Philipp M. Richter

Trade and the Environment: The Role of Firm Heterogeneity

This paper derives a new effect of trade liberalisation on the quality of the environment. We show that in the presence of heterogeneous firms the aggregate volume of emissions is influenced not only by the long-established scale effect, but also by a reallocation effect resulting from an increase in the relative size of more productive firms. We show how the relative importance of these effects, and hence the overall effect of trade liberalisation on the environment, is affected by the emission-intensity at the firm level: Aggregate emissions decrease when trade is liberalised if and only if firm-specific emission intensity decreases strongly with increasing firm productivity.

A Global Perspective on the Future of Natural Gas: Resources, Trade, and Climate Constraints

Natural gas plays an important role in the global energy system as an input to power generation, heating, and industry. This article identifies key drivers and uncertainties for natural gas markets in the coming decades. These include the availability of natural gas from conventional and unconventional sources, the role of international trade, and the impact of climate policies. We build on model-based research as well as an up-to-date survey of natural gas resource availability. We find that natural gas is an abundant fossil fuel and that the Asia-Pacific region will be most important in future global natural gas markets, especially under stringent international climate change mitigation. This means that an increasingly large share of future natural gas trade flows and infrastructure expansions will be directed to the Asia-Pacific region and that the role of liquefied natural gas will continue to increase globally. (JEL: C61, L71, Q33, Q37, Q54)

From Boom to Bust?: A Critical Look at US Shale Gas Projections

US shale gas production is generally expected to continue its fast rise. However, a cautious evaluation is needed. Shale gas resource estimates are potentially overoptimistic and it is uncertain to which extent they can be produced economically. Moreover, the adverse environmental effects of ever more wells to be drilled may lead to a fall in public acceptance and a strengthening of regulation. The objective of this paper is hence twofold: providing a critical look at current US shale gas projections, and investigating in a second step the implications of a less optimistic development by means of numerical simulation. In a world of declining US shale gas production after 2015, natural gas consumption outside the USA is reduced from its reference path by at least as much as US consumption. Trade flows are redirected, and the current US debate on LNG export capacity requirements becomes obsolete.

The Role of Natural Gas in a Low-Carbon Europe: Infrastructure and Regional Supply Security in the Global Gas Model

In this paper, we use the Global Gas Model to analyze the perspectives and infrastructure needs of the European natural gas market until 2050. Three pathways of natural gas consumption in a future low-carbon energy system in Europe are envisaged: i) a decreasing natural gas consumption, along the results of the PRIMES model for the EMF decarbonization scenarios; ii) a moderate increase of natural gas consumption, along the lines of the IEA (2012) World Energy Outlooks New Policy Scenario; and iii) a temporary increase of natural gas use as a bridge technology, followed by a strong decrease after 2030. Our results show that import infrastructure and intra-European transit capacity currently in place or under construction are largely sufficient to accommodate the import needs of the EMF decarbonization scenarios, despite the reduction of domestic production and the increase of import dependency. However, due to strong demand in Asia which draws LNG and imports from Russia, Europe has to increasingly rely on pipeline exports from Africa and the Caspian region from where new pipelines are built. Moreover, pipeline investments open up new import and transit paths, including reverse flow capacity, which improves the diversification of supplies. In the high gas consumption scenario similar pipeline links are realized-though on a larger scale, doubling the costs of infrastructure expansion. In the bridge technology scenario, the utilization rates of (idle) LNG import capacity can be increased for the short period of temporary strong natural gas demand.

Coal taxes as supply-side climate policy: a rationale for major exporters?

The shift away from coal is at the heart of the global low-carbon transition. Can governments of coal-producing countries help facilitate this transition and benefit from it? This paper analyses the case for coal taxes as supply-side climate policy implemented by large coal exporting countries. Coal taxes can reduce global carbon dioxide emissions and benefit coal-rich countries through improved terms-of-trade and tax revenue. We employ a multi-period equilibrium model of the international steam coal market to study a tax on steam coal levied by Australia alone, by a coalition of major exporting countries, by all exporters, and by all producers. A unilateral export tax has little impact on global emissions and global coal prices as other countries compensate for reduced export volumes from the taxing country. By contrast, a tax jointly levied by a coalition of major coal exporters would significantly reduce global emissions from steam coal and leave them with a net sector level welfare gain, approximated by the sum of producer surplus, consumer surplus, and tax revenue. Production taxes consistently yield higher tax revenues and have greater effects on global coal consumption with smaller rates of carbon leakages. Questions remain whether coal taxes by major suppliers would be politically feasible, even if they could yield economic benefits.

Shaking Dutch Grounds Won't Shatter the European Gas Market

The Netherlands have been a pivotal supplier in Western European natural gas markets in the last decades. Recent analyses show that the Netherlands would play an important role in replacing Russian supplies in Germany and France in case of Russian export disruption (Richter & Holz, 2015). However, the Netherlands have suffered from regular earthquakes in recent years that are related to the natural gas production in the major Groningen field. Natural gas production rates– that are politically mandated in the Netherlands – have consequently been substantially reduced, with an estimated annual production 30% below the 2013 level. We implement a realistically low production path for the next decades in the Global Gas Model and analyze the geopolitical impacts. We find that the diversification of the European natural gas imports allows spreading the replacement of Dutch gas over many alternative sources, with diverse pipeline and LNG supplies.There will be hardly any price or demand reduction effect. Even if Russia fails to supply Europe, the additional impact of the lower Dutch production is moderate. Again, alternative suppliers from various sources are able to replace the Dutch volumes. Hence, the European consumers need not to worry about the declining Dutch natural gas production and their security of supplies.