy Portfolio in The United States? – Paper and Presentation
• Impacts of Renewable Fuel Policy with Sentiment on the Energy and Agricultural Markets: A Vine Copula-based ARMA-GJR-GARCHX Model – Paper
• Using Emissions Trading Schemes to Reduce Heterogeneous Distortionary Taxes: the case of Recycling Carbon Auction Revenues to support Renewable Energy – Paper and Presentation
• Getting More of Something Without Subsidizing It: Impact of Time-of-Use Electricity Pricing on Residential Energy Efficiency and Solar Panel Adoption – AEA

On climate change and policy

• Market Power in Coal Shipping and Implications for U.S. Climate Policy – Paper
• Global Cost Estimates of Forest Climate Mitigation with Albedo: A New Integrative Policy Approach – Paper
• Unilateral Action under an Emissions Cap – Paper
• Climate Change Legislation and Social Values: Do They Complement or Substitute Each Other in Reducing Carbon Emissions? – AEA

On climate change and everything else

• Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation – Paper
• Climate Risks of Sales Forecasts: Evidence from Satellite Readings of Soil Moisture – Paper and Presentation
• Climate Change Induced Inter-Province Migration in Iran – Paper
• Climate Finance under Conflicts and Renegotiations: A Dynamic Contract Approach – Paper
• Estimating the Impacts of Changes in Weather Circadian Rhythms on French Agricultural Production – Paper
• Heat and Learning – Paper
• Expectations and Adaptation to Environmental Risks – Paper
• Moving to Floodplains: The Unintended Consequences of the National Flood Insurance Program on Population Flows – Paper
• Salvation or Commodification? The Role of Money and Markets in Global Ecological Preservation – Paper
• Carbon Risk – Paper and Presentation
• Climate Change and Flood Beliefs: Evidence from New York Real Estate – Paper
• Climate Risks of Sales Forecasts: Evidence from Satellite Readings of Soil Moisture – Paper and Presentation
• The Effect of Local Pollution on the Cognitive Productivity of Judges: A Case Study of the Mexican Judiciary – AEA
• Creating comfort in a warming world: The role of smart thermostats – AEA
• Modeling System Complexity in the Context of Geopolitics Related to Climate Change – AEA
• Do Common-Pool Resources Help Insure Household Food Security from Climate Shocks? – AEA
• Malthus in Africa? Positive and Preventive Checks on Population in a Changing Climate – AEA
• Adaptation to Environmental Change: Agriculture and the Unexpected Incidence of the Acid Rain Program – AEA
• Ramping Up Renewable Energies: The Role of Ramping Cost and Electricity Storage – AEA
• Climate shocks, lake drying and children’s cognitive skills and violent behavior: Evidence from Chad – AEA
• A New Approach to Measuring Climate Change Impacts and Adaptation – AEA
• Learning, Adaptation and Climate Uncertainty: Evidence from Indian Agriculture – AEA

From a new working paper by Myunghyun Kim:

“This paper studies international transmission of U.S. monetary policy shocks to commodity exporters and importers. After first showing empirically that the shocks have stronger effects on commodity exporters than on importers, I then augment a standard three-country model to include commodities. Consistent with the empirical evidence, the model
indicates that an expansionary monetary policy shock to the U.S. increases the aggregate output of commodity exporters by more than that of importers. This is because the increased U.S. aggregate demand triggered by the shock leads to greater U.S. demand for commodities and higher real commodity prices, and thus the exports of commodity exporters increase relative to those of commodity importers. Furthermore, I show that if commodity exporters’ currencies are pegged to the U.S. dollar, then the U.S. monetary policy shocks have stronger spillovers to commodity exporters and importers. In the event that the U.S. becomes a net energy exporter, the shocks will have weaker effects on commodity exporters and stronger impacts on importers.”

From Conversable Economist:

“If carbon capture and storage was cheap and easy, it would be a technological fix for the issue of climate change. It’s not that simple, of course. But along with a range of other technologies and policies, carbon capture and storage can be part of the answer. In the Global Status of CCS 2018, the Global CCS Institute provides an overview of this technology (download requires free registration). The tone of the report is boosterish and upbeat about the technology–but it’s also full of facts and case studies and background about efforts currently underway.

Here are some main points:

When the Intergovernmental Panel on Climate Change develops scenarios for how the world economy limit carbon in the atmosphere in the next few decades, a major expansion of carbon capture and storage is baked into those forecasts. 

