PP 2018-09
Evolution of EROIs of Electricity Until 2050: Estimation and Implications on Prices

Adrien Fabre

The EROI –for Energy Returned On Invested– of an energy technology measures its ability to provide energy efficiently. Previous studies draw a link between the affluence of a society and the EROI of its energy system, and show that EROIs of renewables are lower than those of fossil fuels. Logically, concerns have been expressed that system-wide EROI may decrease during a renewable energy transition. First, I explain theoretically that the EROIs of renewables themselves could then decrease as energy-efficient fossil fuels would be replaced by less energy-efficient renewables in the supply-chain. Then, using the multiregional input-output model THEMIS, I estimate the evolution of EROIs and prices of electric technologies from 2010 to 2050 for different scenarios. Global EROI of electricity is predicted to go from 12 in 2010 to 11 in 2050 in a business-as-usual scenario, but down to 6 in a 100% renewable one. Finally, I study the economic implication of a declining EROI. An inverse relation between EROI and price is suggested empirically, even though theory shows that both quantities may move in the same direction.

PP 2018-08

The Role of Individual Preferences in Explaining the Energy Performance Gap

Salomé Bakaloglou – Dorothée Charlier

The aim of this research is to understand the role of socio-economic characteristics and individual preferences to explain the energy performance gap in the residential sector. The gap reflects the difference between theoretical energy consumption of home assessed by engineering models and real energy consumption. Using the ratio of the two consumptions as a measure of the gap, we perform a quantile regression to tease out the effects of preferences on the entire distribution of the energy performance gap spectrum instead of focusing on the conditional average. As a result, this research provides an original contribution: depending on the sense of the gap, our findings suggest that some significant drivers are individual preferences for comfort over economy, explaining until 12% of the gap variability, and poverty. In such a context, some warnings to public authorities are provided regarding the issues of rebound effect and household welfare.

PP 2018-07

Competitive Advantage in the Renewable Energy Industry: Evidence from a Gravity Model

Published in Renewable energy (2018), 131, 472-481.

Onno Kuik – Frédéric Branger – Philippe Quirion

Pioneering domestic environmental regulation may foster the creation of new eco-industries. These industries could benefit from a competitive advantage in the global market place. This article examines empirical evidence of the impact of domestic renewable energy policies on the export performance of renewable energy products (wind and solar PV). We use a gravity model of international trade with a balanced dataset of 49 (for wind) and 40 (for PV) countries covering the period 1995-2013. The stringency of renewable energy policies are proxied by installed capacities. Our econometric model shows evidence of competitive advantage positively correlated with domestic renewable energy policies, sustained in the wind industry but brief in the solar PV industry. We suggest that the reason for the dynamic difference lies in the underlying technologies involved in the two industries.

PP 2018-06

From residential energy demand to fuel poverty : income-induced non-linearities in the reactions of households to energy price fluctuations

Forthcoming in The Energy Journal.

Dorothée Charlier – Sondès Kahouli

In this paper, we propose a panel threshold regression (PTR) model to empirically test the sensitivity of French households to energy price fluctuations – as measured by the elasticity of residential heating energy prices – and to analyze the overlap between their income and fuel poverty profiles. The PTR model allows to test for the non-linear effect of income on the reactions of households to fluctuations in energy prices. Thus, it can identify specific regimes differing by their level of estimated price elasticities. Each regime represents an elasticity-homogeneous group of households. The number of these regimes is determined based on an endogenously PTR-fixed income threshold. Thereafter, we analyze the composition of the regimes (i.e. groups) to locate the dominant proportion of fuel-poor households and analyse their monetary poverty characteristics.
Results show that, depending on the income level, we can identify two groups of households that react differently to residential energy price fluctuations and that fuel-poor households belong mostly to the group of households with the highest elasticity. By extension, results also show that income poverty does not necessarily mean fuel poverty.
In terms of public policy, we suggest focusing on income heterogeneity by considering different groups of households separately when defining energy efficiency measures. We also suggest paying particular attention to targeting fuel-poor households by examining the overlap between fuel and income poverty.

PP 2018-05

The vertical and horizontal distributive effects of energy taxes: A case study of a French policy

Thomas Douenne

This paper proposes a micro-simulation assessment of the distributional impacts of the French carbon tax. It shows that the policy is regressive, but could be made progressive by redistributing the revenue through a flat-recycling. However, it would still generate large horizontal distributive effects and harm an important share of low-income households. The determinants of the tax incidence are characterized precisely, and alternative targeted transfers are simulated on this basis. The paper shows that given the importance of unobserved heterogeneity in the determinants of energy consumption, horizontal distributive effects are much more difficult to tackle than vertical ones.

PP 2018-04

Energy efficiency as a credence good: A review of informational barriers to building energy savings

Louis Gaëtan Giraudet

Information problems have early been suspected to be the main barrier to energy-efficiency investment. I review the vast yet piecemeal research that has been carried out since. Focusing on energy efficiency in buildings, I organize the review around the concept of credence good: just like that of auto repairs or taxi rides, the quality of energy-efficiency measures is never fully revealed to the buyer; as a result, it is subject to multiple information asymmetries. My first contribution is to distinguish symmetric-information problems from information asymmetries. The former arise when information is either incomplete or imperfect, but equally shared by contracting parties; as non-market failures, these can be addressed by technological progress and insurance markets. My second contribution is to give structure to the information asymmetries associated with energy efficiency by disentangling screening, signalling, moral hazard and price discrimination within a variety of contractual relationships involving buyers and sellers, owners and renters, and borrowers and lenders. I find evidence of information asymmetries to be compelling in landlord-tenant relationships, unclear in real estate markets, and scarce in retrofit contracting and financing. I conclude by discussing the intricacies between informational and behavioural problems in energy-efficiency decisions.

PP 2018-03

A preliminary assessment of the indicators for Sustainable Development Goal (SDG) 14 “Conserve and sustainably use the oceans, seas and marine resources for sustainable development”

Laura Recuero Virto

The SDGs are intended to address sustainable development processes in both developed and developing countries, and to facilitate action at all levels and with all actors, including government, civil society, the private sector and the science community to strengthen the capacity of the State to achieve the desired outcomes. The SDG 14 “Conserve and sustainably use the oceans, seas and marine resources for sustainable development” covers, among other features, economic pressures on the marine environment, as well as the Small Island Developing States (SIDS) and coastal communities since they are particularly impacted by the economic pressures and dependent on the oceans in socio-economic terms. This paper reviews the rational for the SDG 14, as well as the framework for the SDG 14 indicators including (i) the basic concepts, i.e. the role of uncertainty, irreversibility and thresholds in the marine context, the multidimensionality of the SDG 14 indicators, and how to ensure effective SDG 14 monitoring and implementation through SMART SDG 14 targets; (ii) synergies and trade-offs among the SDG 14 targets and between SDG 14 and other SDGs targets, and how to track progress on policy coherence at the national level; (iii) synergies between SDG 14 indicators, and ocean-related Millennium Development Goals (MDGs) 7 and Multilateral Environmental Agreements (MEAs) targets and indicators; and (iv) the role of non-traditional sources of data such as big data. In addition, some preliminary indicators for the SDG 14 at the global and national scales (France) are also explored. As a result of this analysis, some areas for future research in the framework of SDG 14 indicators are proposed, i.e. building on the frontiers of ocean science, the development of innovative approaches for data collection, the development of common approaches in valuing marine ecosystem services and national accounting, the provision of incentives for best practice and peer-learning, the harmonisation of measurement methodologies and the selection of SDG 14 indicators according to the geographical level of intervention.

PP 2018-02

Do Entrepreneurship Policies Work? Evidence from 460 Start-Up Program Competitions Across the Globe

Geoffrey Barrows

Many organizations around the world implement programs designed to encourage entrepreneurship, including grant prize awards, accelerator programs, incubators, etc. The goal of these programs is to supply entrepreneurs with early-stage support and visibility to help develop ideas and attract capital; but, if capital markets are efficient, good business ideas should find funding anyways. In this paper, I present evidence from the first global-scale, quasi-experimental study of whether entrepreneurship programs improve outcomes for start-up firms. I employ a regression discontinuity design to test whether winners of start-up program competitions perform better ex-post than losers, where the threshold rank for winning the competition provides exogenous variation in program participation. With 460 competitions across 113 countries and over 20,000 competing firms, I find that winning a competitions increases the probability of firm survival by 64%, the total amount of follow-on financing by $260,000 USD, and total employment by 47%, as well as other web-based metrics of firm success. Impacts are driven by medium-size prize competitions, and are precisely estimated both in countries where the costs of starting a business are low and where these costs are high. These results suggest that capital market frictions indeed prohibit start-up growth in many parts of the world.

PP 2018-01

On the power of indicators: how the choice of the fuel poverty measure affects the identification of the target population

Forthcoming in Applied Economics.

Florian Fizaine – Sondès Kahouli

We propose a critical analysis of fuel poverty indicators and demonstrate that choosing a given fuel poverty indicator and, in particular, its threshold level, is central to the identification of the fuel-poor population.
First, we conducted an inter-indicator analysis to show how profiles of fuel-poor households vary depending on the indicator selected. More specifically, after identifying groups of affected house- holds using a set of objective and subjective measures, we designed a multidimensional approach based on a combination of complementary methods, namely, a multiple correspondence analysis and a hierarchical and partitioning clustering analysis to analyse their characteristics. Through this framework, we highlight the difficulty of identifying a “typical profile” for fuel-poor households because of the significant variability in their characteristics and we show that the composition of the population depends on the choice of the indicator.
Second, we applied an intra-indicator analysis using two objective expenditure-based indicators with thresholds. In particular, we conducted a sensitivity analysis based on a logit model including variables describing household and dwelling characteristics. We show that the profiles of fuel-poor households as well as the drivers of fuel poverty vary considerably with the chosen threshold level.
Given these findings, we stress the need to review how we currently rely on conventional fuel poverty indicators to identify affected groups and give some recommendations.

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