Elisa Lanzi

The Impact of Temperature Change on Energy Demand: A Dynamic Panel Analysis

This paper presents an empirical study of energy demand, in which demand for a series of energy goods (Gas, Oil Products, Coal, Electricity) is expressed as a function of various factors, including temperature. Parameter values are estimated econometrically, using a dynamic panel data approach. Unlike previous studies in this field, the data sample has a global coverage, and special emphasis is given to the dynamic nature of demand, as well as to interactions between income levels and sensitivity to temperature variations. These features make the model results especially valuable in the analysis of climate change impacts. Results are interpreted in terms of derived demand for heating and cooling. Non-linearities and discontinuities emerge, making it necessary to distinguish between different countries, seasons, and energy sources. Short- and long-run temperature elasticities of demand are estimated.

Seasonal temperature variations and energy demand

This paper presents an empirical study of the relationship between residential energy demand and temperature. Unlike previous studies in this field, the data sample has a global coverage and special emphasis is given to the heterogeneous response of different regions and to the contrasting effects on energy demand for cooling and heating purposes. To account for this we distinguish between different regions, seasons, and energy sources. Short- and long-run temperature demand elasticities are estimated. These features make the model results especially valuable in the analysis of climate change impacts as they provide an empirical basis for the study of the impact of climate change on energy demand. To illustrate the potential of the results as a basis for the study of climate change impacts, the estimates are used in a simple exercise that projects changes in energy demand due to temperatures increase in 2085.

Efficiency Improving Fossil Fuel Technologies for Electricity Generation: Data Selection and Trends

This paper studies innovation dynamics in efficiency improving electricity generation technologies as an important means of mitigating climate change impacts. Relevant patents are identified and used as an indicator of innovation. We find that patenting in efficiency improving technologies has mostly been stable over time, with a recent decreasing trend. We also find that majority of patents are first filed in OECD countries and only then in non-OECD or BRIC countries. Conversely, non-OECD and BRIC countries apply for patents that are mostly marketed domestically. This result shows that there is significant technology transfer in the field of efficiency improving technologies for electricity production. This flow of know-how is likely to contribute to mitigation of greenhouse gases emissions in emerging economies in the long run.

Adapting to Climate Change: Costs, Benefits, and Modelling Approaches

This paper provides a summary and a critical survey of the methodologies and results of the literature on the economics of adaptation. We divide the literature into two broad areas of research. First, we examine the studies that analyse adaptation from a bottom-up perspective. Second, we introduce the studies that examine adaptation using a top-down approach. The first group of studies investigates cost and benefits of adaptation at the sectoral, regional and global level. The second group includes theoretical literature on the relationship between mitigation and adaptation as well as emerging insights from some global Integrated Assessment Models (IAMs), which have recently been extended to include adaptation as an alternative and complementary policy option to mitigation. This latter development has raised issues that represent new challenges for the research community. In particular, understanding how to integrate the vast amount of information provided by the bottomup literature on climate change impacts and adaptation into global

Modeling climate change feedbacks and adaptation responses: recent approaches and shortcomings

This paper offers a critical review of modeling practice in the field of integrated assessment of climate change and ways forward. Past efforts in integrated assessment have concentrated on developing baseline trajectories of emissions and mitigation scenario analyses. A key missing component in Integrated Assessment Models (IAMs) is the representation of climate impacts and adaptation responses. In this paper, we identify key biases that are introduced when climate impacts and adaptation responses are omitted from the analysis and review the state of modeling studies that attempt to capture these feedbacks. A common problem in these IAM studies is the lack of connection with empirical studies. We therefore also review the state of the empirical work on climate impacts and identify ways that this connection could be improved.

The FEEM Sustainability Index: An Integrated Tool for Sustainability Assessment

The FEEM Sustainability Index (FEEM SI) proposes an integrated methodological approach to quantitatively assess sustainability performance across countries and over time. Three are the main features of this approach: (1) the index considers sustainability based on economic, environmental and social indicators simultaneously; (2) the framework used to compute the indicators, i.e. a Computable General Equilibrium (CGE) model, allows to generate projections on the future evolution of sustainability; and (3) the methodology used for the normalisation and aggregation of the indicators delivers a unique and comprehensive measure of sustainability. These features along with the multi-regional nature of the CGE model consent to perform policy evaluations and sustainability assessments for different countries or regions in the world. This chapter offers a methodological overview of the FEEM SI approach. To illustrate the potential of the methodology for the measurement of sustainability, the chapter also illustrates results from a climate policy scenario. In the mitigation scenario considered Annex I and Non-Annex I countries taking action towards climate change achieve the lower end of the pledges proposed at the 15th UNFCCC Conference of the Parties in Copenhagen. For countries putting into practice the policy, the environmental sphere more than offsets the related costs (economic pillar), leading to an overall improvement in sustainability. At world level, the outcome is positive even though carbon leakage in countries that are not acting reduces the effectiveness of the policy and the sustainability performance.

The use of indicators for monitoring and evaluation of adaptation: lessons from development cooperation agencies

In the context of scaled-up funding for climate change adaptation, it is more important than ever to guarantee value for money of adaptation interventions. Robust monitoring and evaluation (M&E) ensures that the prospective benefits of interventions are being realized and it helps to improve the design of future projects and programmes. This paper is the first empirical assessment of M&E frameworks used by development cooperation agencies for projects and programmes with adaptation-specific or adaptation-related components. It analyses documents for 106 projects across 6 bilateral development agencies. The analysis finds that Result Based Management, the Logical Framework Approach and the accompanying logframe are the most common M&E approaches used for adaptation. In applying these approaches, the long-term perspective of most adaptation initiatives means that it is particularly important to clearly differentiate between outcomes, outputs and activities. In addition, M&E frameworks for adaptation should combine qualitative, quantitative and binary indicators. Baselines for these indicators should be specified to improve understanding of progress. Significant challenges remain in relation to dealing with shifting baselines, attribution and time lags between interventions and outcomes.

Quantifying Sustainability: A New Approach and World Ranking

This paper proposes a new tool to assess sustainability and make the concept of sustainable development operational. It considers its multi-dimensional structure combining the information deriving from a selection of relevant sustainability indicators belonging to economic, social and environmental pillars. It reproduces the dynamics of these indicators over time and countries. Then, it aggregates these indicators using a new approach based on Choquet’s integrals. The main novelties of this approach are indeed: (i) the modelling framework, a recursive-dynamic computable general equilibrium used to calculate the evolution of all indicators over time throughout the world, and (ii) the aggregation methodology to reconcile them in one aggregate index to measure overall sustainability. The former allows capturing the sector and regional interactions and higher-order effects driven by background assumptions on relevant variables to depict future scenarios. The latter makes it possible to compare sustainability performances, under alternative scenarios, across countries and over time. Main results show that the current sustainability at world level differs from what the traditional measure of well-being, the GDP, depicts, highlighting the trade-offs among different components of sustainability. Moreover, in the next decade a slight decrease in world sustainability may occur, in spite of an expected increase in world domestic product. Finally, dedicated policies increase overall sustainability, showing that social and environmental benefits may be greater than the correlated economic costs.

The Impact of Climate Change on Energy Demand: A Dynamic Panel Analysis

This paper presents an empirical study of energy demand in which demand for a series of energy goods (Gas, Oil Products, Coal, Electricity) is expressed as a function of various factors, including temperature. Parameter values are estimated econometrically, using a dynamic panel data approach. Unlike previous studies in this field, the data sample has a global coverage, and special emphasis is given to sensitivity to temperature variations. These features make the model results especially valuable in the analysis of climate change impacts. Results are interpreted in terms of derived demand for heating and cooling. Nonlinearities and discontinuities emerge, making necessary to distinguish between different regions, seasons, and energy sources. Short and long run temperature elasticities of demand are estimated.Climate change impacts on human life have well defined and different origins, nevertheless in the determination of their final effects, especially those involving social economic responses, interactions among impacts are likely to play an important role.

Can climate policy enhance sustainability

Implementing an effective climate policy is one of the main challenges for the future. Curbing greenhouse gas emissions can prevent future irreversible impacts of climate change. Climate policy is therefore crucial for present and future generations. Nonetheless, one may wonder whether future economic and social development could be harmed by climate policy. This paper addresses this question by examining recent developments in international climate policy and considering different levels of cooperation that may arise in light of the outcomes of the Conference of the Parties held in Doha. The paper analyses how various climate policy scenarios would enhance sustainability and whether there is a trade-off between climate policy and economic development and social cohesion. This is done by using a new comprehensive indicator, the FEEM Sustainability Index (FEEM SI), which aggregates several economic, social, and environmental indicators. The FEEM SI is built into a recursive-dynamic computable general equilibrium model of the world economy, thus offering the possibility of projecting all indicators into the future and of delivering a perspective assessment of sustainability under different future climate policy scenarios. We find that the environmental component of sustainability improves at the regional and world level thanks to the implementation of climate policies. Overall sustainability increases in all scenarios since the economic and social components are affected negatively yet marginally. This analysis does not include explicitly climate change damages and this may lead to underestimating the benefits of policy actions. If the USA, Canada, Japan and Russia did not contribute to mitigating emissions, sustainability in these countries would decrease and the overall effectiveness of climate policy in enhancing global sustainability would be offset.