Global Energy Markets
Objectives
The objectives of the course are to introduce:
(i) Some fundamental concepts of natural resource and energy economics;
(ii) To contribute to a better understanding of the most relevant topics in the field from an economic perspective, in particular, those that are currently discussed in the context of the energy debate;
(iii) To develop the ability of students to apply the tools of economic analysis to policy issues involving an intertemporal perspective, and, finally;
(iv) To improve the students communication skills by strengthening their capacity to provide solid arguments when discussing economic issues.
This course covers topics on energy demand and supply, environmental consequences of energy consumption and production, and the impact of policy intervention. These topics are related to the debate about the consequences of climate change mitigation policy that have emerged in the context of the transition from carbon intensive to low carbon economies which are at the core of the international political agenda. Instead of pricing externalities, the most common practice undertaken by governments has been to promote low carbon alternatives to conventional generation. Yet, not only unintended consequences for the environment may result from those policies but also the high penetration level of those sources creates new challenges. Therefore, for policy purposes, it will be critical to understand the costs and benefits associated with the deployment of those sources. Taking as departure point the basic depletable (fossil fuels) resource model the role played by renewable energy sources is investigated. In particular, the consequences of promoting the development of non-carbon energy sources and its impact on the transition path to a less fossil fuel dependent economy are addressed. In particular, the role played by firms in this context will also be addressed by introducing a new topic on internal carbon pricing practices.
General characterization
Code
2141
Credits
3,5
Responsible teacher
Maria Antonieta da Cunha e Sá
Hours
Weekly - Available soon
Total - Available soon
Teaching language
English
Prerequisites
Bibliography
[McK], Mackay, David, Renewable Energy – Without the Hot Air, 2009.
The recommended book is a very interesting book, and fun to read, written by David McKay, Regius Professor of Engineering at Cambridge University, UK, and available for free download at:
https://www.withouthotair.com/
https://www.youtube.com/watch?v=GFosQtEqzSE
http://www.withouthotair.com/Videos.html
http://www.withouthotair.com/endorsements.html
[T], Tietenberg, T. and L. Lewis, Environmental and Natural Resource Economics, 10th edition, Pearson International Edition, 2015.
Note: All required chapters and readings are identified with an asterisk (*) and are available at the homepage of the course in the moodle. Those with (**) are only suggested.
It is also highly recommended to the students to regularly visit subject-related web sites:
World Bank: http://www.worldbank.org/. Resources for The Future: http://www.rff.org/. United Nations environment program: http://www.unep.ch/etu/publications/index.htm. The Intergovernmental Panel on Climate Change (IPCC): http://www.ipcc.ch/ or any other related site. Also, reading The Economist is a good exercise, as well as the RFF review Resources that can be found at their website.
Finally, you may visit interesting blogs, such as The Huffington Post Blog, the Related Research Blog at Energy Institute at Haas School, Berkeley University. Also, the Weekly Policy Commentary at RFF is also worth a visit.
Teaching method
The in-class teaching in this course is restricted to the lectures, as in Master courses there are no practical sessions. There are two classes per week (3 hours per week), for six weeks.
The students are supposed to read the slides in advance as well as the proposed readings that are uploaded in the moodle page of the course. For the classes the students are supposed to read the slides in advance as well as the proposed readings that are uploaded in the moodle page of the course. The students should also bring the slides to the classes. However, the slides do not substitute in any circumstance the recommended readings. Besides the presentation by the instructor, students are also expected to participate in - class discussion.
Besides the in-class contact with the instructor, the students can also benefit from additional contact during the office hours set on a weekly basis. In case they are not able to make it, they can schedule directly with the instructor a day and time that is convenient for both.
The communication with the students is undertaken through the moodle page of the course. All the course materials are uploaded in the platform, as well as grades, announcements, exchange of emails, among others. So, it is very important that the students visit the platform on a daily basis.
There is a grader assigned to the course. Yet, the grader is not supposed to have contact with the students.
A final session is typically scheduled before the final. In this session we revise the solution topics of the quizzes and the problem sets that were provided to the students in advance. Besides, the instructor answers any clarifying questions raised by the students on the subjects covered.
Evaluation method
The final grade of the course is given in an individual basis, on a scale from 0 to 20. The final grade is obtained by weighting the different assessments as follows:
(i) two problem sets (15%).
(ii) three quizzes (15%).
(iii) one written (short) report and in class presentations (20%).
(iv) final exam (50%).
In the first week of classes the groups are set. They should not include more than three elements. However, if the number of students enrolled in the course is larger than 30, then they may have four elements. The instructor is expected to be informed by email about the names and the numbers of the students that include the different groups.
