Climate change is one of the most critical global environmental
challenges of our time. Many studies indicate that carbon dioxide
is the main cause of global warming that is driving climate change.
Source:
http://www.e2singapore.gov.sg/climate-change-energy-efficiency.html
Slide 3
World CO 2 by Sector in 2008 Source: International Energy
Agency (IEA) CO 2 from electricity sector is about 32% of the
overall total which is the highest by sector.
Slide 4
Plutonium Seeping From Japan's Nuclear Plant Plutonium Seeping
From Japan's Nuclear Plant Source: BOISE weekly (30 March 2011)
Nuclear power involves issues of safety and radioactive waste
management.
Slide 5
Growth in World Net Electricity Generation and Total World
Electricity Consumption, 1990-2035 Growth in World Net Electricity
Generation and Total World Electricity Consumption, 1990-2035
Source: Energy Information Administration (EIA) Electricity surplus
is expected to account for one third of electricity generation by
2035.
Slide 6
Figure 3: Number of People Without Access to Electricity in The
Reference Scenario (Millions) Figure 3: Number of People Without
Access to Electricity in The Reference Scenario (Millions) Source:
International Energy Agency (IEA) 22 percent of the world's
population did not have access to electricity in 2008
Slide 7
Increase electricity supply for excess demand countries Provide
an economic gain for excess supply countries Decrease levels of CO2
emissions from electricity generation Electricity Trade
Benefits
Slide 8
International Electricity Trade Burtraw et al. (2001) Their
paper demonstrates that the means of allocating allowances is
extremely important to the efficiency and cost of achieving carbon
reductions Pomeda and Camacho (2003) Support that innovation is
presented as a mechanism to enhance electricity market efficiency
Scheepers et al. (2003) Technological innovations will lead towards
electricity generation through renewable energies, and this
decreases CO2 emissions
Slide 9
Reduction of Social Cost by International Trade Source:
http://www.electriccarsrated.com/
Slide 10
This study examines whether electricity co-operation regarding
import and export can reduce CO 2 emissions. Research Question
Slide 11
ImportImport DemandDemand GenerationGeneration ExportExport ?
co 2 Conceptual Framework Distribution Loss Taxes Subsidies
Sequestration Technologies Energy Policies Regulations
International agreements Economy Demography Weather or Season
Demand Response Interruptibles
Slide 12
Panel Data Analysis determines coefficients of CO 2 function. -
Pooled Ordinary Least Squares - Fixed Effects (First differences
& Within) - Random Effects The main goal of this study is to
compare electricity generation and electricity trade to determine
which provides lower CO 2 emissions. Panel Data Analysis determines
coefficients of CO 2 function. - Pooled Ordinary Least Squares -
Fixed Effects (First differences & Within) - Random Effects The
main goal of this study is to compare electricity generation and
electricity trade to determine which provides lower CO 2 emissions.
Econometric Methodology
Slide 13
ln (CO 2it ) = + 1 ln (GC it )+ 2 ln (M it )+ 3 ln (X it )+ u
it CO 2 is Carbon Dioxide from electricity generation GC is
electricity generation for country Mis electricity import X is
electricity export u it is the error term assumed to be independent
over i: countries, t: time (year) u it = i + it where i denotes the
unobservable individual-specific effect it denotes the remainder
distribution. CO 2 Function (Model 1)
Slide 14
ln (CO 2it ) = + 1 ln (GE it )+ 2 ln (T it )+ u it CO 2 is
Carbon Dioxide from electricity GE is total electricity generation
T is total electricity trade u it is the error term assumed to be
independent over i: countries, t: time (year) u it = i + it where i
denotes the unobservable individual-specific effect it denotes the
remainder distribution. CO 2 Function (Model 2)
Slide 15
Data Set
Slide 16
ELECTRICITY CO-OPERATION AND DECARBONISATION
Slide 17
Appropriate Estimation Models of Panel Data Analysis for Model
1 notes: Standard errors in ( ) and *** significant at 1% level.
Model 1: World AsiaMiddle EastAfrica North America Latin America
Europe Australia FD WI POLSREFDPOLS Generation for country 0.549***
(0.009) 0.994*** (0.031) 0.597*** (0.013) 0.362*** (0.015) 1.400***
(0.040) 0.450*** (0.019) 0.495*** (0.027) 1.859*** (0.058) Import
0.022*** (0.004) -0.182*** (0.022) 0.034*** (0.010) 0.032***
(0.006) -0.122*** (0.026) 0.031*** (0.005) 0.030*** (0.010). Export
-0.013*** (0.004) 0.035 (0.025) 0.041*** (0.012) 0.021*** (0.007)
-0.132*** (0.012) -0.059*** (0.006) -0.017** (0.009). 0.001 (0.004)
-0.006 (0.017) -3.395*** (0.118) -2.022*** (0.122) -11.036***
(0.355) -2.730*** (0.184) 0.002*** (0.010) -17.397*** (0.638)
0.2460.743 0.458 0.3120.284 0.252 0.3830.873 0.768
F-Statistics1568.07***364.43***760.56***526.78***1080.29***
137.39*** 1042.36 (3) 830.79***
Observations4357699481948111740134474
Slide 18
Result of CO 2 Function (Model 1)
Slide 19
Appropriate Estimation Models of Panel Data Analysis for Model
2 notes: Standard errors in ( ), *** significant at 1% level and *
significant at 10% level. Model 2: World AsiaMiddle EastAfrica
North America Latin America Europe Australia FD WIREPOLSREFDPOLS
Total generation 0.545*** (0.008) 0.908*** (0.032) 0.600*** (0.013)
0.368*** (0.016) 1.407*** (0.029) 0.427*** (0.022) 0.491*** (0.028)
1.859*** (0.058) Total trade 0.010*** (0.004) 0.118*** (0.019)
0.044*** (0.009) 0.038*** (0.006) -0.304*** (0.020) -0.012* (0.007)
0.008 (0.011). 0.001 (0.004) -0.003 (0.017) -3.423*** (0.118)
-2.092*** (0.185) -10.363*** (0.268) -2.551*** (0.203) 0.002
(0.009) -17.397*** (0.638) 0.2480.745 0.449 0.3130.285 0.276
0.3860.873 0.726 F-Statistics 2323.17***522.78*** 1129.37***
1818.50***200.10*** 1042.36 (2) 825.14*** 584.34***
Observations4357699481948111740134474
Slide 20
Result of CO 2 Function (Model 2)
Slide 21
The MIT scenario (2008) of a linear Sea Level Rise (SLR) of 1
metre >>> loss $2 trillion in present value Susmita (2007)
In this century, hundreds of millions of people in the developing
world can expect displacement by SLR The highest efficiency usage
of surplus electricity through trading >>> reduce CO 2
emissions in the atmosphere by about 11% (calculated from IEA data)
Discussion
Slide 22
Electricity co-operation with regard to import and export is
highly significant in decreasing CO 2 emissions. Such trade can
have a positive impact on efficient management of decarbonisation
of energy supply and be instrumental for governments in the fight
against global warming. Conclusion
Slide 23
Thailand Flood 2011 Picture: GeoEye, National University of
Singapore (NUS)
Slide 24
Acknowledgement
Slide 25
Slide 26
If we live as if it matters and it doesn't mat ter, it doesn't
matter. If we live as if it doesn't matter and it matters, then it
matters. " Norman Myers quotes from an international conference on
the environment
Slide 27
Pooled Ordinary Least Squares (POLS) Estimation y it represents
the dependent variable x it represents observed variables z i
represents unobserved variables it is an idiosyncratic error term
Hence, it can be written in the regression model as and under the
restriction
Slide 28
Fixed Effects: First Differences Estimation, and + The
unobserved effect is removed by subtracting the observation + More
efficient for nonstationary data - Intercept and any X variable
that remains fixed for each individual will be removed from the
model - n degrees of freedom are lost - results in autocorrelation
if it satisfies the conditions of the regression
Slide 29
Fixed Effects: Within Estimation, and + The unobserved effect
is removed by subtracting the observation - Intercept is constant,
so it is removed from the model - is cancelled, hence the within
estimator cannot estimate their effect
Slide 30
Random Effects Estimation In particular, RE estimator turns out
to be equivalent to estimation of
Slide 31
Descriptive Statistics Dependent variables and independent
variables are measured on different scales, Hence all variables are
taken logarithms to interpret easier.