“In October 2018, the Intergovernmental Panel on Climate Change (IPCC) released its highly anticipated Special Report on Global Warming of 1.5 °C (SR15), reinforcing the role carbon capture and storage technology must play in beating climate change. … Significantly for CCS, it made the point that any remaining emissions would need to be balanced by removing CO2 from the air. CCS was acknowledged in three of all four pathways IPCC authors used to reach 1.5°C and was singled out for its ability to: `play a major role in decarbonising the industry sector in the context of 1.5°C and 2°C pathways, especially in industries with higher process emissions, such as cement, iron and steel industries.'”

There are a number of reasonably large-scale CCS facilities in operation, but they have naturally tended to pick the approaches that are already cost-effective. The question is whether CCS will spread into a much broader array of uses. 

There are now 43 commercial large-scale global CCS facilities, 18 in operation, 5 in construction and 20 in various stages of development. … The first-of-a-kind commercial CCS facilities addressed in this report have already been in operation for years, mostly in industrial applications. They are “low hanging fruit”  in terms of deployment – natural gas processing, fertiliser, ethanol production where CO2 capture is an inherent process of productions. There is still a swathe of industrial applications crying out for CCS application. There is also a wave of new innovations such as hydrogen with CCS, direct air capture, CCS hubs and clusters that need to be deployed. …”

Continue reading here.

From VoxEU:

“The Industrial Revolution has been of vast benefit to humanity, but it came at the cost of a global explosion in anthropogenic emissions of greenhouse gases. The UK was the first country into the Industrial Revolution. Now it is one of the first countries heading out, with annual CO2 emissions per capita back below the levels of the 1860s. This column presents an econometric model of UK emissions over the last 150 years to establish what has driven them down and reveal the impacts of important policies, especially the Climate Change Act of 2008. Even so, large reductions in all the UK’s CO₂ sources are still required to meet its 2050 target of an 80% reduction from 1970 levels.

The Industrial Revolution began in the UK in the mid-18th century for reasons well explained by Allen (2009). With antecedents in the scientific, technological, and medical knowledge revolutions from two centuries earlier across many countries, the UK was the first country to industrialise on a large scale. The consequences are startling: 250 years later, real income levels per capita are about seven-fold higher (https://ourworldindata.org/economic-growth shows even greater changes in other countries), many killer diseases have been tamed, and longevity has approximately doubled. As Crafts (2002) showed, the average individual would be unwise to swap their life now for that of even one of the richest people several centuries ago; the Industrial Revolution and its successors have been of vast benefit to humanity.

An unintended consequence has been an explosion in atmospheric carbon dioxide and other greenhouse gas emissions. These are by-products of energy production, manufacturing, and transport (all about a quarter of emissions), with agriculture, construction and waste removal creating most of the rest. Although the UK’s first electricity generating power station in 1868 was hydro driven, coal-fired steam-driven power stations were introduced by 1882 and have since produced most of its electricity. The paleo-record over the last 750,000 years of intermittent ice ages shows atmospheric CO₂ levels of between 180 parts per million (ppm) and 300ppm, but these levels now exceed 400ppm. The increases in atmospheric CO₂ recorded since 1958 at Mauna Loa (Sundquist and Keeling 2009) are clearly anthropogenic in origin (e.g. Hendry and Pretis 2013). The climate change induced by increased greenhouse gases has potentially dangerous implications, highlighted by Stern (2006) and recent IPCC reports, leading to the agreement in Paris at COP21 to seek to limit temperature increases to less than 2 Centigrade, and “to pursue efforts to limit it to 1.5C’’.  Much remains to reduce CO₂ emissions towards the net zero level that will be required to stabilize temperatures at any level. Meinshausen et al. (2009) analyse the difficulties of even achieving 2C, but renewable technologies offer hope of at least further large emission reductions.

However, there was a dramatic drop in the UK’s per capita emissions of CO₂ by 2017 to below the levels of the 1860s – the country first into the Industrial Revolution is one of the first out. On 22 April 2017, Britain went a full day without turning on its coal-fired power stations for the first time in more than 130 years, and on 26 May 2017 it generated almost 25% of its electrical energy from solar. The UK’s CO₂ emissions are now just half of their peak level in 1970. How was this reduction achieved?

UK CO₂ emissions

The data from 1860 on UK CO₂ emissions, fossil fuel volumes, and the ratio of CO₂ emissions to the capital stock are shown in Figure 1. While other greenhouse gas emissions matter, CO₂comprises about 80% of the UK total, with methane, nitrous oxide, and hydrofluorocarbons (HFCs) making up most of the rest in CO₂ equivalents. However, various fossil fuels have different CO2 emissions per unit of energy produced and depend on how efficiently fuels are burnt, from an open fire through vehicles, to a gas-fired power station.”

 

Continue reading here.