Essays in energy and environmental economics

Nasseri, Iman
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[Honolulu] : [University of Hawaii at Manoa], [December 2013]
This dissertation is comprised of three essays on energy and environmental economics. The first two essays of this dissertation examine sectoral energy consumption in the State of Hawaiʻi. My first essay focuses on the intermediate demand for energy consumption by economic sectors. I model Hawaiʻi's economy in a computable general equilibrium (CGE) framework and follow the footprint of efficiency improvement in the economy by looking at the energy flows in Hawaiʻi's economy. Assuming a "free" technological change becoming available to firms, this essay ranks the economic sectors with respect to their saving potential. While there are currently some energy efficiency rules and incentives in place, this essay provides insights to design alternative sector-specific energy efficiency policies that could help to achieve the State's goals. My results identify hotels, construction, accommodations, restaurants, and retail trade as the key sectors to be targeted for a successful sector-specific energy efficiency program. The above-mentioned sectors together comprise 56% of total potential reduction in energy use and GHG emissions in Hawaiʻi's economy. In the second essay, I turn my attention to final energy consumers, contributing toward the understanding of electricity and fuel use associated with residents and visitors of Hawaiʻi. Using an Input-Output model, I analyze the difference in total energy consumption--both direct purchases and indirect demand for energy through purchases of other goods and services--of residents and visitors. I run the same analysis using both 2007 and 1997 data set to compare the consumption pattern change over time. My results show that on a per-capita basis, residents tend to consume more electricity through spending on health services, real estate rentals, professional services, and trade, while top visitor electricity-intensive expenditures include hotel, restaurants, trade (shopping), and tourism services (museums, tours and travel agencies). The results for 1997 and 2007 show a remarkable difference between residents and visitors: while total demand for fuels and electricity increased by 18% and 33%, respectively, for residents, they both fell by 4% and 9%, respectively, for visitors. Adjusting for population change, per-capita results reveal the same pattern but different magnitudes. Therefore, I conclude that the tourism industry has improved efficiency in both fuel and electricity usages by decreasing energy intensity of their activities over the observed decade. During the observed 10-year period, energy-use visitor factor dropped for fuel from 3.5 to 2.5 (a 28% drop) and for electricity from 2.4 to 1.5 (a 38% drop). Finally, to assess the underlying driving forces influencing the observed changes in energy consumption in Hawaiʻi, I used a decomposition methodology to explain the changes in sectoral energy demand between 1997 and 2007 in terms of activity, structure, and intensity effects. The findings indicate that the activity effect contributed greatly to the observed growth in energy consumption, that the structural effect was small, and that the reduction in energy intensity by sector was a clear signal of improvement in energy efficiency. Finally, in my third essay, I look into the controversial topic of climate policy under uncertainty. The literature on hybrid climate policy could be divided in two groups: studies of one group discuss the welfare-enhancing features of hybrid policies in a qualitative framework, while the others compare the policies by measuring welfare loss in a stochastic dynamic setting. My third essay seeks to contribute to the literature by providing a theoretical welfare analysis for optimal hybrid policy under uncertainty. Moreover, I contribute to the U.S. climate policy literature using a numerical example. In this essay, I bypass the conventional price and quantity mechanisms and focus on the two common hybrid policies: Two-Step Carbon Tax as a price-driven mechanism, and Cap-and-Trade with Allowance Reserve, as a quantity-driven mechanism. I first solve for the optimal policy parameters in the context of climate change and then set the model's parameters to U.S.-specific values to quantify the solutions and compare them with respect to their expected welfare loss. The numerical analysis ranks the two-step tax policy above the cap-and-trade with allowance reserve in terms of social welfare loss, given the same cost and uncertainty parameters.
Ph.D. University of Hawaii at Manoa 2013.
Includes bibliographical references.
Two-Step Carbon Tax, Cap-and-Trade
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