The above sections focused on examining the direct or out of pocket costs of subsidies. However, besides generating direct costs, subsidies also generate two types of indirect costs. First, since subsidies are distortions to energy prices, they result in individuals and firms misallocating resources and using too much energy and too little of other inputs. This in turn results in lower levels of GDP, since resources could otherwise be more efficiently used to produce more output. The difference in GDP between the observed world and the world without distortions is thus the indirect financial cost of fossilfuelsubsidies. Second of all, since we use more fossilfuel energy when it is cheaper, we are also emitting too much carbon dioxide. The difference in emissions between scenarios where we pollute too much and the right amount is the environmental cost of subsidies. A huge advantage of the model- based methodology of extracting subsidies developed in RLS is that the model can be used to perform counterfactual experiments. In particular, (net) fossilfuelsubsidies can be set to zero in all countries where they are positive, whilst keeping all other aspects of the countries unchanged. This then allows me to calculate a measure of the additional indirect financial and environmental costs of positive net subsidies by seeing the implications that the model with zero subsidies would have on emissions and GDP. 76 In the following section, I proceed to analyze these indirect costs. First, Figure 14 plots the
gradients can be used to make a first estimate of the emissions in the city as long as the upwind site is representative for the background air. As we make long-term average flux estimates we only need to correctly represent the average transport processes. Although this mass-balance approach is very simplified, it shows reasonable flux estimates with errors of 15-23% compared to the emission inventory. This method even allows us to separate between three source areas while only accounting for the observed wind direction, except in the presence of elevated stack emissions. Nevertheless, the estimates can be influenced by biogenic fluxes and by atmospheric processes that are not taken into account (such as entrainment). Moreover, the flux estimates are made using a strict data selection based on well-mixed daytime conditions. Although such simplifications and selections are often done to minimize the model errors (Boon et al., 2016; Bréon et al., 2015; Lauvaux et al., 2013), the resulting emission estimates are not necessarily representative for hours outside the selection. Indeed, if we would include observations from all hours of the day in the flux estimate of Metropolitan Rotterdam (Table 2.2) the resulting hourly emission estimate would be about half as large (i.e. night time emissions are smaller). Besides this bias we find a large variability in emission estimates using individual concentration gradients, which can be 30% up to more than 100% of the average emission estimate for a specific source area. Similarly, Mays et al. (2009) found large short-term variability in emissions, which makes it difficult to extrapolate the results and calculate a yearly total emission based on a few concentration gradients.
The purpose of the paper is to (i) show that univariate GARCH is not a special case of multivariate GARCH, specifically the Full BEKK model, except under parametric restrictions on the off-diagonal elements of the random coefficient autoregressive coefficient matrix, that are not consistent with Full BEKK, and (ii) provide the regularity conditions that arise from the underlying random coefficient autoregressive process, for which the (quasi-) maximum likelihood estimates (QMLE) have valid asymptotic properties under the appropriate parametric restrictions. The paper provides a discussion of the stochastic processes that lead to the alternative specifications, regularity conditions, and asymptotic properties of the univariate and multivariate GARCH models. It is shown that the Full BEKK model, which in empirical practice is estimated almost exclusively compared with Diagonal BEKK (DBEKK), has no underlying stochastic process that leads to its specification, regularity conditions, or asymptotic properties, as compared with DBEKK. An empirical illustration shows the differences in the QMLE of the parameters of the conditional means and conditional variances for the univariate, DEBEKK and Full BEKK specifications.
measured, comparable fossil-fuelsubsidies exists at the international level. As argued by Koplow (2009), this is both because of political pressure from the direct beneficiaries of subsidies and because of the immense complexity of the task given the profusion and diversity of subsidy programs across countries. 4 Indirect measures of subsidies - such as the ones constructed by the IMF (2013) or the IEA (2012) - are based on the price-gap approach. This methodology allows researchers to infer national subsidies by comparing measured energy prices with an international benchmark price. The key limitation of this technique is that it does not account for government actions which support carbon energy without changing its final price (Koplow, 2009). 5 Furthermore, the data necessary for this exercise is limited and since estimates are based on energy prices measured ‘at the pump’, they incorporate significant non-traded components which biases estimates. In this paper, I propose a completely novel, indirect, model-based method for estimating the size of fossil-fuelsubsidies by examining country-specific patterns in carbon emission-to-GDP ratios, known as emission intensities. The method is based on two observations about carbon emission intensity which this paper proposes to analyze. First, emission intensities tend to follow a hump-shaped pattern with income. Figure 1(a) plots emission intensity time paths for 26 OECD countries versus each country’s GDP per capita, for 1751-2010. The graph suggests that middle-income countries produce dirtier output than rich or poor countries. Second, the emission intensity of later developers tends to follow a so- called ‘envelope’-pattern over time: the intensities of later developers rise quickly until they roughly reach the intensity of the United Kingdom (UK) - the first country to start the modern development process - after which, their intensity tends to approximately follow the same path as that of the UK. An illustrative example of this envelope-pattern is shown in Figure 1(b). 6 In the graph, the
According to the Intergovernmental Panel on Climate Change (IPCC), no more than one- fifth of the current proven fossilfuel reserves can be burned to mitigate climate change (McGlade & Ekins, 2015; Meinshausen et al., 2009). Consequently, fossilfuel divestment is seen as a potential activity to achieve this goal (Gillan & Starks, 2000; Guay, Doh, & Sinclair, 2004). In response, a number of well-known institutional investors started reducing their investment in the fossilfuel industry (Mooney, 2017) because of both, ethical (Clark & Monk, 2010) and financial (Rubin, 2016) reasons. They are afraid of reduced returns caused by stranded assets (Ansar, Caldecott, & Tilbury, 2014; Green & Newman, 2017) occurring through the devaluation of fossilfuel assets that cannot be burned without exceeding the 2°C goal. Furthermore ethically motivated investors divest, to reduce the carbon 1 footprint of their portfolios (Frankel, Shakdwipee, & Nishikawa, 2015; Scipioni, Manzardo, Mazzi, & Mastrobuono, 2012). Other investors divest to influence the fossilfuel industry to reduce their carbonemissions (Arabella Advisors, 2015; Dawkins, 2016).
general equilibrium modelling. The former finds that subsidy removals would impact welfare, emissions, and competitiveness disproportionately: those countries without subsidy removals would benefit in com- petitiveness, compared to those countries that implement the phasing out. The results of the latter study reveal that negative macroeconomic impacts of subsidies removal can be largely mitigated if only 10% of subsidies are removed while increasing subsidies for renewable energies has positive macroeconomic impacts. Finally, Beaton & Lonton ( 2010 ) evaluates the effectiveness of two strategies (an unconditional cash transfer to households and the roll-out of a programme designed to incentivise household switching from kerosene to LPG usage) used in Indonesia to reduce the impacts of fossilfuel subsidy reform. The paper contends that both programmes were adequately implemented and successful in overturning oppo- sition to a fuel subsidy reform and in counteracting adverse economic effects of the reforms, achieved in a wider context of educating the general population on the benefits of such reforms.
Researcher have discovered that a pattern is followed by the people, with the development, increase in income, more commercialization, he shifts from traditional to new and cleaner fuel or source of energy .In the other words, with the development people have a tendency of switching to modern and clean fuel. This habit of people is known as fuel switching. Even within these developing countries there is a demarcation between households having high economic status and household with low economic status, the former use modern and clean fuel while the latter use traditional fuel. With the improvement in the condition of the low strata population, they tend to switch to modern fuel. The hypothesis that explains the phenomenon is known as Energy Ladder. Figure 1.1 shows the energy ladder. In developing countries around 90% of people have lack of access to sufficient energy resources and around 2.4 billion depend on biomass, Barnes
Abstract: Rapid globalization and industrialization is witnessed across the globe. This has led to a rapid increase in energy demand. In India, it is found that energy consumption is growing exponentially. A sustainable energy model that helps in optimizing the energy consumption is the need of the hour. The model should help policymakers to put proactive plans in place. A two-step process has been carried out. A demand prediction model is proposed to forecast the fossil based energy demand for India upto 2040-41. 92 econometric models have been were developed and the best fit was found. The requirement was found to be coal and lignite = 32203.42 pJ oil = 20396.92 PJ, natural gas = 3460.77 pJ and electricity = 9887.71 pJ. The total energy requirement in 2040-41 will be 65948 pJ in 2040-41. Using constraints such as energy return on investment, acceptability, reliability and CO2 emissions a multi-objective optimization model that maximizes efficiency and minimizes cost is developed. Renewable energy substitution scenarios are developed. Solar energy is expected to dominate and polices have to designed to ensure that the naturally available solar energy is being utilized to a larger extent. Smart grid technology is at its nascent stage of development in India. Research and development has to be done to enhance the use of smart grid so that decentralized energy generation from renewable energy can be increased.