While the problem sets and the written report and in-class presentation are team work, the quizzes and the written final exam are individual work.
The problem sets are uploaded in the home page of the course in the moodle platform. In the first page of the problem set the students find the due date, always coinciding with the days of the classes. Typically, the students have one week to complete the problem set and should deliver it in the beginning of the class in the due date. These can be either handwritten or typed.
There will be three quizzes over the six-week period. The quizzes are not previously announced. For the final grade, only the two best quizzes are considered, weighting 7.5% each. There are no make-up quizzes and/or finals, unless under exceptional circumstances. In this case, the solution is found in collaboration with the Pedagogical Council, which is called to judge on such cases. Moreover, a minimum grade of 8.5/20 in the final is required to pass the course, independently of the other course work.
The written report and the in class presentations are the last assessment piece before the classes end. In order to prepare the report and the oral presentations, each group has to choose one paper among a few that the instructor selects for this purpose. These papers are uploaded in the moodle home page of the course in the second week of classes, and the students have approximately one week to decide. As soon as the groups have made up their minds about the papers to present and discuss (they can also discuss with the instructor) they should talk to the instructor, to ensure that no other group will choose it. Moreover, each group will be discussant of one of the other papers that will be presented by the other groups. The choice of this paper by each group can be taken later, at the most in the fourth/fifth week of classes, and the instructor should be informed. The written report should not exceed two pages. To help students to prepare the written report and the oral in-class presentation and discussin, an outline is provided with all the relevant information. This outline is uploaded in the home page of the course in the moodle platform. Each group evaluates each other performance for the in-class presentations and discussion. This evaluation is also taken into account when calculating the final grade.
The final exam takes one hour and a half, and it is a closed-book exam. Besides, the students cannot use calculators.
The School does not tolerate cheating and/or plagiarism in any form. The students should abide by rules defined by the Nova SBE Honor Code. In every final an integrity statement available in every exam sheet has to be signed by each student. Sanctions are considered in case the rules are violated, depending on how serious the wrongdoing is.
Please find below the guidelines for in-class presentations and discussions: Outline for presentation: (20 mn)
1. Motivation.
2. Economic Question and contribution.
3. Literature review.
4. The Model (short of equations, only those really needed).
5. Results and discussion.
6. Conclusions.
Note: all questions should be asked at the end of the presentation
Rules while presenting and discussing:
each member of the group should be given the same time to present;
do not read while presenting;
talk to the audience and show enthusiasm and self-confidence.
Discussant group: (5 mn)
One slide with the research questions and the questions to be raised.
In-class discussion:
5 mn for the audience to raise questions plus the group to answer the questions asked by the discussant group. All groups should participate. 30 mn total for each group.
Subject matter
1. Introduction: Course overview
[T] Chap.1*
[McK], Chaps. 1, 2
Examples of interesting texts:
Oil and the economy: The oil conundrum Plunging prices have neither halted oil production nor stimulated a surge in global growth, The Economist, January 26, 2016.
President Obamas State of the Union Address, January 2016
https://medium.com/@ObamaWhiteHouse/president-obama-s-2016-state-of-the-union-address-7c06300f9726President Obamas climate action plan, June 2013.
https://obamawhitehouse.archives.gov/sites/default/files/image/president27sclimateactionplan.pdf
http://www.eesi.org/papers/view/fact-sheet-timeline-progress-of-president-obama-climate-action-plan, August 5, 2015.
http://www.c2es.org/content/federal-action-on-climate/
State of the Union 2012 (24/1/2012): President Obama´s speech An America Built to Last, pgs 6-7
https://www.theguardian.com/world/2012/jan/25/state-of-the-union-address-full-text
Let There Be Light, Special Report, The Economist, January 17th, 2015.
Natural Gas: Golden Scenarios, The Economist, February 28th 2015.
Brown, S., Falling Oil Prices and US Economic Activity: Implications for the Future, RFF Issue Brief 14-06, December 2014.
Krupnick, A., R. Kopp, K. Hayes and S. Roeshot, The Natural Gas Revolution: Critical Questions for a Sustainable Energy Future RFF, March 2014.
OPEC Holds Production Unchanged; Prices Fall, by Stanley Reed, 28/11/2014, New York Times * https://www.nytimes.com/2014/11/28/business/international/opec-leaves-oil-production-quotas-unchanged-and-prices-fall-further.html
Wang, Z. and A. Krupnick, US Shale Gas Development: What Led the Boom ?, RFF Issue Brief 13-04, May 2013.
