Knut Einar Rosendahl

Does Improved Environmental Policy Enhance Economic Growth

The environmental impacts on an economy is studied over time using endogenous growth theory. Externalities from the environment on production are central in the analysis, and we examine whether an optimal path realizes more rapid economic growth. The paper focuses mainly on developing countries, where production is largely influenced by the environmental quality. The result of the analysis indicates that the economic growth rate may not depend on the internalization of the environmental externality, but rather on the internalization of the human capital externality. The level of economic activity, however, generally seems to depend on the internalization of both externalities.

Gains from Cartelisation in the Oil Market

In this paper we ask whether OPEC still gains from cartelisation in the oil market despite low producer prices and a modest market share. We apply two intertemporal equilibrium models of the global oil market; one consisting of a cartel and a fringe, and one describing a hypothetical competitive market. Comparing the outcome of these models we conclude that there are positive cartelisation gains of about 18 per cent in the oil market. In comparison with what Pindyck (1978) found for the 1970s this may be considered as quite modest. Moreover, we study whether the cartelisation gains to OPEC are altered by different moves by non-OPEC producers or consumer countries. Generally, we find that the relative cartelisation gains are unchanged. One exception is exploration activities, where we find that a major increase in non-OPEC reserves could remove the cartelisation gains to OPEC completely. In this case, the OPEC-countries could find themselves better off without the cartel.

Stabilization of CO 2 concentrations: mitigation scenarios using the Petro model

How to stabilize the CO2 concentration in the atmosphere depends crucially on baseline assumptions of future economic growth, energy demand and supply technologies, etc. In this paper we investigate how different assumptions about the future affect the necessary global policy measures to reach specific concentration targets for CO2. This is done by constructing two contrasting baseline scenarios within an intertemporal model of fossil fuel markets. We find that the appropriate CO2 emission and concentration paths for a given concentration target are very dependent on the baseline. Moreover, the impact on oil wealth for OPEC and other oil producers of stabilizing CO2 concentrations depends significantly both on the baseline and on whether the target is reached through carbon taxes or autonomous technological change in carbon-free energy sources. Carbon leakage through changes in international fossil fuel prices is found to be negligible and possibly negative.

Mitigation costs, distributional effects, and ancillary benefits of carbon policies in the Nordic countries, the U.K., and Ireland

This paper provides a survey of top-downmodelling analyses of carbon (C) abatementmitigation costs, distributional effectsand ancillary benefits in the Nordiccountries, the U.K. and Ireland. Specialemphasis is placed on the effects ofrevenue recycling and tax exemptions.According to the analyses, modestemissions reductions can be met withoutsubstantial costs for the countriesstudied, and a strong double dividend isfound in some analyses. The gross domesticproduct (GDP) or welfare effects are mostlyin the range of –0.4 and 1.2 percent whenC emissions are reduced by 20–30 per cent.Lowest costs are obtained without taxexemptions and with tax revenues used toreduce distortionary taxes. Ancillarybenefits are mostly in the range35–80/MgC-1, i.e., about the same order ofmagnitude as the mitigation costs.Distributional effects are mostlyregressive, unless the tax revenues aredistributed in lump-sum fashion with equaltransfers to each household.

Liberalizing the energy markets of Western Europe - a computable equilibrium model approach

Using a computable equilibrium model, the short-run effects of a radical liberalization of the West European natural gas and electricity markets are examined. In each model country, oil, gas, coal and electricity are produced, traded and consumed. There are world markets for oil and coal, and well-integrated competitive markets for gas and electricity in Western Europe. Gas and electricity are transported and traded across markets under the assumption of ideal third-party access regimes for transportation and limited capacities in the transportation networks. It is found that relative to the data year 1996, radical liberalization reduces the average end-user price of natural gas by around 20%, and the average end-user price of electricity by around 50%. The supply of electricity increases by around 20%, mainly due to increased coal power production. After such liberalization, coal power emerges with the largest market share of electricity production in Western Europe.

Price and welfare effects of emission quota allocation

We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market with heterogeneous electricity producers, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total emission target is fixed. This is particularly the case if output-based allocation (OBA) of quotas is used. Gas power production is then substantially higher than if quotas are grandfathered. Moreover, the welfare costs of attaining a fixed emission target are significantly higher. The numerical results for OBA are supported by a theoretical analysis, which offers some new results.

The Effects of Transport Regulation on the Oil Market: Does Market Power Matter?

Popular instruments to regulate consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel efficiency. Their impacts on oil consumption and price vary. One important factor is the market setting. We show that if market power is present in the oil market, the directions of change in consumption and price may contrast those in a competitive market. As a result, the market setting impacts not only the effectiveness of the policy instruments to reduce oil consumption, but also terms of trade and carbon leakage. In particular, we show that under monopoly, reduced oil consumption due to increased fuel efficiency will unambiguously increase the price of oil.

Health effects and social costs of particulate pollution – a case study for Oslo

This study analyses health damages from particulate pollution and the corresponding social costs. The analyses, which are based on transferring dose–response functions to Norway, is made within an integrated approach, where the economic impacts of the health damages are handled separately from the non‐economic welfare effects. We find that the social costs of health damages in Oslo are significant, and that the non‐economic welfare effects clearly dominate the cost figure.

Profitability of fossil-fuel production under different instruments in international climate policies

This article discusses how different climate policy instruments such as CO2 taxes and renewable energy subsidies affect the profitability of fossil-fuel production, given that a fixed global climate target shall be achieved in the long term. Within an intertemporal framework, the model analyses show that CO2 taxes reduce the short-term profitability to a greater extent than technology subsidies, since the competition from CO2-free energy sources does not become particularly noticeable until decades later. Due to, for example, the discounting of future revenues, most fossil-fuel producers prefer subsidies to their competitors rather than CO2 taxes. However, this conclusion does not apply to all producers. Oil producers outside OPEC lose the most on the subsidizing of CO2-free energy, while CO2 taxes only slightly reduce their profits. This is connected to OPECs role in the oil market, as the cartel chooses to reduce its extraction significantly in the tax scenario. The results seem to be consistent with the observed behaviour of important players in the climate negotiations.