Patrik Söderholm

Pricing environmental externalities in the power sector: ethical limits and implications for social choice

Abstract During the last decade, a series of valuation studies have made attempts at estimating the external environmental costs of various power generation sources. The purposes of this paper are: (a) to explore some of the ethical limits of the economic valuation of environmental impacts; and (b) to analyze what the implications are of these limits for the social choice between different electric power sources. Environmental valuation based on welfare economic theory builds on restrictive behavioral foundations and can only partly model moral values, although such values are an essential part of peoples preference towards the environment. In addition, public preferences are seldom exogenously given as is commonly assumed in economic theory, but are instead formed in public discourse. For this reason, the range of electricity externalities where economic valuation (and thus cost–benefit analysis) should be applied is likely to be narrower than often assumed. After analyzing the scope, methodology and the results of the so-called ExternE project, the paper concludes that many power generation externalities are either inherently ‘new’ or inherently ‘complex’. In these cases, the initial challenge lies not in ‘discovering’ private preferences, but in specifying the conditions for public discourse over common ways of understanding what the pertinent issues are about. This implies that research on the environmental externalities of power generation must, in addition to refining the theory and the applications of existing non-market valuation techniques, also address the instruments and content of political and moral debate.

Convergence of carbon dioxide emissions : a review of the literature

The objective of this paper is to review previous research on convergence of carbon dioxide emissions among countries. We discuss the key findings in this work, how the choices of model, data, statistical tests, etc. influence the results, and highlight some policy implications. The empirical research on convergence in per capita carbon dioxide emissions shows some evidence of convergence between developed (OECD) countries, while at the global level there appear to be relatively persistent gaps or divergence. These results are however sensitive to the choice of econometric approach and data set (e.g., the length of the time series). Still, the empirical basis for an egalitarian rule of equal per capita emissions in the design of global climate policy is not solid; it ignores the specific structural characteristics of countries such as climate, natural resource endowments, etc. The analysis therefore points to a need for more in-depth analyses of the structural determinants of carbon intensity (productivity) at the country level, as well as to additional research on the economic consequences of different types of equity principles (including combinations of such principles).

The Deliberative Approach in Environmental Valuation

The purpose of this article is to discuss the role of deliberative research methods in environmental policy decision-making. The theory of neoclassical environmental economics is basis on economic ...

Fuel flexibility in the West European power sector

This paper analyzes the role of fuel flexibility in the West European power generation sector. Fuel flexibility is recognized to have two important features. It improves the power sectors ability to respond to fuel supply interruptions, and it permits short-run price-induced interfuel competition. The security of supply issue is examined by assessing the ability of the West European power sector to respond to an interruption in gas imports. This ability is found to be high. Especially the use of oil in dual- and multi-fired plants provides a significant buffer against a potential gas supply cut. In an attempt to measure the degree of price-induced interfuel substitution in West European power generation two flexible cost functions are employed; the Translog and the Generalized Leontief. The cross-price elasticities of fossil fuel demand generated by these indicate notable short-run interfuel substitution in Western Europe, in particular between oil and gas. Since emerging competitive electricity and gas markets normally induce utilities to reduce fuel costs through improved fuel contracting, short-run interfuel substitution is likely to remain significant also in the future. This has important implications for European energy markets and policies.

A note on inter-country differences in waste paper recovery and utilization

Countries worldwide express waste paper recycling targets in terms of recovery and utilization rates. The main purpose of this paper is to identify and analyze the most important determinants of inter-country differences in these waste paper rates. By employing two regression models and using data for 89 and 81 countries, respectively, the paper concludes that relative waste paper recovery and use are largely market-determined, and depend thus on long-standing economic factors such as population intensity and competitiveness in the world market for paper and board products. We also find evidence that supports the conjecture that rich countries tend to recover relatively more waste paper than is the case in low-income countries, reflecting the higher demand for waste management and environmental policies in more developed economies. As recovery and utilization rates are determined largely by long-standing economic and demographic characteristics the degree of policy flexibility in affecting these rates may be limited. In particular, an ambitious utilization rate target may be very costly to enforce as it can conflict with existing trade patterns of paper and board products as well as with other environmental goals. Additional policy targets may, therefore, be desirable, especially since paper recycling is motivated primarily by environmental concerns and seldom is a benign activity in itself.