Mapping Renewable Path Ways towards 2020, EU RoadMap, European Renewable Energy Council (EREC), 2011.
http://www.eufores.org/fileadmin/eufores/Projects/REPAP_2020/EREC-roadmap-V4.pdf
Natural Research Council, Chapter 6, Climate Change and the Path toward Sustainable Energy Sources, 2011.
Issues of the day, RFF, 2010:
http://www.rff.org/files/sharepoint/Documents/Publications/1004_Issues_of_the_Day/Is sues_of_the_Day_Complete.pdf
Getting Warmer, A special report on climate change and the carbon economy, The Economist, December 5th, 2009.
Nature, Editorial April 2009.
https://www.nature.com/articles/4581077a.pdf
The Power and the Glory, A special report on energy, The Economist, June 21st 2008.
2. Energy Markets
2.1. Fundamentals on Natural Resource and Energy Economics;
2.1.1. Concepts.
[McK], Chaps. related to the different renewable sources.
[T], Chaps. 2*, 6*, 7*
Navigating Energy Choices in the 21st Century, RFF, 2005.*
http://www.rff.org/files/sharepoint/WorkImages/Download/RFF_Resources_156.pdf
2.1.2. Learning about renewable energy sources
[McK], Chaps. related to the different renewable sources.
[T], Chaps. 7*
National Renewable Energy Lab web site on learning about renewable energy:
https://www.energy.gov/science-innovation/energy-sources
Renewable energy association:
2.1.3. Major Trends
Examples of references providing important and updated valuable information:
International Energy Outlook 2017 http:
http://www.eia.gov/forecasts/ieo/
World Energy Outlook 2016:
https://www.iea.org/newsroom/news/2016/november/world-energy-outlook-2016.html
British Petroleum (BP) Energy Outlook 2017:
BP Statistical Review of World Energy, June 2017.
Annual Energy Outlook, January 5 2017, US Energy information Administration by Adam Sieminsky:
https://www.eia.gov/pressroom/presentations/sieminski_01052017.pdfRenewables 2017, Global Status Report:*
http://www.ren21.net/gsr-2017/
https://www.iea.org/publications/renewables2017/
http://www.ren21.net/status-of-renewables/global-status-report/
Covert, T., M. Greenstone, and C. Knittel. (2016). Will We Ever Stop Using Fossil Fuels ? Journal of Economic Perspectives, 30(1), 117-138.*
Recent articles:
https://www.nytimes.com/section/climate
https://www.nytimes.com/interactive/2017/business/energy-environment/oil-prices.html
https://www.nytimes.com/2017/03/15/us/politics/trump-obama-fuel-economy-standards.html?_r=0
3. The Economics of Depletable Resources and the Transition toward a Less Fossil
Fuel Dependent Economy
[T], Chaps. 5*, 6*, 7*
3.1. Supply Fundamentals
3.2. Suppliers´ Behavior: Green Paradox
Di Maria, C., Lange, I., and Van der Werf, E. (2014). Should we be worried about the green paradox? Announcement effects of the acid rain program. European Economic Review, 69, 143-162.
Gerlagh, R. (2011). Too Much Oil, CESifo Economic Studies 57, 79-102.**
Grafton, R. Q., Kompas, T., and Van Long, N. (2012). Substitution between biofuels and fossil fuels: Is there a green paradox ?. Journal of Environmental Economics and Management, 64(3), 328-341.**
Hamilton, J. D. (2012). Oil prices, exhaustible resources, and economic growth (No. w17759). National Bureau of Economic Research. (Handbook of energy and climate).*
Hoel, M. (2009). Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions, WP-FEEM 262.
Hotelling, H. (1931). The economics of exhaustible resources. The Journal of Political Economy, 137-175.
Jensen, S., K. Molin, K. Pittel, and T. Sterner. (2015). An Introduction to the Green Paradox: The Unintended Consequences of Climate Policies. Review of Environmental Economics and Policy 9(2), 246-265.*
Lemoine, D. (2013). Green expectations: Current effects of anticipated carbon pricing. University of Arizona Department of Economics Working Paper, (13-09) (SSRN 2247736)
Sinn, H. W. (2008). Public policies against global warming: a supply side approach. International Tax and Public Finance, 15(4), 360-394.
van der Ploeg, F., & Withagen, C. (2013). On the relevance of green paradoxes, OxCarre Policy Paper 18, Oxford Centre for the Analysis of Resource Rich Economies.*
van der Ploeg, F., & Withagen, C. (2012). Is there really a Green Paradox ?. Journal of Environmental Economics and Management, 64(3), 342-363.
van der Ploeg, F., & Withagen, C. (2012). Too much coal, too little oil?, Journal of Public Economics, 96, 62-77.
