Robert N. McRae

The robustness of a translog model to describe regional energy demand by Canadian manufacturing industries

Abstract The use of translog cost functions to represent the cost of production and/or the cost of energy has become quite commonplace in the last few years. Increasingly, the econometric results of such production/energy studies are being used for policy analysis. In light of this use, we address the question of the robustness of the translog representation during a period of rapidly changing relative energy prices. Since Canadian manufacturing data are available by region as well as nationally, there are several different methods of arranging the data for estimation: the data could be national, regional or pooled-regional. Using the Canadian data we explore the sensitivity of the translog representation of the production/energy model under national, regional and pooled data sets. The different methods of data arrangement yield significantly different parameter estimates.

The National Energy Conflict

The National Energy Program has become the focal point of the federal-provincial conflict over energy pricing and revenue sharing. The paper uses a regionally-based model of the Canadian energy system to calculate the effects of the NEP on revenue distribution and on net oil imports. The budget plus the Alberta production cutbacks is shown to be inferior to the budget, especially for Albertans, and much inferior to a compromise that raises oil prices by an additional

Resolving the Energy Conflict: From the National Energy Program to the Energy Agreements

2 per barrel in 1981, 1982, and 1983.

Supply oriented macroeconomics: The MACE model of Canada

On September 1, 1981, a memorandum of agreement was signed by the Prime Minister of Canada and the Premier of Alberta, outlining key features of energy pricing and taxation between that date and December 31, 1986. Parallel agreements were signed with British Columbia on September 24th and with Saskatchewan, the third main producing province, on October 26th. Never before has either level of government committed itself to such a detailed energy plan, especially for such an extended period. The fact that the agreements are between governments with diverging interests has meant that many more features of energy pricing and taxation are spelled out and committed than would be the case with a policy document or energy plan issued by one government on its own. The level of commitment is also higher, as the documents will probably be regarded by succeeding governments as binding, subject to change only by agreement. Energy users and energy producers thus face a clearer and more certain set of prices and taxation arrangements than ever before, although the background of world events and future energy costs remains as uncertain as it has ever been. The energy agreements ended ten months of conflict following the introduction of the federal National Energy Program (NEP) on October 28, 1980, and are the first energy agreements between the federal and provincial governments since the world oil price more than doubled in 1979-80.

Stabilization, Allocation and the 1970s Oil Price Shocks

Abstract This paper describes MACE, a two sector annual nacroeconometric model of the Canadian economy. The sectoral breakdown highlights the role of energy in a small open economy. In addition, the model emphasizes the supply side, which includes both the evolution of normal output and the determination of the level of current output as the consequence of an explicit operating rate decision by firms. The bulk of the paper outlines the approach used to model supply side considerations, since this is where most of the models innovative features lie.

Primary energy demand in Canada

The stabilization and allocation effects of two types of policy adopted by Canada in the 1970s to shelter the domestic economy from the 1973–74 and 1979–80 oil shocks are analyzed in this paper. After outlining the model, estimates of the effects of alternative Canadian energy pricing strategies are presented. The stabilization and allocation effects of the relatively expansionary public spending policies in Canada during the world industrial recession after the first oil shock are compared.

The Interdependence of Monetary, Debt and Fiscal Policies in an International Setting

Abstract A regional energy demand model for Canada is described and its properties analysed. The model contains a consistent set of estimated equations that describe the end-use demand for energy within the major consuming regions. A thermal electric submodel is also described which determines the primary energy required to generate thermal electricity within each of the regions. Using the historical model structure together with forecasts of the exogenous variables, a base-case forecast of energy demand is produced. The base-case results are compared to the results of sensitivity experiments and policy experiments involving price changes for crude oil and natural gas.

Canadian energy development under the free trade agreement

There are a number of theoretical and empirical frameworks available for assessing the economic interdependence of nations. The theoretical models are noted for the variety of their assumptions and a corresponding dispersion of results. Most of the empirical frameworks are based entirely on international transmission through trade flows.1 There have been studies of international capital movements, but usually not in a framework wherein the interaction of trade and capital flows can be assessed. To our knowledge, the linked RDX2 — MPS system is the only mechanism currently available for tracing international repercussions in the full context of trade, capital flows and migration.2 The two component models, and the nature of their linkage, have been described elsewhere, and are summarised briefly in the Appendix (p. 167), so that it is only necessary to note here that the two models are reasonably comparable in terms of aggregation, and that both have well-developed financial sectors, and a variety of channels whereby the financial and real sectors influence one another.

Blueprint for Future Energy Policy? A Review of Energy and Canadians into the 21st Century

Abstract The Free Trade Agreement between Canada and the USA endorses the status quo as far as energy trade is concerned; but it provides an important guarantee of future access, as far as Canada is concerned. This is especially critical for natural gas and electricity exports, since they are expected to increase. This article will demonstrate that an increase in energy exports benefit not only the energy sector but also provide favourable macroeconomic responses.

Oil and gas in Canada : the effects of domestic policies and world events

This review/article examines the report of the Energy Options process, ENERGY AND CANADIANS INTO THE 21ST CENTURY. The report lists seven inter-related principles which are to be used by governments to establish a coherent framework for energy policy. The report does not tackle in much detail current energy issues, nor does it provide much insight into energy matters in the 21st century--despite the title. Nevertheless, if governments abide by the principles enunciated in the report, I believe future energy policies will be less contentious than they were in the past.