Slide 32
Panel Unit Root Tests Results notes: * Rejects at 5% level.
Every continent is I(1) except for Africa which is I(0).
Slide 33
Panel Model Estimators Results (Model 1) Notes: Standard errors
in ( ), *** significant at 1% level
Slide 34
Panel Model Estimators Results (Model 2) Notes: Standard errors
in ( ), *** significant at 1% level, * significant at 10%
level
Slide 35
Hausman Test Result notes: *** significant at 1% level and **
significant at 5% level.
Slide 36
Hausman Test Result notes: *** significant at 1% level and **
significant at 5% level.
Slide 37
Breusch-Pagan Lagrange multiplier (LM) Test Results Model 1
Breusch-Pagan Lagrange multiplier (LM) Test Results Model 1 notes:
Standard errors in ( ) and *** significant at 1% level.
Slide 38
Breusch-Pagan Lagrange multiplier (LM) Test Results Model 2
Breusch-Pagan Lagrange multiplier (LM) Test Results Model 2 notes:
Standard errors in ( ) and *** significant at 1% level.
Slide 39
Not surprisingly, following free trade theories, electricity
export increases CO 2 emissions by only 0.01% which is much lower
than for electricity generation (0.55%). This is because
electricity trade reduces electricity cost (private and social) by
increasing market efficiency and encourages innovation in
electricity generation through competition resulting in less CO 2
production (Pomeda and Camacho, 2003). Discussion (2)
Slide 40
Furthermore, export countries do not usually use flue sources
to generate electricity for export. For example, in 2009, USA
imported 52,190,595 MWh of electricity from Canada (EIA, 2011),
most of which came from Canadian hydroelectricity power at Niagara
Falls. Another example is lectricit de France (EDF), the country's
main electricity generation and distribution company, which manages
the country's 59 nuclear power plants. Discussion (3)
Slide 41
Australia is an interesting case, not only because of no
international electricity trade in this continent, but also other
reasons. In Australia, mainly fossil fuels are used to generate
electricity. In 2005, the largest source of emissions came mainly
from electricity production (around 70%). Around 95% of electricity
comes from fossil fuels with coal being the main source. After an
extended promotion of green power (renewable electricity) only 7%
of Australian households opted to pay more for electricity
generated from renewable energy Discussion (4)
Slide 42
Obviously, it is impossible that electricity trade can be the
highest efficiency (no electricity surplus) because there are some
limitations. There are transmission and distribution losses, hence
if the distance between trading partners is too far, electricity
import will be more expensive than domestic generation, making
trade impossible. Discussion (5)
Slide 43
The difficulty of storing electricity is a major force behind
the significant growth in electricity trading (Lucia and Schwartz,
2002 and Geman and Roncoroni, 2006), since electricity needs to be
available at the time the energy is required. As a result, the
larger the area containing electricity producers (export countries)
and consumers (import countries) for international trade, the more
successful is the balance between demand and supply. Discussion
(6)
Slide 44
Electricity ranks as a special commodity since it is vital to
the running of every economy. Because of this, countries trading in
electricity require a high level of mutual trust. Electricity
import and export involves more than just buying and selling - it
is founded on co-operation.. Discussion (7)