4. Internalizing environmental externalities: Carbon Pricing the Role of:
Renewable energy
4.1. Arguments and policies to promote renewable sources
Acemoglu, D., Akcigit, U., Hanley, D., and Kerr, W. (2014). Transition to clean technology (No. w20743). National Bureau of Economic Research.
Acemoglu, D., Aghion, P., Bursztyn, L., and Hemous, D. (2012). The environment and directed technical change. The American Economic Review, 102(1), 131.
Brennan, T. J. (2011). Energy efficiency policy: Surveying the puzzles. Resources for the Future Discussion Paper, (11-27).
Fisher, C., and Preonas, L. (2012). Combining Policies for Renewable Energy: Is the Sum Less than the Sum of its Parts. International Review of Environmental and Resource Economics, 4, 51-92.*
Frondel, M., Ritter, N., Schmidt, C. M., and Vance, C. (2010). Economic impacts from the promotion of renewable energy technologies: The German experience. Energy Policy, 38(8), 4048-4056.*
Goulder, L. H., and Parry, I. W. (2008). Instrument choice in environmental policy. Review of environmental economics and policy, 2(2), 152-174.
Heal, G. (2010). Reflections—the economics of renewable energy in the United States. Review of Environmental Economics and Policy, 4(1), 139-154.*
Jaffe, A., R. Newell, and R. Stavins. 2005. A Tale of Two Market Failures: Technology and Environmental Policy, Ecological Economics 54, 164-174.*
Komor, P. (2009). Wind and solar electricity: challenges and opportunities. Pew Center on Global Climate Change.*
Lyon, T. P., and Yin, H. (2010). Why do states adopt renewable portfolio standards?: An empirical investigation. The Energy Journal, 133-157.**
Strand, J. (2007). Energy Efficiency and Renewable Energy Supply for the G-7 Countries, with Emphasis on Germany (No. 7-299). International Monetary Fund.
4.2. Assessing the costs of fossil fuels and renewables
Borenstein, S. (2012). The Private and Public Economics of Renewable Electricity Generation, Journal of Economic Perspectives, 26(1), 67-92.*
Coady, D. P., Parry, I., Sears, L., and Shang, B. (2015). How Large Are Global Energy Subsidies?. IMF, 2015.**
Greenstone, M., and Looney, A. (2012). Paying too much for energy ? The true costs of our energy choices. Daedalus, the Journal of the American Academy of Arts & Sciences, 141(2), 10-30.*
Greenstone, M., Kopits, E., and Wolverton, A. (2013). Developing a social cost of carbon for US regulatory analysis: A methodology and interpretation. Review of Environmental Economics and Policy, 7(1), 23-46.**
Heal, G. (2010). Reflections—the economics of renewable energy in the United States. Review of Environmental Economics and Policy, 4(1), 139-154.**
Joskow, P. L. (2011). Comparing the costs of intermittent and dispatchable electricity generating technologies. The American Economic Review, 101(3), 238-241.**
Komor P. (2009). Wind and solar electricity: challenges and opportunities. Pew Center on Global Climate Change.*
Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Outlook 2014, Energy International Agency, April 2014.*
Parry, I., Veung, C., and Heine, D. (2015). How Much Carbon Pricing Is In Countries’ own Interests? The Critical Role Of Co-Benefits. Climate Change Economics, 6(04), 1550019.
4.3. The social costs of intermittency
Borenstein, S. (2012). The Private and Public Economics of Renewable Electricity Generation. Journal of Economic Perspectives, 26(1), 67-92.
Batalla-Bejerano, J., Costa-Campi, M.T., and E. Trujillo-Baute, E. (2016). Impacts of intermittent renewable generation on electricity system costs, Energy Policy, forthcoming.
Joskow, P. L. (2012). Creating a smarter US electricity grid. The Journal of Economic Perspectives, 26(1), 29-48.
Pollitt, M., and Anaya, K. (2015). Can current electricity markets cope with high shares of renewables ? A comparison of approaches in Germany, UK and the State of New York, ERPG WP 1519, Cambridge WP in Economics 1531.**
4.4. Energy fuel mix impact on energy prices
de Miera, G. S., del Río González, P., and Vizcaíno, I. (2008). Analyzing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain. Energy Policy, 36(9), 3345-3359.*
Frondel, M., Ritter, N., Schmidt, C. M., and Vance, C. (2010). Economic impacts from the promotion of renewable energy technologies: The German experience. Energy Policy, 38(8), 4048-4056.*
McConnell, D., Hearps, P., Eales, D., Sandiford, M., Dunn, R., Wright, M., and Bateman, L. (2013). Retrospective modeling of the merit-order effect on wholesale electricity prices from distributed photovoltaic generation in the Australian National Electricity Market. Energy Policy, 58, 17-27.
Seel, J., Barbose, G. L., and Wiser, R. H. (2014). An analysis of residential PV system price differences between the United States and Germany. Energy Policy, 69, 216-226.
Tveten, Å. G., Bolkesjø, T. F., Martinsen, T., and Hvarnes, H. (2013). Solar feed-in tariffs and the merit order effect: a study of the German electricity market. Energy Policy, 61, 761-770.*
Lisky, M., and Vehviläinen, I. (2016). Gone with the wind ? An empirical analysis of the renewable energy rent transfer, mimeo.
Würzburg, K., Labandeira, X., and Linares, P. (2013). Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria. Energy Economics, 40, S159-S171.
5. Energy policy assessment on supply and demand sides: Case studies
Baker, E., Fowlie, M., Lemoine, D., and Reynolds, S. S. (2013). Revised version published in the Annual Review of Resource Economics. Annual Review of Resource Economics, 5(1), 397-426.
Benthem, A.. (2015). Energy Leapfrogging, Journal of the AERE.
Borenstein, S. (2008). The market value and cost of solar photovoltaic electricity production. Center for the Study of Energy Markets University of California Energy Institute.
Davis, L. (2016). The environmental cost of global fuel subsidies, Energy Journal, forthcoming.
Davis, L. (2014). The Economic Cost of Global Fuel Subsidies. American Economic Review, 104(5), 581-85.
de Miera, G. S., del Río González, P., and Vizcaíno, I. (2008). Analyzing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain. Energy Policy, 36(9), 3345-3359.
Di Maria, C., Lange, I., and Van der Werf, E. (2014). Should we be worried about the green paradox? Announcement effects of the acid rain program. European Economic Review, 69, 143-162.
Fowlie, M., Greenstone, M, and Wolfram, C. (2015). Are the Non-Monetary Costs of Energy Efficiency Investments Large? Understanding Low Take-up of a Free Energy Efficiency Program, Energy Institute at Haas WP 256.
Frondel, M., Ritter, N., Schmidt, C. M., and Vance, C. (2010). Economic impacts from the promotion of renewable energy technologies: The German experience. Energy Policy, 38(8), 4048-4056.
Glaeser E. L., and Kahn M. E. (2010). The greenness of cities: carbon dioxide emissions and urban development. Journal of Urban Economics, 67(3), 404-418.
Hitaj, C. (2013). Wind power development in the United States. Journal of Environmental Economics and Management, 65(3), 394-410.
Joskow, P. L. (2011). Comparing the costs of intermittent and dispatchable electricity generating technologies. The American Economic Review, 101(3), 238-241.
Klier, T., and Linn, J. (2013). Fuel prices and new vehicle fuel economy—Comparing the United States and Western Europe. Journal of Environmental Economics and management, 66(2), 280-300.
Lemoine, D. (2013). Green expectations: Current effects of anticipated carbon pricing. University of Arizona Department of Economics Working Paper, (13-09) (SSRN 2247736).
McConnell D., Hearps P., Eales D., Sandiford M., Dunn R., Wright M. and Bateman, L. (2013). Retrospective modeling of the merit-order effect on wholesale electricity prices from distributed photovoltaic generation in the Australian National Electricity Market. Energy Policy, 58, 17-27.
Myers E., Are Home Buyers Myopic ? Evidence from Capitalization of Energy Costs, Energy Institute@ Haas, WP # 273, January 2017.
Rintamaki T., A. Siddiqui and A. Salo. (2017). Does renewable energy generation decrease the volatility of electricity prices ? An analysis of Denmark and Germany Energy Economics 62, 270-282.
Seel, J., Barbose, G. L., and Wiser, R. H. (2014). An analysis of residential PV system price differences between the United States and Germany. Energy Policy, 69, 216-226.
Small, K. A. (2012). Energy policies for passenger motor vehicles. Transportation Research Part A: Policy and Practice, 46(6), 874-889.
Tveten, Å. G., Bolkesjø, T. F., Martinsen, T., and Hvarnes, H. (2013). Solar feed-in tariffs and the merit order effect: a study of the German electricity market. Energy Policy, 61, 761-770.
Zivin, J., Kotchen, M., and Mansur, E. (2014). Spatial and Temporal Heterogeneity of Marginal Emissions: Implications for Electric Cars and Other Electricity-Shifting Policies, Journal of Economic Behavior and Organization 10, Part A, 248-268.
Programs
Programs where the course is taught: