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Volume 33, Number 2 Copyright 2010
I C E E D
The Journal of ENERGY AND DEVELOPMENT
Volume XXXIII Spring 2008 Number 2
Fueling Brazil: The Effects of the Ethanol Cluster in the Local Community Thomaz Alvares de Azevedo ....................................................................
Reciprocating Engines: Their Application in Commercial Sectors Jack A. Fuller and Aseem Tiwari ............................................................
The Bases of a New Organization of the Russian Oil Sector: Between Private and State Ownership Sadek Boussena and Catherine Locatelli ................................................
What Drives Carbon-Dioxide Emissions: Income or Electricity Generation? Evidence from Saudi Arabia Mansur Masih, Mohammed A. Al-Sahlawi, and Lurion De Mello .........
The Socioeconomic Drivers of Rural Electrification in Sub-Saharan Africa Oona Nanka-Bruce ..................................................................................
Oil for China: The Sino-Russian Waltz Shelton Woods ..........................................................................................
Lignite Mining and Lignite-Fired Power Generation in Western Macedonia of Greece: Economy and Environment Fotios Chatzitheodoridis, Argyrios D. Kolokontes, and Lavrentios Vasiliadis ........................................................................
SPECIAL PUBLICATION LISTING Cumulative Abstracts for the Occasional Papers Series (1986-2010) published by: The International Research Center for Energy and Economic Development ....................................................................
INDEX TO VOLUME XXXIII
The Journal of Energy and Development is indexed or abstracted in A Matter of Fact; Abstracts in Environmental Management; Contents of Recent Economic Journals (Her Majesty’s Stationary Office, London); Current Contents: Social and Behavioral Sciences; EconLit, e-JEL; Environmental Abstracts; Environmental Periodicals Bibliography; Journal of Economic Literature; Linguistics & Language Behavior Abstracts; Middle East Journal; Monthly List of Selected Articles (United Nations, Geneva); Social Sciences Citation Index; Social Services Abstracts; Sociological Abstracts; and Worldwide Political Science Abstracts. Reprints may be obtained from Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, Massachusetts 01923; William S. Hein & Co., Inc., 1285 Main Street, Buffalo, New York 14209; OCLC Public Affairs Information, 521 West 43rd Street, New York, New York 10036, and UnCover, 3801 East Florida Avenue, Suite 200, Denver, Colorado 80210. Back issues of The Journal of Energy and Development may be obtained from William S. Hein & Co., Inc.
FUELING BRAZIL: THE EFFECTS OF THE ETHANOL CLUSTER IN THE LOCAL COMMUNITY
Thomaz Alvares de Azevedo*
Introduction il prices have increased more than fivefold since 2002,1 and among the many innovative proposals that have since been offered for decreasing oil dependency, the production of biofuels has held a central position.2 Moreover, replacing oil consumption with biofuels also is estimated to decrease pollution. During the United Nations Climate Change Conference of 2009 (COP15), Brazilian authorities estimated that, in the past 30 years since the country started producing biofuels, it has prevented the emission of 800 million tons of carbon dioxide.3 The use of food as raw material for fuel, however, has sparked intense debate; critics such as Nobel Prize laureate Paul Krugman have raised the specter of an inevitable food/fuel trade-off: ‘‘Land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis.’’4 Such concerns have been balanced by the hope that technologies allowing higher-yield crops and more efficient biofuel production—for example, using sugarcane-based rather than corn-based ethanol—may release pressure on land
*Thomaz Alvares de Azevedo, a Research Fellow at the Council on Hemispheric Affairs, has written studies on Brazil-U.S. energy policy. He also has co-authored reports on development issues with JBS International, including an impact study of a U.S. Agency for International Development Presidential Initiative. The author currently is conducting a randomized controlled trial study with the Center for Micro Finance on the impacts of self-help group loans on communities in Tamil Nadu, India. He holds an M.A. in international affairs from The George Washington University as well as degrees in law and philosophy from the Universidade Catolica do Rio de Janeiro and the Universidade Federal do Rio de Janeiro. The Journal of Energy and Development, Vol. 33, No. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). All rights reserved.
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use.5 It should be pointed out, however, that there is no consensus in the literature about whether technology alone will overcome the food-fuel competition.6 Although the impact of ethanol on the macro-level issues of oil dependency, pollution, and food supply certainly are important, the expansion of the biofuel industry in developing countries is likely to have a strong effect at the local level on the communities in which the industry is centered. Several studies have demonstrated that clustering offers unique opportunities to engage a wide range of domestic links between both producers and consumers and between the goodsand-services sector and the knowledge sector, but the literature is still poor in terms of research on the effects of clustering on immigration, labor productivity, and urbanization.7 In this paper we investigate the case of Brazil, one of the few countries that has achieved energy self-sufficiency precisely through the use of ethanol-based technology. We first assess the formation of a sugarcane ethanol production cluster in the S˜ o Paulo state and we then observe the effects of such a cluster on a national and intrastate immigration, labor productivity, and urbanization in two micro-regions in the core of this cluster, Campinas and Piracicaba.
Background The use of alternative sources of energy as an avenue for decreasing oil dependency made headlines in the United States in 2005, after the Energy Policy Act required that 7.5 billion gallons of ethanol and biodiesel enter the U.S. fuel supply by 2012 (about 5.75 percent of total fuel projections).8 In his 2007 State of the Union Address, President Bush called for a nearly sixfold increase in ethanol production by 2017. Despite its recent entry into the U.S. consciousness, however, ethanol is not a new project, particularly in Brazil, where it has been produced since 1975. As a result of this ongoing promotion of sugarcane ethanol technology, in 2006 Brazil achieved not only a 20 percent ethanol surplus but also energy self-sufficiency.9 Brazil’s President Lula da Silva proudly declared that achieving selfsufficiency with respect to energy was a triumph of stability, economic security, and political lucidity.10 This trend seems unlikely to change direction any time soon; the number of ethanol plants in Brazil is estimated to grow from 335 plants in 2006 to 412 in 2012, or roughly one new plant per month for the next six years.11 Brazil’s apparent success with sugarcane ethanol raises several critical questions. Is Brazil’s sugarcane ethanol production dispersed across the country or is it being concentrated in specific areas? What is the effect of it on urbanization, social growth, and migration? Here we use demographic and economic data to address these questions. Our analysis provides insight into the question of whether ethanol production in Brazil has fueled a formidable triumph or could prove to be a terrible mistake.
FUELING BRAZIL: THE EFFECTS OF THE ETHANOL Analysis
It is estimated that ethanol production alone creates 465,000 direct jobs and that it is present in 1,042 cities.12 In this paper we analyzed the prospects of an ethanol manufacturing cluster being formed in the state of S˜ o Paulo, as well as this a cluster’s impacts on national and intrastate migration, labor productivity, and urbanization. The use of ‘‘cluster’’ in this study refers to a geographically proximate group of interconnected companies in a particular field, as described by Michael Porter.13 It is noteworthy, however, that the simple location of actors in geographic proximity does not lead automatically to interaction, learning, or innovation.14 For the preparation of this paper we used different datasets encompassing an 18-year span (1990-2007). Data from Brazil, the S˜ o Paulo state, and the microa regions of Campinas and Piracicaba within this state were utilized. We use ‘‘micro-region’’ to refer to a grouping of bordering municipalities whose raison ˆ d’etre is to integrate the planning and execution of public services. All the datasets were provided by the Brazilian Institute of Geography and Statistics (IBGE). The source for the gross domestic product (GDP) of the municipalities is from Diretoria de Pesquisas, Coordenacao de Contas Nacionais and addresses the x˜ years 1999-2005. The sources for population and demographic concentration are the Demographic Census of 1991 and 2000 and the Population Count of 1996 and 2007. The industrial production and employment data are from the Enterprise General Dataset (Cadastro Central de Empresas) and the Annual Industry Survey (PIA). In the first section, we argue that S˜ o Paulo state is demonstrating increases in a its share of the Brazilian sugarcane agribusiness, despite reductions in overall secondary-sector activities. In order to measure this, we calculated the share of national employment (SHR) for S˜ o Paulo state in the sugar production and a sugarcane ethanol industries as well as in the secondary sector. To support our argument we compare the growth rate of sugar production and sugarcane ethanol production in S˜ o Paulo state with the rest of the country, using the secondarya sector growth rate as a base line. We also look at the location quotient (LQ)—the ratio of the industry’s share of total state employment relative to its total national employment—across these industry segments.15 We show that the LQ for sugar production and sugarcane ethanol has been rising in S˜ o Paulo state, while the LQ a for the secondary sector has been falling. By comparing S˜ o Paulo state’s ethanol a LQ and its growth rate vis-a-vis the rest of the country, we show that the state of ` S˜ o Paulo not only has been specializing in both the sugar production and suga arcane ethanol sectors, but also that it has been concentrating those sectors within the state’s borders. In second part of the article, we argue that core regions within S˜ o Paulo state’s a ethanol manufacturing cluster have been experiencing an increase in urbanization
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as well as immigration. We show that two core regions, Campinas and Piraciciba, experienced a positive social growth rate, indicating that they are receiving significant immigration. We further show that these two regions witnessed significant urban population growth in recent years. These measures suggest that the ethanol manufacturing cluster in S˜ o Paulo state has had significant impacts on labor a mobility in its core regions.
