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Doctoral thesis, 2019

Essays on climate policy and agriculture

Aklilu, Abenezer Zeleke


This thesis is a compilation of four papers that study energy demand, climate policy, production, and carbon sequestration within transport, agriculture and forestry. The four papers study separate topics, but have in common that they address issues that are relevant to Sustainable Development Goals. The first paper estimates the short-run and long-run price and income elasticities of gasoline and diesel demand in the EU-28 countries. The estimation method uses the ARDL bounds approach and tests the existence of a long-run relationship using data from 1978 to 2013. The study provides methodologically consistent elasticity estimates that are comparable across the EU-28 countries and allow the analysis and forecasting of the effect of a common fuel policy. Applying the estimated elasticities to an analysis of the EU’s 2030 emission and fuel consumption reduction targets shows that the current tax level does not guarantee that the target will be achieved. The second paper estimates the cost to car owners of achieving the EU’s 2050 transport sector emission reduction targets through passenger car switching from fossil fuel-driven to hybrid and electric-driven cars. Costs are calculated as decreases in consumer surplus using a dynamic optimization model. The results show that the total emission reduction cost amounts to 0.37% of the EU’s GDP, and that Germany, Italy, Spain, France, and the UK account for approximately two thirds of the total cost. Hybrid cars are cost-effective means of abatement, while electric cars are a viable means of abatement only when coupled with grid decarbonization. The third paper examines the effect of time spent collecting water for household consumption on rural agricultural production. A household-level fixed effects estimation approach is employed using three-round panel data from Ethiopia. The results show that time allocated for water collection negatively affects agricultural production by displacing productive labor. The fourth paper reviews studies in economics on the efficient design of policies for forest carbon sequestration and compares their findings with the design systems in practice. The paper shows that specific design problems are associated with the heterogeneity of landowners, uncertainty, additionality, and permanence in carbon projects. Discounting the value of the forest carbon sink, optimal contract design, and offset baseline management are recommended in the literature for the management of most design problems.


gasoline and diesel demand, price and income elasticity, ARDL bounds, GHG emission reductions, EU 2050 targets, passenger cars, cost-effectiveness, water collection, agricultural production, policy design, forest carbon sequestration

Published in

Acta Universitatis Agriculturae Sueciae
2019, number: 2019:8
ISBN: 978-91-7760-334-4, eISBN: 978-91-7760-335-1
Publisher: Department of Economics, Swedish University of Agricultural Sciences

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