If these assumptions hold, consumption subsidies drive a wedge between the costs of products and their prices, and thus between the social cost and benefits of subsidized products. At the margin, subsidized consumption is worth less than it costs. (This is perhaps most easily seen when scarce foreign exchange is being used to import subsidized petroleum products or when excessive amounts of subsidized petroleum products are being consumed domestically, rather than being exported to earn foreign exchange. In either case foreign exchange could be used to buy imported goods and services that are valued more highly than the subsidized petroleum products.) The result of excessive consumption of subsidized fuel is a sacrifice of potential welfare, often called deadweight loss. Even though the extreme assumptions underlying this model of welfare maximization do not accurately describe reality, it is generally thought that, with some important exceptions, free market prices approximate values fairly closely. This is the reasoning that underlies both the case for subsidy reform and the price-gap methodology described in the next section.
A more nuanced shortcoming is the methodology employed by Rogner when compiling fossilfuel resource data. Three classifications of fossil fuels are used: reserves, resources and occurrences. Conventional thinking in the fossilfuel industry does not recognise ‘occurrences’ as a source of energy, and understands ‘resources’ will never be fully exploited. The experience of the Forties oil field in the North Sea is typical: the extraction rate rose from nothing in 1975 to 671 thousand barrels per day in 1980, before falling again by almost 99% to just 8.2 thousand barrels per day in 2008. The field is likely to be abandoned within a decade, having achieved a recovery rate of between 62 and 70% of the oil in place [14-15]. Whilst this abandonment could be ascribed to economic factors rather than physical (in an open system it might be cheaper at this point in time to exploit a resource elsewhere), there is a physical constraint limiting the complete extraction of resource in place. If the objective of fossilfuel extraction is to supply energy to society, the resource will only be extracted if it can provide net energy after the energy cost of extraction has been subtracted from the total energy extracted. Additionally, the energy cost of infrastructure (cars, roads, etc.) must be ‘paid’ before oil can be used. Break-even at the well-head is not good enough for extraction to be viable. It is likely that a fraction of the resource will not be able to be extracted in such an energy-positive way and will therefore remain out of reach.
We argue that human capital created by education is not only a productive input that directly raises productiv- ity, but also plays a crucial role in the development and adoption of new technologies that drive long-term growth. In addition, the model shows some evidence of the impact of labor force and fertility, suggesting that increasing levels of education play an important role in family planning. Of course there will always be cultural and religious factors and idiosyncratic variations that affect fertility choices; nevertheless, this cultural diver- sity (expressed in the model as non expected random options) is also an important factor of stabilization for the different scenarios. However, in the context of this work and according to the tested conditions, we conclude that increasing educational levels drive to a fall in fertility and an increase in productivity growth.
Given the tendency of multilateral efforts to gridlock, mini- lateral ‘ coalitions of the willing ’ could potentially move ﬁ rst with rules of their own. Such initiatives could become more compre- hensive in coverage once the need for supply-side interventions becomes more widely appreciated. For example, a moderate export tax coordinated among the four largest (steam) coal exporters, Indonesia, Australia, South Africa and Colombia, could bring them net economic bene ﬁ ts, as well as reducing emissions (Richter et al., 2015). The resultant rise in traded coal prices would reduce con- sumption, while the billions of dollars potentially raised annually could fund structural transition in mining regions, and/or R & D. In principle at least, even OPEC members could apply a carbon tax to their exports, earmarking revenues for the GCF (Vidal, 2012) or for their own diversi ﬁ cation efforts. In advance of more comprehensive international rules being agreed, both equity and economic ef ﬁ - ciency rationales speak in favour of wealthy, historically polluting countries moving ﬁ rst to forgo the exploitation of particularly high- cost, carbon-intensive fossil fuels, such as deep-sea oil ﬁ elds (Lenferna, 2018). Tying such initiatives to Paris goals would make more explicit the need for other countries to address supply issues (Piggot et al., 2017).