Sugar Production and Sugarcane Ethanol in S˜ o Paulo State: The first step in our a
analysis was to assess whether there exists a historic agglomeration of secondarysector industries in S˜ o Paulo state. In order to do so, we computed the share of a national employment (SHR) of this sector in this state during half a decade, from 2001 to 2005.16 In 2005 as much as 35.13 percent of employment in the secondary sector was concentrated in S˜ o Paulo state, that is, more than one in each three a workers (table 1). However, over time we found a steady de-concentration, with the growth rate of employment in this sector lagging behind the rest of the country by 1.38 percent per annum.17 Despite this lag in the growth rate, the location quotient was 1.17, indicating a higher than average concentration of industrial activity in this location (table 2).18 Notwithstanding the slowed rate of growth in the secondary-sector overall, the LQ > 1 suggests that S˜ o Paulo state is spea cialized in a number of particular industrial activities, and that these industries likely go beyond providing goods and services at a local level to include exports to other regions. The second step in our analysis was to look at whether the sugar production and the sugarcane ethanol production industries are among the secondary-sector industries agglomerated in the S˜ o Paulo state. More specifically, we were interested a in whether these industries were following the pattern of de-concentration of the secondary-sector industries overall or whether they were among those industries in which the state has been specializing, thus pointing to a cluster formation. In order to answer these questions we carried out an interstate analysis in which we
SHARE OF NATIONAL EMPLOYMENT (SHR), 2001-2005 (in percent) Share of National Employment Secondary sector Sugar production Sugarcane ethanol production 2001 36.72 23.99 30.14 2002 35.91 27.16 22.87 2003 35.55 25.78 38.85 2004 35.05 27.39 34.58 2005 35.13 26.24 32.67
Source: Based on The Brazilian Institute of Geography and Statistics (IBGE), Cadastro Central de Empresas, table 1733, available at http://www.ibge.gov.br/home/estatistica/economia/ cadastroempresa/2008/.
FUELING BRAZIL: THE EFFECTS OF THE ETHANOL Table 2
LOCATION QUOTIENT (LQ), 2001-2005 Location Quotient (LQ) Secondary sector Sugar production Sugarcane ethanol production 2001 1.20 0.78 0.98 2002 1.18 0.89 0.75 2003 1.18 0.86 1.29 2004 1.17 0.91 1.15
2005 1.17 0.87 1.09
Source: Based on The Brazilian Institute of Geography and Statistics (IBGE), Cadastro Central de Empresas, table 1733, available at http://www.ibge.gov.br/home/estatistica/economia/ cadastroempresa/2008/.
compared the difference between S˜ o Paulo state’s rate of employment in sugar a and sugarcane ethanol production and those of other states (i.e., all of Brazil with the exception of S˜ o Paulo state) from 2001-2005 (table 3). Then we tested a whether the difference in the employment growth rate was statistically significant with a repeated-measures ANOVA comparing the state’s number of workers in each sector in S˜ o Paulo vis-a-vis those in other states. We also tested whether the a ` LQ for these sectors was higher than one, indicating a higher than average concentration of the industry in that location (table 2). In 2005, as much as 26.24 percent of employment in the sugar production sector was concentrated in the S˜ o Paulo state. We found that while the ema ployment growth rate in the sugar production sector in other states during the 2001-2005 period was 10.58 percent, S˜ o Paulo state’s sugar production sector a growth rate in employment was 12.98 percent, a 2.4 percent difference. In order to test whether this difference in the growth rate of employment was statistically significant, we conducted a repeated-measures ANOVA examining the number of workers in the sugar production sector in S˜ o Paulo vis-a-vis those in other states a ` for the 2001-2005 period and found a significant effect of region on employment in the sugar sector (F(1,7) = 208.12; p < .001). Despite the small number of observations, we found evidence that S˜ o Paulo state’s sugar production sector has a been expanding faster than the sugar production sector in other states, that is, S˜ o a Paulo state’s specialization in the sugar production sector is resulting in Brazil’s growing sugar production sector being concentrated within that state’s borders. However, the location quotient was 0.87, indicating that the state is likely not producing a surplus of sugar. The LQ < 1 indicates that if S˜ o Paulo state has a 19 a sugar production cluster, it is only a local one. For the sugarcane ethanol sector, we found that while the employment growth rate in other states was 8.11 percent, S˜ o Paulo state’s ethanol sector growth rate in a employment was 10.45 percent, a 2.34 percent difference. In order to test whether this difference in the growth rate of employment was statistically significant, we conducted a repeated-measures ANOVA on the state’s number of workers in the
the analysis of the employment growth rate in each of these sectors shows the result of this specialization is that the S˜ o Paulo state has been able to concentrate the a expansion of both these industries within its borders.67 percent of employment in the sugarcane ethanol sector was concentrated in the S˜ o Paulo state. the regional a production level has also been increasing. As the a concentration of ethanol workers in S˜ o Paulo state has increased. the a location quotient was 1.09.158 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 3 EMPLOYMENT GROWTH RATE IN THE SUGAR AND THE ETHANOL INDUSTRIES.20 These trends probably have intensified since 2003 when the Iraqi war began— starting a skyrocketing of the price of oil21—and flex-fuel cars became commercially viable. while the SHR and LQ analyses demonstrate S˜ o Paulo state’s a specialization in both the sugar production and the sugarcane ethanol sectors.001).11 Source: Based on The Brazilian Institute of Geography and Statistics (IBGE). we see evidence for a traded sugarcane ethanol cluster in place in S˜ o Paulo state (LQ > 1). 7) = 107.12. as much as 32. faster than regional consumption. In addition to this pattern of concentration.23 These micro-regions also ranked high a . we found evidence that S˜ o Paulo state’s sugarcane ethanol sector has been a expanding faster than the sugarcane ethanol sector in other states. p < . a Therefore. We did not find a sugar production-traded cluster in S˜ o Paulo state. indicating that S˜ o Paulo state is likely to be exporting a sugarcane ethanol to other economic areas. Despite the very small number of observations.98 Rest of Brazil 10. The bigger picture points to some reasons why the growing traded ethanol cluster in S˜ o Paulo state may have been consolidated in the last years. table 1733. and Urbanization in Piracicaba and Campinas: In a comprehensive investigation. Productivity. Cadastro Central de Empresas. available at http://www. in 2005.45 Rest of Brazil 8.ibge.br/home/estatistica/economia/ cadastroempresa/2008/. Yasushi Ueki found that the major entities involved in research and development (R&D) for the sugarcane-processing sector in Brazil are located in the municipalities of Campinas and Piracicaba and their neighboring areas in the S˜ o Paulo state. Thus.58 Sugarcane Ethanol S˜ o Paulo State a 10. but we can speculate that this is due to a linkages between this sector and the sugarcane ethanol sector. 2001-2005 (in percent) Employment Growth Rate Years 2001-2005 Sugar Production S˜ o Paulo State a 12.gov.22 Social Growth. sugarcane ethanol sector in S˜ o Paulo vis-a-vis those in other states for the 2001a ` 2005 period and found a significant effect of region on employment in the ethanol sector (F(1.