Fossil fuel flexibility in west European power generation and the impact of system load factors

This paper analyzes short-run interfuel substitution in west European power generation, and the impact of system load factors on fossil fuel choice. The problems are studied within a restricted translog cost share model. The paper concludes that interfuel substitution in existing power plants is substantial, especially that between oil and gas. This is consistent with the notion that short-run fuel substitution takes place in dual- or multi-fired plants, by switching load between different single-fired plants, and by some conversions of power plants to be able to burn alternate fuels. The empirical investigation also indicates that the system load factor is a notable determinant of fossil fuel choices in west Europe, and the paper ends with an assessment of the fuel consequences of some load management schemes in the region.

Estimating and decomposing the rate of technical change in the Swedish pulp and paper industry: A general index approach

Abstract The purpose of this paper is to analyse the rate and the impacts of technical change in the Swedish pulp and paper industry. In contrast to earlier research on this industry we replace the standard time trend with time-specific dummy variables enabling the estimation and decomposing of a general index of technical change. The analysis is made within a Translog cost function model, which is estimated using a panel data set with observations across individual paper and board mills over the time period 1974–1994. Our results indicate that the highest rates of technical change have generally occurred during the latter part of this period. Pure technical change is the primary component that has directed technical change over the entire time period. We also find evidence of non-neutral technical change. Energy use has been stimulated by technical improvements while labour use has been discouraged. Also, technical change has had wastepaper and woodpulp using impacts. However, the magnitudes of these latter impacts are relatively small, implying that the increase in wastepaper use during the last decades has mainly been stimulated by relative price changes.

Fuel choice in West European power generation since the 1960s

The purpose of the paper is to analyse the economic and political factors that have shaped West European fuel-use in power generation since the 1960s. The historical analysis concludes that political and institutional constraints have had a huge impact on fuel choice, especially on the construction of new plants. The influence of politics has, however, changed over time — away from direct intervention towards regulation of decentralised markets. Further, the prospects for reactivating large-scale projects have become limited, and, as a result, the refurbishing and increased utilisation of existing plants, as well as conversions of plants to new fuels, soared in the 1980s and the early 1990s. Uncertainty about future fuel prices, few technical improvements in new plants, siting problems and stringent environmental regulations for new plants explain this development. Finally, the short-run flexibility of the Western European power sector has improved since the 1970s, something which has important implications for the electricity sectors and fuel markets.

The role of pilot and demonstration plants in technological development: synthesis and directions for future research

Pilot and demonstration plants (PDPs) play important roles in technological development. They represent bridges between basic knowledge generation and technological breakthroughs on the one hand, and industrial application and commercial adoption on the other. The objectives of this article are to synthesise and categorise existing research on PDPs, as well as to suggest an agenda for future research. We review the PDP phenomena in three literature streams: engineering and natural science research, technology and innovation management, and innovation systems. The analysis highlights clear differences in e.g. conceptions of system boundaries and what the literature streams seeks to accomplish, but also similarities such as the key ideas of using PDPs for technology scale-up and uncertainty reduction.

Structural changes in Swedish wastepaper demand: A variable cost function approach

The primary purpose of this paper is to analyse the short-run price responsiveness of wastepaper demand in Sweden for four different paper and board products, as well as any structural changes in demand behaviour for these products over time. The analysis is done within a variable Translog cost function model, and we employ data for individual paper and board mills over the time period 1974-1994. The results suggest that the short-run own-price sensitivity of waste paper demand is relatively high compared to those of other input factors, and it has also tended to increase over time for some of the paper products. In addition, wastepaper demand has also become more sensitive to changes in energy prices, and its use increases with increases in the price of energy. However, the relationship between wastepaper and woodpulp is more complex, and in many instances wastepaper and woodpulp are short-run complements. Overall this implies that price based recycling policies will be relatively successful in promoting wastepaper use, but they will not necessarily lead to the conservation of virgin forest resources.