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Doctoral thesis, 2011

Three essays on Swedish energy and climate policy options

Furtenback, Örjan;

Abstract

This thesis contains three papers. Paper I: Demand for waste as fuel in the Swedish district heating sector: a production function approach. This paper evaluates inter-fuel substitution in the Swedish district heating industry by analyzing the district heating plants in Sweden in the period 1989 to 2003, specifically those plants incinerating waste. A multi-output plant-specific production function is estimated using panel data methods. A procedure for weighting the elasticities of factor demand to produce a single matrix for the whole industry is introduced. The price of waste is assumed to increase in response to the energy and CO$_2$ tax on waste-to-energy incineration that was introduced in Sweden on 1 July 2006. Analysis of the plants involved in waste incineration indicates that an increase in the net price of waste by 10% is likely to reduce the demand for waste by 4.2%, and increase the demand for bio-fuels, fossil fuels, other fuels and electricity by 5.5%, 6.0%, 6.0% and 6.0%, respectively. Paper II: Towards a dynamic Ecol-Econ CGE model with forest as biomass capital This study presents a dynamic Computable General Equilibrium (CGE) model that combines economic and ecological aspects of forest biomass. A framework is introduced for modeling the growth of a biomass stock which interacts with economic sectors. Harvest of and demand for forest products and forest amenities are determined endogenously in an inter-temporally consistent way. The idea is based on a Markovian growth model of the forest. The study demonstrates an approach for incorporating non-market values of forests, such as carbon sequestration, recreation and biodiversity, into a growth model. A simple simulation illustrates harvest behavior when the economy is subjected to shocks. Paper III: A dynamic CGE-model with heterogeneous forest biomass: Applications to climate policy. This study introduces a framework for modeling a renewable forest biomass stock interacting with economic sectors in a competitive economy. The equilibrium is formulated as a mixed complementary problem (which explicitly represents weak inequalities and complementarity among decision variables and equilibrium conditions). The complementarity format permits detailed modeling of the growth and harvest of a biomass stock together with a second-best characterization of the overall economy. First the complementarity features of economic equilibrium and its integration with an ecological representation of the biomass stock are provided. Then a stylized numerical example of a dynamic computable general equilibrium model is presented. Finally, illustrative applications of the model for gauging the likely effects of environmental subsidies and taxes intended to promote increases carbon storage in forest biomass are given, the results are discussed.

Keywords

factor demand, inter-fuel substitution, waste management, Dynamic CGE, Markovian growth, Inter-temporal optimization, Infinite-horizon equilibria

Published in

Acta Universitatis Agriculturae Sueciae

2011, number: 2011:81
ISBN: 978-91-576-7625-2
Publisher: Institutionen för skogsekonomi, Sveriges lantbruksuniversitet

Authors' information

Furtenback, Örjan
Swedish University of Agricultural Sciences, Department of Forest Economics

UKÄ Subject classification

Economics

URI (permanent link to this page)

https://res.slu.se/id/publ/106383