1991 and 2000. table 202 and Contagem da Populacao.br/home/estatistica/populacao/default_censo_2000.33 1. Therefore.ibge.128.317 inhabitants in 2007.937 tons.br/home/estatistica/populacao/contagem2007/default.555. While Campinas’ micro-regions occupied the 23rd position within the state’s 63 micro-regions. These findings not only corroborate the presence of an ethanol cluster in S˜ o Paulo state but also provide a some indication of where the core of the cluster might be. with 4.shtm and http://www. both micro-regions are experiencing an annual a population growth rate above the national and state average (table 4). The Piracicaba micro-region.ibge.453 tons produced in 2006. The social growth rate can be used as a proxy to assess whether a location is receiving or exporting migrants.gov.24 Although S˜ o Paulo is the most urbanized state in Brazil. a high degree of economic activity tends to attract people to a region. Our analysis shows that both the Piracicaba and the Campinas micro-regions are likely to be receiving national as well as intrastate migrants.62 Source: Based on The Brazilian Institute of Geography and Statistics (IBGE). with 534.36 1. we carried out an analysis of social growth and urbanization in micro-regions in Piracicaba and Campinas in order to assess the potential effects of an ethanol cluster on these micro-regions.53 1. only behind the state capital of S˜ o Paulo.shtm. available at http://www.21 0. with 2. If the location’s population growth rate is higher than the country’s growth rate. The a Campinas micro-region.66 0. 1996 and 2007. then the location is likely to be receiving migrants. our analysis shows that both the Piracicaba and the Campinas micro-regions experienced an Table 4 POPULATION GROWTH RATE AND SOCIAL GROWTH RATE OF PIRACICABA AND CAMPINAS MICRO-REGIONS. The difference between the micro-region population’s growth rate and the country and state rate is the social growth rate.gov.FUELING BRAZIL: THE EFFECTS OF THE ETHANOL 159 in sugarcane production.484. Piracicaba’s micro-region ranked 9th with 9. ranks 16th in population size among the 63 micro-regions within the S˜ o Paulo state.17 0.98 Brazil S˜ o Paulo State a 0. Furthermore.519. This is an expected effect of clustering. . Censo ´ Demografico. Another effect often associated with cluster formation is an increase in people moving to urban areas. 1991 AND 2007 (in percent) Social Growth Rate Compared to Population Growth Rate Brazil S˜ o Paulo state a Micro-region: Piracicaba Micro-region: Campinas 1. tables 472 x˜ and 793. ranks second. a so that the increase in urbanization tends to be proportionally smaller.
.70 97. the lower growth rate in labor productivity of Campinas and Piracicaba vis-a-vis the state ` Table 5 PROPORTION OF POPULATION RESIDING IN URBAN AREAS. Despite the small number of observations. that we are not using a sector-specific GDP either for sugarcane ethanol or for sugar production. those newcomers (or the locals displaced by them) may not have ended up in the sector in which the area is specializing but rather are working either in less specialized industries or in the informal sector. however.160 THE JOURNAL OF ENERGY AND DEVELOPMENT above-average increase in urbanization in the period from 1991 to 2000 (table 5). Censo ´ Demografico.80 91.61 1.08 95. the micro-regions at the core of the sugarcane ethanol clusters are not keeping up with the state’s improvements in labor productivity. An important question is whether the high degree of economic activity translates into economic opportunity. table 202.ibge. as was done for the SHR and LQ analysis. Our analysis shows (table 6) that both Campinas and Piracicaba micro-regions experienced a labor productivity growth rate lower than S˜ o Paulo state overall for a the 2001-2005 period. nonetheless.gov. As increase in economic opportunity is expected to be found in areas experiencing economic growth. The output unit used in our analysis was GDP and the unit of labor was number of people employed.85 Source: Based on data from the Brazilian Institute of Geography and Statistics (IBGE).62 1.41 92.26 Thus. we used a labor productivity analysis on the period from 2001 to 2005. 1991 AND 2000 (in percent) Resident Population in S˜ o Paulo state a Piracicaba micro-region Campinas micro-region 1991 92. available at http://www. This might be an externality effect of the formation of an ethanol cluster in this area. as when clusters are being formed and people migrate to these areas. In order to answer this question. Another likely reason is related to the social growth experienced by these micro-regions. the region is experiencing improvements in its labor productivity—to increase output by one unit the region needs less than one unit of labor. We should note. 1991 and 2000.25 The underlying assumption is that if the output increases at a higher rate than employment. One possible reason for this finding is that the ethanol boom from the beginning of 2000s.99 2000 93. This means that although there is evidence of the formation of both a traded sugarcane ethanol cluster and a local sugar production cluster in this state. especially due to the sharp increase of oil prices and development of competitive flex-fuel automobiles.84 Difference 0. is still too recent and R&D is still ongoing.shtm. there seems to be a trend of people not only migrating to these micro-regions.br/home/estatistica/ populacao/default_censo_2000. but migrating to these micro-regions’ urban areas.
a 2006 study of air pollution in the city of Piracicaba found that during the sugarcane burning period there was a significant increase in respiratory hospital admissions due to respiratory system conditions. AND MICRO-REGION GROSS DOMESTIC PRODUCT (GDP).72 11. public efforts for improving environmental health conditions in areas where sugarcane is being harvested for ethanol should be taken into account by the local administrations within micro-regions that rely on the ethanol sector. the U. similar to the phenomena of exposure to industrial and vehicle-emitted air pollutants. this finding is in line with the theory that the formation of clusters leads to a shift of labor from relatively poorer areas to relatively richer areas. available at http://www. in a report to the Brazilian embassy in Washington. Concerning the former.FUELING BRAZIL: THE EFFECTS OF THE ETHANOL Table 6 NATIONAL.br/home/estatistica/ economia/contasregionais/2003_2007/default. Congress does not renew the import tariffs of $0.66 3.55 8. trade theory tells . imports of Brazilian ethanol have been growing at high rates since 2005.gov. EMPLOYMENT. this level of imports of Brazil’s ethanol may grow even more if the U.ibge.37 12.S.94 7.5 percent ad valorem tax on ethanol.shtm. states that although the ethanol production of the United States surpasses Brazil..S.73 7.67 4. PIB dos Municipios.54 per gallon plus 2.92 3. STATE.38 5. Although we have discussed population migration and labor productivity.82 Brazil rate S˜ o Paulo state a rate Campinas micro-region rate Piracicaba micro-region rate Source: Data from the Brazilian Institute of Geography and Statistics (IBGE). D.C.95 10. AND LABOR PRODUCTIVITY GROWTH RATES.28 If import tariffs in the United States are not renewed.27 So. Concerning the latter.19 4. may be signaling the fact that informal labor is growing and may become an issue in those micro-regions. matters such as air pollution due to ethanol production and the impact of ethanol on international trade are still left open. 1999-2002 and 2002-2005. Brazil’s International Trade Studies Foundation (FUNCEX). 2001-2005 (in percent) 161 2001-2005 GDP growth rate Employment growth rate Labor productivity growth GDP growth rate Employment growth rate Labor productivity growth GDP growth rate Employment growth rate Labor productivity growth GDP growth rate Employment growth rate Labor productivity growth 11.
among those. consumer surplus in Brazil will drop while producer surplus will increase (domestic prices go up). more than one in three workers in the secondary sector was concentrated in the S˜ o Paulo state. political decisions concerning international trade also should be taken into account by the local administrations within micro-regions that rely on the ethanol sector. during the 2001a 2005 period. we found a steady de-concentration pattern with the state’s growth rate of employment in the secondary sector lagging behind the rest of the country by of 1.S. we found that in 2005. energy once again has become a subject of hype and polemic.51 per gallon ethanol subsidy until at least 2010. Despite this de-concentration pattern. despite the dea concentration evident in the state overall. since 1999 the Brazilian government has no subsidy for its ethanol production. Reduction of U. accelerating urbanization a trends even more. the literature is still poor in terms of research regarding the consequences of the expansion of the ethanol sector to the local population. In this paper we assessed the formation of an ethanol cluster in the state of S˜ o Paulo as well as a this cluster’s impacts on national and intrastate immigration. Solutions for decreasing oil dependency and climate change are being discussed and. S˜ o Paulo is specialized in a plethora of a industrial activities at a level that is above local clusters (LQ > 1)—industries that go beyond providing goods and services for the region in which they are located to reach other regions. Moreover. Second. urbanization. LQ analysis indicated that S˜ o Paulo state is unlikely to a . At the same time. That is. The analysis presented in this paper pointed to a number of conclusions regarding the effects of Brazil’s growing ethanol sector.38 percent per annum. and food production. 29 Of note is the fact that while the United States will keep a $0. Discussion With a barrel of crude oil having passed the $100 mark in 2008 and evidence for global warming mounting. as a result. Thus. during the 2001-2005 period we a found a concentration pattern with the state’s growth rate of employment in the sugar production sector and the sugarcane ethanol sector being significantly ahead of the rest of the country. First. protectionism to Brazil’s ethanol may foster immigration to micro-regions within the S˜ o Paulo state (Campinas and Piracicaba). biofuels like ethanol have occupied a central position. it is worthwhile stressing that the ratio of the industry’s share of total state employment relative to its total national employment (LQ) indicated a higher than average concentration of industrial activity in the S˜ o Paulo state. we found that in 2005 as many as one in five workers in the sugar production sector and almost one in three workers in the sugarcane ethanol sector were concentrated in S˜ o Paulo state.162 THE JOURNAL OF ENERGY AND DEVELOPMENT us that there will be more competition for Brazilian ethanol and. However. labor productivity.
This finding is in line with the theory that the formation of clusters leads to the shift of labor from relatively poorer areas to relatively richer areas. but migrating to these micro-regions’ urban areas. financial incentives.30 while it will be up to the private sector to provide products that satisfy customer demands and that are produced in an environmentally friendly way. While the a SHR and LQ analysis revealed S˜ o Paulo state’s specialization in both the sugar a production and the sugarcane ethanol sectors. This means that although there is evidence for the formation of both a traded sugarcane ethanol cluster and a local sugar production cluster in this state. Campinas’ and Piracicaba’s inferior labor productivity vis-a-vis the rest of the state may be signaling the fact ` that informal labor is growing and could become an issue in those micro-regions.FUELING BRAZIL: THE EFFECTS OF THE ETHANOL 163 be exporting sugar to other economic regions but is likely to be exporting sugarcane ethanol. and a regulatory environment that encourages innovation. For example. This might be an externality effect of the formation of an ethanol cluster in this area. an innovative cluster might become prevalent in the same areas if the presence of the ethanol production industry attracts research and development firms to the region. which would be observable as an increase in . it is reasonable to expect that the quest for improving efficiency in the production of energy—like ethanol—will generate knowledge spillovers into other industries. Statistic tests confirmed the trend that people are not only migrating to these micro-regions. However. Third. Thus. more indepth investigations of linkages across industries as well as externalities still are needed. Thus. we see evidence for a local sugar production cluster and a traded sugarcane ethanol cluster in place in S˜ o Paulo state (LQ < 1).32 Although our efforts have provided evidence of the location of an ethanol cluster in Brazil and touched on some of the effects of this cluster on its location. we also showed that both micro-regions experienced a labor productivity growth rate lower than that of the S˜ o Paulo state for the 2001-2005 a period. our analysis of the sugarcane ethanol cluster in the state’s micro-regions of Piracicaba and Campinas showed that both micro-regions received migrants in the period of 1991-2001. and that both also have been experiencing an increase in urbanization. the micro-regions at the core of the sugarcane ethanol clusters are not keeping up with the state’s improvements in labor productivity. The further development of the ethanol cluster will depend largely on both the policies of the public sector and the capacity of the private sector to take advantage of sophisticated local needs. The set of policies that the public sector in each microregion will need to balance includes infrastructure investment. the analysis of the employment growth rate on each of these sectors demonstrated the result of this specialization is that the S˜ o Paulo state has been able to concentrate the expansion of both these a industries within its borders.31 Fostering regional economic development seems to lie in a process driven by market forces together with conscious planning that aims at both identifying strengths in order to improve the business environment and investing to seize opportunities that have presented themselves.
Ward. Campinas and Piracicaba. a study ordered by the Governor of the S˜ o Paulo state reported that the Brazilian sugarcane agribusiness a not only corresponded to 2. available at http://money.164 THE JOURNAL OF ENERGY AND DEVELOPMENT the proportion of residents working in the science and technology sector in regions supporting ethanol clusters. 2008. accessed December 9. Despite Supply Rise. we should not disregard how the development of this industry may affect those communities at its heart.’’ Guardian Online. but that it also created approximately 1 million direct jobs.’’ CNN Money. and urbanization in two micro-regions within this state.37 On the other hand. we have observed that in cities within the state where this industry is focused.htm. such as pollution and crime. ‘‘Oil Crosses Record $110. there were significant socioeconomic impacts on the local communities: immigration and urbanization increase.guardian. ‘‘Considering Trade Policies for Liquid Biofuels. Goldman. although the impacts of the biofuel sector in the global economy can be tremendous. Thus. NOTES D. 2 D. and we demonstrated the effects of this cluster on national and intrastate immigration.com/2008/03/12/markets/oil_eia/index. In 2004. identifying the emergence of business clusters in developing countries and their effects on the local communities is important as researchers continue to assess the consequences of the staggering increase in the urban population in the developing world. and W. ‘‘Brazil Defends Biofuels at Copenhagen Summit. Ciobanu. Kojima. due to the effect of proximity on the ability of firms to learn from each other. with the S˜ o Paulo state concentrating both on a the production of sugar and the expansion of the ethanol industry in Brazil. number 4 (2007). productivity. at least 400. accessed March 12. 2009.33 Finally.34 On one hand. Mitchell. and negative externalities. Importantly.’’ Energy Sector Management Assistance Program Special Report on Renewable Energy.uk/environment/2009/dec/09/biofuels-brazil-copenhagen-summit.39 Throughout this paper we have shown that this specialization has only deepened in the past few years.2 percent of the country’s GDP. M. city growth offers such advantages as costreducing economies of scale. 1 C. a trend that tends only to grow sharper as other industries move to the region attracted by the conditions created by the ethanol sector.cnn. and agglomeration. available at http://www.35 It also offers positive social and economic externalities such as cheap transport36 and cultural amenities.co. city growth brings congestion factors that may increase costs. 3 . since proximity may foster collective efficiency. such as real estate speculation.000 alone within the state boundaries.38 Conclusion In this paper we investigated the formation of an ethanol cluster in the S˜ o a Paulo state in Brazil.
’’ The New York Times. 17-23.’’ Economic Development Quarterly. 1 (1999). 15 Location quotient (LQ) is a ratio measure of the concentration of a cluster in a particular location relative to the national average.. We calculated LQ as (state industry employment/state total employment)/(country industry employment/country total employment). ‘‘Growing Expectations: New Technology Could Turn Fuel into a Bumper Crop. L.crawfordfund. 218-20.-Brazil Partnership.’’ Folha e ´ e On-Line. October 1. Jank. Moreira.C.org/topics/docs/WWC%20Jank%2022fev%2007. pp. or Fuel?’’ Georgetown Journal of International Affairs.br/opiniao/show. February 18-20. S.’’ Keynote address. Misangi and M.’’ Brazil Institute. ‘‘Location. Canberra. February 2000. ‘‘Ethanol—Benefits. ‘‘The Cutting Edge: Collective Efficiency and International Competitiveness in Pakistan. ‘‘Food. 2009. no. Feed.html?publication=237&rtn=88. 5 S. J. available at http://www.wilsoncenter.html. 12 M. 64-69. Trojer. Temu. 2008. 15-34. July 1992. D. 2004. 1498-511. 81-107.br/folha/dinheiro/ ult91u107062.C. Special Report. Zeng.pdf. diz Lula. accessed January 10. ‘‘When Food Makes Fuel: The Promises and Challenges of Biofuels.’’ November 23. Jank. ‘‘Auto-suficiˆ ncia em petroleo favorece economia e independˆ ncia. Meyer-Stamer. and A.org/resources/ doc. B. Diyamett. Von Braun. Competition and Economic Development: Local Clusters in a Global Economy. Proceedings 2007-Biofuels.’’ Washington. and A. August 2007.org. H.wilsoncenter. pp. Z. Australia. 14 13 . D. L. accessed April 21.nytimes. 27. N.shtml.uol.com/ 2008/04/07/opinion/07krugman. ‘‘Path Dependence in Regional Development: Persistence and Change in Three Industrial Clusters in Santa Catarina. com/2008/01/10/opinion/10cohen. 2009.’’ Science News.asp?msgCode=B4FBFA4B-0F6C43C5-873C-2B70369EBE71. 2008. accessed on December 17. B. S. Krugman.com. K. J. pp. pp. Mwamila. Spitz. accessed April 7. 2008). LQ > 1 indicates higher than average concentration in that location. pp.’’ in Innovation Systems and Innovative Clusters in Africa. available at http://www. From the President’s Desk. Wright. Risks and Challenges. K. available at http://english. winter-spring 2008. 11 10 9 8 7 6 M. E. Cohen. ‘‘From Clusters to Innovation Systems in Traditional Systems Industries.: The World Bank. 2006.nytimes. August 1998. Proceedings of regional conference on Innovation Systems and Innovative Clusters in Africa. Bagamoyo. pp. 2005.com. June 2008. ‘‘Is Ethanol for Everybody?’’ The New York Times. Knowledge. Brazil. Schmitz. available at http://www. Technology and Cluster-Based Growth in Africa (Washington. ‘‘Brazil-U. Mytelka. WBI Development Studies. available at http://www. Nadvi. available at http://www.’’ Oxford Development Studies.FUELING BRAZIL: THE EFFECTS OF THE ETHANOL 165 4 P.S.html.folha. ‘‘Grains Gone Wild. ‘‘Potential Supply and Demand for Biofuels in the Coming Decade: Towards a U.unica. M.’’ Paper presented at the Woodrow Wilson International Center for Scholar’s Seminar on ‘‘The Global Dynamics of Biofuels. eds. Energy and Agriculture.’’ IDS Bulletin. vol. L.’’ World Development. Biofuels Cooperation: One Year Later. R. Porter.S.. D. C. M. The Crawford Fund Annual Conference. February 20. ‘‘On the Clustering of Small Firms. Tanzania. 2007. Ewing. available at http://www1.
available at http:// www. Reese. available at http://www. November 2006. Weak Economy. 24 PricewaterhouseCoopers. 28 Brazilian Embassy in Washington. In order to compute the rate of growth. pp.com/printed-book/205113. multiplied by 100. N. A. L.ide. May 2007. M. Martinelli.com/ en_GX/gx/government-public-sector-research/pdf/cities-final. E. vol. Institute of Developing Economies.br/anuario2008/capitulo2a. 2008. pp.’’ Environmental Health Perspectives. 6 and 7 (2003). the domestic consumer accounts for the largest share of ethanol demand in Brazil. Artaxo. Local Leadership (New York: PricewaterhouseCoopers. 19 20 18 17 M. we calculated the growth rate as the natural logarithm of final value minus the natural logarithm of the initial value divided by the number of intervening years. ‘‘Barreira a produtos brasileiros no mercado dos ´rcio Exterior.’’ Despite this trend. P. 2006). available at http://www.com/washwire/2008/03/20/obama-ties-iraq-war-to-high-oilprices-weak-economy/.166 THE JOURNAL OF ENERGY AND DEVELOPMENT 16 We calculated the share of national employment (SHR) by taking the state employment in the industry divided by the country’s total employment in the industry. Estados Unidos. P. 22 Associacao Nacional dos Fabricantes de Veıculos Automotores. L. pdf. Timiraos.anfavea. International Trade Theory and Policy: Introductory Issues. ‘‘Obama Ties Iraq War to High Oil Prices. Dox˜ ´ mestic Sales and Export. Organization for Economic Cooperation and Development (OECD).’’ Fundacao Centro de Estudos do Come x˜ 27 26 25 S.go. 23 Rate of growth in labor productivity = Rate of growth in output (as GDP) – Rate of growth of employment. International Limited.wsj. 37.’’ 2008.C. Saldiva. Arbex. Lara. Cities of the Future: Global Competition.. Pereira. ‘‘Do We Really Need Another Typology? Cluster of Local Economic Development Strategies. OECD Territorial Reviews: Competitive Cities in the Global Economy (Paris: OECD. Japan External Trade Organization. with 40 percent of its automotive fleet running on this biofuel. Zanobetti x and A.pdf. May 2006.’’ Discussion paper no. D.pwc. L. M. accessed March 8. 725-29. We calculated growth rate as the natural logarithm of final value minus the natural logarithm of the initial value divided by the number of intervening years.jp/dspace/handle/2344/588. 545-46.com. The fact that S˜ o Paulo state a has the nation’s highest ratio of cars per square kilometer may explain the reason why S˜ o Paulo’s a ethanol cluster is not a consolidated export region of biofuels (LQ > 1. 21 Y. E. 30 29 . ‘‘The Impact of Sugar Cane-Burning Emissions on the Respiratory System of Children and the Elderly. multiplied by 100.’’ Regional Studies. ‘‘Industrial Development and the Innovation System of the Ethanol Sector in Brazil. pp. Suranovic. Vehicles: Production.’’ Economic Development Quarterly. Porter. Porter.flatworldknowledge. nos. 368-76. available at https://ir. Ueki. A. J. 2005).25). ‘‘The Economic Performance of Regions. Tokyo. ‘‘The Economic Performance of Regions. June 2007. Braga.’’ Wall Street Journal Online. available at http://blogs. 109. L. Cancado.
Dempsey. greenhousegas. Todaro and S. Assessment of Greenhouse Gas Emissions in the Production and Use of Fuel Ethanol in Brazil. Department of Commerce. Feldman.’’ The American Economic Review. 34 Estimates of the United Nations University. pp. pp. February 25. 33 32 G.macedo.C. Washington. Innovation and Growth in the Global Economy (Cambridge. Habiby. 1991). Massachusetts: MIT Press.org/events/docs/brazil. E. Smith. ‘‘Competitiveness in Rural U.edu.unicamp. Future Forms and Design for Sustainable Cities (Oxford: Architectural Press.pdf. Economic Development. D.FUELING BRAZIL: THE EFFECTS OF THE ETHANOL 167 31 A. spring 2004. Audretsch and M.’’ Journal of Political Economy. H. Krugman. Regions: Learning and Research Agenda. and P. July 2000. Porter et al. 2003). ‘‘R&D Spillovers and the Geography of Innovation and Production. 39 .’’ Report prepared for the Economic Development Administration of the U. Elhanan. ‘‘Increasing Returns and Economic Geography. available at http://www. 483-99. D.S. M. de Macedo. 38 M. Leal. available at http://www. 630-40. P. Grossman and H. June 1991..’’ Journal of Urban Economics. M.’’ Economic Development of America.S.unu.. 2004. and J. June 1996. P.wider. (New York: Addison Wesley. 2005). ‘‘Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration. 8th ed. 37 M. Secretariat of Environment of the State of S˜ o a Paulo. pp.wilsoncenter. ‘‘Michael Porter on Essential Elements for Regional Competitiveness and the Role of the Inner City. da Silva. March 2004. 1-28. Konishi. World Institute for Development Economics Research (UNU-WIDER). 36 35 I. Jenks and N. C.
D.Morgantown in developing this research. University of Oklahoma. (2) peaking.000 hours per year. and Energy Studies Review. the author held teaching and administrative positions at California State University. as a sampling.RECIPROCATING ENGINES: THEIR APPLICATION IN COMMERCIAL SECTORS Jack A. 169 . No. and West Virginia Re-Refining. The Journal of Energy and Development..S.. and a Ph. Fuller and Aseem Tiwari* Introduction he research data referenced in this paper was gathered to focus on the commercial application of reciprocating engines in a wide range of commercial sectors. and University of Northern Iowa and has served as a consultant for the U. and (3) standby. in the same discipline as well as an M. Professor of Decision Analysis and Operations Management. Mr. Fuller. Earlier.B. Data were collected on the number of reciprocating engines used in three main applications: (1) base load. Base-load applications represented operation of engines for more than 4. earned an undergraduate degree in electrical engineering from Iowa State University. Department of Energy. His articles have appeared in Journal of Energy Resources Technology. The authors acknowledge financial support from the National Energy Technology Laboratory (NETL) . 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). Ashland Coal. All rights reserved. Inc. All conclusions are those of the authors and should not be attributed to the sponsoring agencies. in the same field from the University of Arkansas. Ltd. The Energy Journal. Aside from his work on global market analysis for reciprocating engines. India) and an M.A. The Business Review..S. Los Angeles. among others. West Virginia University (Morgantown). Journal of Business and Economics Research. whereas peaking applications represented engines operating for less than 4. Tiwari is currently working as a consultant in mechanical engineering on projects including the design and development of a compact mobile emissions measurement system and marketing/strategic planning for a consumer product launch in Latin America.000 T *Jack A. 33. Aseem Tiwari holds a bachelor’s degree in mechanical engineering from Osmania University (Hyderabad. Journal of Energy Engineering. College of Business and Economics. both from West Virginia University. a master’s in business administration from the University of Iowa. Vol.
2 This can be attributed to their wide power range and flexibility. and institutional applications. high-density electric loads. and standby power in industrial. and other diverse types of power generation applications. reciprocating engines are more widespread. least expensive distributed power-generation technology in the world today. this amount—multiplied by tens of thousands—can have a significant impact on air . lawn care. The engine power output in megawatts (MW) pertaining to each application was reported also in order to determine the total power output in gigawatts (GW) generated in every sector. Spark ignition engines use gasoline or natural gas but can also be set to run on propane or special gases (such as landfill. marine propulsion. well-established in the power-generation market. According to the United States Department of Energy. trucks. reciprocating gas engines are the fastestselling. both on-road and offroad. remote power. allowing them to be used in numerous functions such as local power grid and substation support. While the average power engine emits only a small amount of pollution. However. in the United States and other industrialized nations. In certain instances. Reciprocating engines are internal combustion engines used in the distributed power-generation market. The standby application was divided into interconnected and noninterconnected categories. and considered a mature technology. residential. commercial. peak-shaving. internal combustion (IC) engines (SI and CI) can be set up to run in a dual-fuel configuration that burns primarily natural gas with a small amount of diesel pilot fuel for ignition. The introduction of the Automotive Emission Control program was a reaction to the rapidly decreasing quality of the air.170 THE JOURNAL OF ENERGY AND DEVELOPMENT hours per year. This is mainly due to the increasing number of engines. the production of these engines currently exceeds 35 million units per year for automobiles. Compression ignition engines operate on diesel fuel or heavy oil. diesel engines are increasingly being restricted to emergency standby or limited duty-cycle service because of air emission concerns.1 In comparison to alternative distributed-generation technologies. diesel engines historically have been the most popular type of reciprocating engine for both small and large power-generation applications. Of the various types of available engines. The total number of engines in these applications was then categorized into 48 major and minor commercial sectors.3 Types of Reciprocating Engines There are two basic categories of reciprocating engines being used for distributed power generation: spark ignition (SI) engines (typically fueled by gasoline or natural gas) and compression ignition (CI) engines (typically fueled by diesel fuel). or digester) for power generation. In North America. combined heat and power (CHP) applications. flare. construction and mining equipment.
and combustion are required. This turns the crankshaft creating mechanical power. the piston moves downward exposing the exhaust port. increasing the inlet pressure of the air and generating more power). elevator . The Environmental Protection Agency (EPA) uses six criteria pollutants as indicators of air quality: carbon monoxide (CO). A four-stroke engine generates a power stroke in two revolutions of the piston. A typical four-stroke engine has four cycles: intake. commonly known as the power stroke. and exhaust.’’ Standby systems are used by hospitals to satisfy fire and safety codes. The two-stroke engine produces more mechanical power but is less efficient and generates higher hydrocarbon (HC) emissions than does the four-stroke engine. The Clean Air Act requires certain methods of monitoring the criteria pollutants in the air. A compression engine operates in a similar manner. In the final cycle. the piston returns upward. compression.’’ cycle of an engine can be either naturally aspirated (allowing air in through the carburetor from its natural surroundings) or turbo-charged (where the air entering the engine is compressed through a turbo-charger. Compared to the four-stroke engine. appropriate amounts of fuel. compression. allowing the exhaust to escape. the fuel/air mixture is introduced. When the piston moves upward in a two stroke engine. they also differ in their stroke cycles. Reciprocating Engine Use in the Distributed Power-Generation Market The simplest distributed power generation application is ‘‘standby power. the fuel/air mixture is compressed to a critical pressure. intake valves located at the top open. ozone (O3). In addition to engines being able to use different types of fuels. oxides of nitrogen (NOx). The intake. and lead. the fuel/air mixture is compressed. and all of the states in the United States use the same methods to detect them. or ‘‘breathing. The spark plug then fires. while a two-stroke engine does this in one revolution. combustion (power). it is important to detect them and identify their sources. and the burned mixture is forced out. In the first cycle. After combustion.4 To prevent air pollutants from reaching levels that can cause harm. EPA has established primary and secondary standards called the National Ambient Air Quality Standards (NAAQS). sulfur dioxide (SO2).RECIPROCATING ENGINES: COMMERCIAL-SECTOR USE 171 quality. the exhaust valves open.5 Operation of Internal Combustion Engines For IC engines to function properly. the two-stroke engine operates somewhat differently. the piston moves downward in the cylinder. Rather. except there is no spark. particulate matter (PM). allowing the fuel/air mixture to fill the upper portion. igniting the mixture and forcing the piston back down. For each of these. air. As the piston returns upward. creating a spontaneous combustion.
The function of the engine in this application is to operate for a majority of the time to produce some or all of the facility’s power. where they offer payments for the use of such engines during periods of high electricity demand. water pumping. New technologies for the power-generation market are continually being investigated. improve power system and grid reliability. Engine manufacturers are continually producing more sophisticated emission control components and systems to meet more stringent emission standards. This type of application can be used to improve poor load factors or high electricity provider demand charges. (2) utilities coordinating peak-shaving programs. Peak shaving can be defined as one of three things: (1) customers generating power on-site during utility-defined peak periods. and other vital systems that could create distress if power is lost. Typically. and exhaust systems have all been modified to aid in this effort. Fuel. The other major application is in peak shaving. known as the Advanced Reciprocating Engines Systems Program (ARES). allows newer vehicles to produce less emissions. As new environmental standards become established. less environmentally evasive engines may become more popular. get better fuel economy. and lower cost power . Peak shaving is typically most effective when combined with other distributed generation applications. create ultralow emissions.7 With the deregulation of the electricity market and the growing need for a dependable power source. Continuous power is another distributed power generation application. such as in California. ignition. distributed power generation and reciprocating engines are a growing alternative to the use of utility power as one’s primary source of power. A study of the reciprocating engine distributed power -generation industry showed that such engines are used mainly for industrial applications but can also be used in commercial settings to help alleviate certain costs. These independent systems automatically provide power when the primary source fails and/or falters in its voltage or frequency thus allowing operations to continue. and deliver better performance and power than those produced a few years ago. Over the past three decades. established engine manufacturers have entered into a cooperative program with the United States Department of Energy to create a new generation of natural gas-fired reciprocating engines. This program. Such standards may well impact the future popularity of reciprocating engines in the distributed generation market. the power output ratings for such engines are 1 to 30 MW. Recently.6 Peak-shaving applications are used to reduce the overall cost of peak-load power. while environmental factors have fueled the need for a more fuel-efficient engine that produces lower emissions. was established to improve fuel efficiency and flexibility. and (3) the use of reciprocating engines to reduce costs due to competitive market prices. engine technology has improved. Technology constantly is trying to keep up with the demand of customers and policy makers. through computerized engine control systems.172 THE JOURNAL OF ENERGY AND DEVELOPMENT loads. Utilizing electronic fuel injection.
currently operating in 48 major and minor commercial sectors in the United States.450 operating engines as of January 1.000 hours per year. public buildings. Competing technologies that are available now. One primary source of such information was the ‘‘Annual Power Generation Order Survey’’ conducted by the publication Diesel & Gas Turbine Worldwide for the years 1978 through 2003. such as fuel cells and micro-turbines. 2004. as of January 1. business services. 1 to 30 MW in size. Base-load applications represented continuous operation of engines for more than 4. or interconnected standby applications. hospitals. The telecommunications sector is observed to be the most popular with 4.657.000 hours per year. with most of these being used in the electrical utility sector. (2) peaking. A total of 285 engines were reported to be operating in peaking applications. The total engine power output in GW was determined in each of the three applications to report the total power output in GW generated in every sector. A horizontal comparison within all sectors can be used to reveal the most popular sectors. The total number of engines operating in this sector was reported to be 2. base-load. Efforts such as these will determine the future of reciprocating engines in the highly competitive power-generation market where more efficient and environmentally friendly generators will be needed. with 2.618. The hospital application area was the second most popular. Research Study As one of the objectives of this research study was to determine the approximate total number of reciprocating engines. engines operating in every sector were categorized into three main distributed powergeneration applications: (1) base load. used for this application in the United States was 17. The peaking application was noted to be more popular than CHP. and prisons utilized the largest number of engines in this application category. The standby application was divided into interconnected and non-interconnected categories. and (3) standby.RECIPROCATING ENGINES: COMMERCIAL-SECTOR USE 173 technologies. whereas peaking applications represented engines operating for less than 4. The total number of operating reciprocating engines. 2004. Results The data reported in table 1 revealed that the most popular application area was for non-interconnected standby operations.663 reciprocating engines being used for . appear to be more environmentally friendly and may pose a real threat to the reciprocating engine’s firm hold on the distributed power-generation market. The service category for rental for temporary use also utilized a significant number of engines in non-interconnected applications. Sectors such as telecommunications.
203 28 852 509 181 9 4 3 210 52 142 3 36 9 33 24 531 217 (continued) .Table 1 174 DATA ON RECIPROCATING ENGINES OPERATING IN COMMERCIAL SECTORS IN THE UNITED STATES IN THESE PRIMARY APPLICATION AREAS. JANUARY 1. 2004 Other NonInterconnected Applications Commercial Sector 4 2 3 107 10 15 229 9 3 7 3 3 7 18 36 942 18 848 487 125 Non-Interconnected Combined HeatBase Interconnected Emergency/ Power Load Peaking Standby Standby Total Applications 2 4 4 4 1 1 15 53 4 1 1 2 3 7 2 3 15 3 2 10 1 9 200 36 127 18 8 6 1 THE JOURNAL OF ENERGY AND DEVELOPMENT 6 5 2 6 2 3 Agriculture Livestock production Fishing Oil extraction Offshore oil platforms Mining Electric utility Natural gas transmission Water supply Wastewater treatment Food Textiles Lumber Paper Printing Petroleum refining Chemicals Plastics and rubber Cement Primary metals Fabricated metals Machinery Electronic equipment Transportation equipment 9 18 18 526 213 1 1 4 2 2 7 107 62 1.
etc. circus.685 71 2.630 376 53 180 25 55 182 624 1.296 36 1.685 71 20.657 737 1.663 376 55 182 29 56 182 624 1.296 36 6 1. 2004 Other NonInterconnected Applications Commercial Sector 2 Non-Interconnected Combined HeatBase Interconnected Emergency/ Power Load Peaking Standby Standby Total Applications 4 1 2 4 22 14 7 2 2 9 1 3 17 6 36 31 2 4 1 73 18 127 4.356 688 307 2.436 236 1. JANUARY 1. insurance. real estate Universities Hospitals Non-hospital medical buildings Social assistance Museums Casinos Hotels Data centers Office buildings Prisons Railroads Private houses Public buildings Construction companies Rental for temporary use In-field movie making.346 RECIPROCATING ENGINES: COMMERCIAL-SECTOR USE Miscellaneous manufacturing Motor vehicle parts Motor vehicle dealers Water transportation Retail stores Telecommunications Broadcasting Business services Finance.618 6 1 175 229 2 4 73 20 127 4. Total 2 12 10 285 159 17.Table 1 (continued) DATA ON RECIPROCATING ENGINES OPERATING IN COMMERCIAL SECTORS IN THE UNITED STATES IN THESE PRIMARY APPLICATION AREAS.361 737 1.450 236 1.958 .399 708 350 2.
349 786 212 Non-Interconnected Combined HeatBase Interconnected Emergency/ Power Load Peaking Standby Standby Other NonInterconnected Applications Total Applications 4 5 4 7 1 2 29 81 7 2 1 4 4 12 2 5 26 8 3 19 3 10 318 49 157 30 9 11 1 THE JOURNAL OF ENERGY AND DEVELOPMENT 6 7 4 9 4 9 3 19 Agriculture Livestock production Fishing Oil extraction Offshore oil platforms Mining Electric utility Natural gas transmission Water supply Wastewater treatment Food Textiles Lumber Paper Printing Petroleum refining Chemicals Plastics and rubber Cement Primary metals Fabricated metals Machinery Electronic equipment Transportation Equipment Miscellaneous manufacturing 38 33 765 405 2 4 4 2 4 14 861 116 3.481 24 1.018 38 1.Table 2 176 TOTAL POWER GENERATED IN MEGAWATTS (MW) IN ALL COMMERCIAL SECTORS UNDER THE THREE MAIN APPLICATION CATEGORIES. 2004 Customer Category 4 2 9 861 47 50 430 13 7 18 4 5 14 54 48 2.357 833 296 16 6 5 337 72 179 3 61 14 63 42 774 418 3 (continued) . JANUARY 1.
Table 2 (continued) TOTAL POWER GENERATED IN MEGAWATTS (MW) IN ALL COMMERCIAL SECTORS UNDER THE THREE MAIN APPLICATION CATEGORIES.353 661 110 279 50 63 289 1.097 2. real estate Universities Hospitals Non-hospital medical buildings Social assistance Museums Casinos Hotels Data centers Office buildings Prisons Railroads Private houses Public buildings Construction companies Rental for temporary use In-field movie making.415 960 517 4.524 441 5.869 337 2.362 2.212 2.439 661 112 282 55 65 289 1. insurance.152 3.892 337 2.499 994 639 4.955 9 1 461 5 91 28 176 7. 2004 Other NonInterconnected Applications Customer Category Non-Interconnected Combined Emergency/ HeatBase Interconnected Standby Power Load Peaking Standby Total Applications 5 2 2 10 29 24 9 2 2 15 2 6 46 9 112 84 3 5 2 91 24 176 7.083 58 2.083 58 9 2.097 2.524 441 38. etc.179 RECIPROCATING ENGINES: COMMERCIAL-SECTOR USE Motor vehicle parts Motor vehicle dealers Water transportation Retail stores Telecommunications Broadcasting Business services Finance. Total 2 30 47 552 293 31. JANUARY 1.152 3. circus.671 177 .
and the electric utility sector generating 3. in reviewing tables 1 and 2 together. Goldstein et al. The telecommunications sector operated the largest number of engines in the non-interconnected standby application category and also generated the largest power output on an annual basis among all of these commercial sectors.439 MW. This is of particular significance today with the current national interest in developing distributed power generation capability in the United States.018 MW. respectively. The power output generated by other applications was noted as being very low in comparison to the first two.178 THE JOURNAL OF ENERGY AND DEVELOPMENT distributed power generation. reciprocating engines are being used in many commercial sectors and contributing to a wide range of operations. NOTES L. with a total of 1. Department of Energy Efficiency and Renewable Energy. These 49 commercial sectors utilized reciprocating engines in three main applications. the most popular application was in the noninterconnected standby operation area. ‘‘Gas-Fired Distributed Energy Resource Technology Characterizations. both with respect to total number of reciprocating engines currently in operation and the highest power generator category.. The second most popular area was in other noninterconnected application with 5. 2004. Business services and public buildings also were reported as quite popular applications (in that order).671 MW was reported in all sectors. November 2003.955 MW. The other popular sectors generating comparable power outputs were noted to be hospitals at 4. A horizontal comparison between all sectors reveals the total power output in MW of engines operating in popular sectors. with telecommunications generating the highest at 7.399 and 1. NREL/TP-620-34783. The non-interconnected standby application was found to be the most popular.361 engines being used as of January 1.083 MW. This article is the third in a series by the authors on reciprocating engines as a source of distributed generation: ‘‘Reciprocating Engines: Their Use as a Source of Distributed Power Generation in North America’’ and ‘‘Reciprocating Engines: A Global Comparative Study as 1 .685 engines. The data reported in table 2 also show the total power output generated in all the sectors operating in three main application areas. Reciprocating engines have been and will likely continue in the future to be a major contributor to distributed power generation in the United States across a broad spectrum of commercial sectors. Conclusions In conclusion. Just as with the data on number of engines in table 1. S. whereas rental for temporary use was the third most popular area with 1.’’ U.362 MW. prisons generating 3.892 MW. A total power output of 38. The total power output generated in this application reached 31.
see U. ‘‘National Ambient Air Quality Standards (NAAQS). Distributed Energy Resources.epa. California Energy Commission. U. Advanced Reciprocating Engines Program.’’ The Journal of Energy and Development. ‘‘Advanced Reciprocating Engine Systems Program Fact Sheet.S.gov/ttn/naaqs/..epa. 191-98.RECIPROCATING ENGINES: COMMERCIAL-SECTOR USE 179 a Source of Distributed Power Generation.’’available at http://www.S.gov/de/pdfs/reciprocting. Sacramento.eere.energy. U. respectively. U.eere. Distributed Energy Resources. 6 Scott Tomashefsky and Marks Mignon. 15-24. and autumn 2006.’’ P700-02-002.pdf. Environmental Protection Agency. pp.gov/ de/pdfs/gasrecips. Environmental Protection Agency. ‘‘Clean Air Act. 7 5 4 3 2 Ibid. Office of Power Technologies. Department of Energy. available at http://www.S.energy. June 2002.gov/oar/caa/. available at http://www. ‘‘Advanced Generation: Reciprocating Gas Engines.’’ available at http://www. ‘‘Distributed Generation Strategic Plan.’’ February 2001. For wide-spread pollutants.pdf. pp.S. Department of Energy. spring 2006.’’ Proceedings in 1990. California. .
Boussena. the evolution of this model has cast doubts on the durability of such a structure. Boussena has held a number of advisory positions on international energy issues including Senior Associate at Cambridge Energy Research Associates (1996 to 2001) and Special Advisor to Societe Generale (Paris) since 2001. but also on the country’s economic growth. Mr. All rights reserved. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). institutional and economic reforms. The Journal of Energy and Development. he served as the President of OPEC from 1990 to1991 and as Minister of Energy and Industry for Algeria from 1988 to 1991. The author also was Chairman and CEO of Sonatrach. P. Earlier. and C. Swartenbroekx). Pauwels. has rekindled the debate not only on the longterm outlook for Russian oil production and its contribution to the balance of world markets.D. However. Since 2004. the Algerian national oil and gas company. and The Journal of Energy and Development. Catherine Locatelli has been a Research Fellow at LEPII (University of Grenoble and Centre National de la Recherche Scientifique. 33. France. in economics from the University of Grenoble and is a specialist in Russian energy. France) since 1990. In terms of production and exports. Le de ´trolier: Questions actuelles du pe ´trole et du gaz. and Caspian and Chinese energy issues. 181 . the decline in output observed in 2008. Vol. No. Among her publications are Energie et transition en Russie: ´fi les nouveaux acteurs industriels (with S. following the slowdown in growth of 2005 and 2007. as well as articles in such journals as The pe International Journal of Global Energy. In ´´ ´ ´ 2006. he was appointed General Academic Editor for the OPEC Energy Review.THE BASES OF A NEW ORGANIZATION OF THE RUSSIAN OIL SECTOR: BETWEEN PRIVATE AND STATE OWNERSHIP Sadek Boussena and Catherine Locatelli* he reforms and privatization programs of the 1990s structured the Russian oil industry around a few large national and private companies within a network of complex power relationships with the federal state and the regions. Energy Policy. The question we T *Sadek Boussena has been Professor of Economics at the University of Grenoble. Russia is a decisive player in international oil markets. She holds a Ph. and a Senior Researcher at the LEPII (Laboratoire d’economie de la production et de l’integration ´ ´ international) since 1992. J.
It is in the approach itself that there seems to be innovation. China. First. implies the need for a different development model for rent industries from that of a system of private holdings dominated by banks. the State intends to use Russia’s oil power as an international political tool in its relations with the major powers of the United States. the government can use the oil sector to support economic growth. This would bring an end to the overexploitation of existing deposits. Second. In contrast with the situation over the past 10 years. This would involve sharing the rent in a different manner (more in favor of the State). The failure of the reforms. Other approaches are therefore necessary. the Russian government now wants to harmonize its oil policy in accordance with the means it effectively has at its disposal and the economic and institutional constraints resulting from its transition to a market economy. which is largely dependent on the hydrocarbon sector. Third. in the final instance. they want to ensure the long-term future of the oil industry by encouraging greater investment in exploration. and Japan. the State intends to exercise stricter control over this industry by relying on a private sector that would be linked closely with a public sector and would respect the ‘‘national interest’’ as defined by the government. Europe. These three objectives are not incompatible with a redistribution of the oil rent between different private groups and entities that are close to or useful to the Russian government. effectively. . The main aim of this article is to underline the fundamental principles of Russia’s new oil policy. Our conclusion is that the changes brought about by the Russian government’s new energy policies are not contrary to the main objectives of an oil industry that is interested in operating efficiently. the authority that coordinates rights concerning the disposal of assets. There are three main reasons why the Russian authorities want to ‘‘take back’’ the oil sector. the lack of transparency and uncertainty in the institutional environment in Russia that until now has cast serious doubts on the capacity of the State to regulate rent industries through classic market mechanisms from the point of view of both taxation and access to resources. and following the standards and rules operating in a market economy. They show that the methods of sharing oil revenues adopted in the 1990s under the presidency of Boris Yeltsin are being challenged. those that will structure its future organization. given the tensions observed in the hydrocarbon markets. The State seems to choose a ‘‘hybrid governance’’ of the hydrocarbons sector. in which it remains. especially with regard to setting up a clearly defined and secure system of private ownership rights. From 2010 on. In this respect. The conflicts surrounding the merger of Gazprom and Rosneft (in 2005) are an indication of the various power struggles affecting the reorganization of the Russian oil industry.182 THE JOURNAL OF ENERGY AND DEVELOPMENT should be asking is whether or not the drop in Russia’s output is simply related to the current economic climate or if it is symptomatic of changes of a more structural nature.
During the period of restructuring of the Russian oil industry. TNK and Siberian Oil Company (Sibneft) acquired equal shares in control of Slavneft. TNK-BP since 2003). the banks created by the holding companies themselves (Lukoil. and Surgutneftegaz (SNG) account for 65 percent of production and over 50 percent of crude exports. Restructuring of the Oil Industry in the 1990s: The profound restructuring that occurred in the 1990s led to the emergence of an oligopoly structured around three main groups that replaced the hierarchical centralized organization of a planned economy. But this reform attempt has been unable to remove the uncertainties about the future of the energy industry.’’ that is. It is made up of five large. Yukos acquired 54. and TNK acquired control of Sidanko (Siberian and Far East Oil Company).g. Yukos (at least until the end of 2004). in the neighborhood of 5 million barrels per day (b/d) between 1987 and 1998. the Russian oil industry reform was intended to produce a new organizational model based on a different system of private enterprises. with Rosneft accounting for 4. Following the Loans for Shares program of 1995.RUSSIAN OIL-SECTOR REORGANIZATION The Revival of the Russian Oil Industry 183 As part of the ‘‘liberal’’ approach to transition developed by the proponents of the Washington Consensus view. This concentration of the oil industry was brought about by the vast merger movement that took place in the late 1990s when Lukoil acquired 100 percent control of KomiTek.or medium-sized companies that are not vertically integrated. The last and more heterogeneous group is made up of integrated or non-integrated companies that are majority-owned by the State (for Rosneft and Slavneft until 2002) or by regional governments (e. However. their share in production is marginal. In particular. TNK-BP) and the companies held by ‘‘insiders.05 million b/d (the lion’s share contributed from Russian operations) but began to . Surgutneftegaz). nevertheless. vertically integrated companies responsible for production through to the distribution chain: Lukoil. despite considerable production increases since the end of the 1990s. the industry has to deal with the major challenge represented by the necessary development of oil-rich Eastern Siberian in light of the gradual depletion of the major deposits in Western Siberia. Tatneft and Basneft).2 The first.1 The idea was to redefine ownership rights through vast privatization programs. between the companies held by banks ‘‘outside’’ the group (Yukos.2 percent control of Eastern Oil Company (VNK). production dropped considerably. Output peaked in the then-Soviet Union in 1987 at 12. most of the shareholders in this group were Russian banks.8 percent of production in 2003 (see table 1). Tyumen Oil Company (TNK.3 The second group is composed of small. with a fundamental distinction.. which accounts for most of the country’s oil production (72. Sibneft.6 percent in 2003). while trying to stimulate competition by breaking up the old Soviet hierarchies. is formed by private industrial and financial groups.
23 3.65 million b/d in 2006 and 9. 1. p.184 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 1 THE MAIN RUSSIAN OIL COMPANIES. PRODUCTION.1 6.6 1.59 0.1 million b/d by 2020.6 0.S. and 6. The International Energy Agency (IEA) also has made a drastic revision to its forecast for 2030. Russia’s oil output recovery has been spectacular (7.63 million b/d.2 0.4 million b/d in 2003. Russian output will be only 9.7 million b/d for 2030. and 9.2 0. since the close of the 1990s. Group owned by ‘‘insiders’’ Lukoil Surgutneftegaz Subtotal Majority national or regional government ownership 1. 2003 AND 2004 (in million barrels per day) Production 2003 Crude Oil Exports 2003 Companies Private vertically integrated companies 1. