Electricity Investment in Liberalised Markets

The study looks at the dynamics of investment in power generation in liberalised electricity markets. It surveys the theoretical arguments and practical experience to date, with the aim of drawing out key messages, in particular in relation to the impact on the environment and on the expansion of the electricity system in developing countries.

Research contact Malcolm Keay

Environmental costs of restructuring the electricity sector in Mexico

The aim of this research is to simulate if the policy change “electricity reform”, which implies changes in ownership and competition, would affect the costs of externalities in Mexico. Electricity reform is defined in two ways. First is as a radical liberalization. The second is more realistic: to allow competition in the fossil fuel generation market, but keeping hydro and nuclear generation capacity in public hands. Externalities are defined as the unwanted emission of gases produced while electricity is generated. Two effects are analyzed. First is if the expected improvement in electricity firms’ productivity and efficiency leads to a higher level of emissions. Second is if liberalization changes current technology mix towards a more/less polluting mix. A computable general equilibrium model is used to simulate these effects.

This project is part of Mr Fuentes' on-going PhD research.

Research contact: Rolando Fuentes

Europe's Power Play: A Single Energy Market – How Desirable, How Feasible?

The European Union's efforts to create a joined up energy policy, including the links and contradictions between market liberalisation, energy security and combating climate change.

Macroeconomic Carbon Correlations: Methods and Empirical Evidence

Given the obvious connection between physical production and energy use, on the one hand, and the dominance of fossil fuels in the energy mix world-wide on the other, it would not be surprising if there were a strong correlation between a country's carbon dioxide emissions and its national income.

What is surprising is that, while there has been a lot of misuse of alleged correlations – usually in terms of 'carbon elasticities' or 'carbon intensities' – often for political reasons, the economic research community has so-far failed to make any significant contribution to this issue.

There have been a considerable number of peer reviewed econometrics papers investigating the possibility of an inverted u-shape (Kuznets-type) relation between (per capita) national income and (per capita) CO2 emissions. However, all papers that have claimed to have found such a correlation were subsequently found to be statistically flawed for one reason or another.

This research, a collaborative effort with modelers and econometricians from the Department of Economics at the University of Berne/Switzerland, considers the methodological problems and possible solutions to these issues.

Research contact Benito Müller

Russia and OPEC

The aim of the project is to examine the key factors that could make Russia more susceptible to co-operation with the Organisation of Petroleum Exporting Countries in supply management. It in this assessment the research project focuses on three areas:

Russia’s technical ability to manage its oil output;
Russia’s political and economic dependency on oil exports;
Geopolitical considerations.

Research contact: Shamil Yenikeyeff

Where does Russia stand?

Russia appears to be at a crossroads in its emerging stance towards major forces in the world energy markets. A major shift in the behaviour of this key non-OPEC producer could have considerable implications on how global markets develop. In the current times of high energy prices Russia is quickly developing features usually present in traditional oil/gas exporting economies. Shamil Yenikeyeff’s project will attempt to establish whether these features show that the Russian government has failed to diversify the national economy making it even more sensitive to export revenues. In this respect the project will examine the changing role of the state in the Russian oil/gas industry and Russia’s growing fiscal dependency on exports of mineral resources.

Research contact: Shamil Yenikeyeff

Dr Keun-Wook Paik: Sino-Russian Oil and Gas Cooperation

The project on Sino-Russian oil and gas cooperation will review China and Russia's oil and gas cooperation since 1993; examining the status of the oil and gas industry in China and Russia. Factors affecting oil and gas cooperation between the two energy giants will be analysed and the crucial question of how far that cooperation can go will be addressed.

US Energy and Climate Change Policies

David Robinson is writing a book on the subject of US energy and climate change policies. The book provides an analytical framework for understanding the development of these policies, as well as their implications. Basically, it argues that energy (security) and climate change have provided a powerful argument to support government intervention: namely “market failures”, both real and imaginary. Government direction on key decisions, such as the choice of technology for new electricity generation plant, undermines the basic logic of market liberalisation, which was to shift risks and decision making to the competitive market. The challenge is now to avoid costly “policy failures” which are significantly greater than the market failures they seek to redress. The book analyses policies and policy proposals at municipal, state, regional and federal levels in the US. It identifies actual and likely winners and losers, opportunities for investors and how these policies affect international energy markets and negotiations over climate change. It also assesses what role can and should be played by markets and market mechanisms in this new policy-driven paradigm.