We begin in the next section by clarifying what is meant by ‘subsidy’, and how that shapes the information available on fossilfuelsubsidies. Our alternative to reliance on dispute settlement to clarify WTO rules focuses on improving trans- parency and surveillance, which we believe is more feasible given the current state of negotiations in the Doha Round, but Members are unlikely to notify all their fossilfuelsubsidies to the SCM Committee. One way to encourage noti ﬁcation of such subsidies would be to allow them to be potentially ‘non-actionable’ under Article 8 of the ASCM, but this article lapsed in 2000; in the second section, we show why it is unlikely to be restored. In the third section, we suggest that the Trade Policy Review Mechanism (TPRM) offers a better immediate forum. We show that the TPR Secretariat has the ability to use information from a wide variety of sources, which creates an opportunity, discussed in the fourth section, for non-governmental organizations (NGOs) to provide such third-party noti ﬁcations. For data to be useful, they ought to be provided in a standard format; in the ﬁfth section, we propose a new template that NGOs could use to notify publicly available information on fossilfuelsubsidies to the WTO. We believe the WTO offers both a framework and mechanisms for reviewing a broad range of trade- related policies. In the conclusion, we discuss the broader implications of how such engagement with civil society can contribute to the functioning of the WTO. Improving the existing transparency and surveillance mechanisms would allow Members to discuss both subsidies that foster sustainable development and inef ﬁcient subsidies that present a threat to the trading system, energy security, and the global climate.
NDRC (2014c) is only a sector-based, normative document, a national carbon market supported by this type of document raises concerns for the legal foundation of its future enforcement, given the jurisdictional complexities involved in enforcing China’s large portfolio of environmental regulations. Second, China needs to invest in the necessary market infrastructure, such as trading platforms, registry systems, and an MRV system at the national level. Third, the lack of good emission data presents a big challenge in terms of setting a cap, deciding which sectors should be covered and how permits should be allocated to the covered entities, and designing accounting and verification rules. The above key components of a well-designed carbon market need to be built on reliable GHG emission (or energy consumption) data at the national, provincial, and/or firm (and even installation) level. Although experimentation through pilot carbon markets has enabled the government to collect emission data from more than 2,000 covered emitters (Zheng 2014), the
Perhaps most important is the fact that GHG emissions are a natural part of our planet’s life cycle, if kept within the limits of our biosphere’s capacity. Using fossil fuels has enabled spectacular economic development since the industrial revolution. The upward trajectory in global GDP has brought with it a commensurate increase in atmospheric GHG concentrations. Fortunately, ecosystems are sufficiently resilient to absorb a great deal of environmental change, but human CO 2 emissions threaten to exceed the biosphere’s absorptive capacity. It is important, therefore, to present the planetary context for the trends we describe in order to know if they really matter.
Koutsoyiannis et al. (2009a) described the chaos and un- certainty (internal variability) inherent in rainfall patterns and compared this to the rather more certain projections of pop- ulation growth and energy shortages. They suggested that planners should at least give increased consideration to en- vironmental, social and economic changes other than to cli- mate change alone. This supports a similar conclusion of Nel and Cooper (2009), who proposed that energy shortages will present a much greater problem than climate change. If the conventional projections of high fossilfuel growth prove im- possible, then there are profound implications for communi- ties. Apart from the significance this has for climate change uncertainty, energy is crucial to the global economy and hu- man wellbeing, and lower-than-projected energy availability suggests real limits to the global economy. Nel and van Zyl (2010) presented a new economic model that accounted for energy resource constraints, projecting a reduction in global GDP in the second half of the 21st century. Hamilton (2009) contended that the 2008 Global Financial Crisis was itself triggered by high oil prices. These factors, coupled with the relative certainty of ongoing global population growth, point to severe problems outside of climate change.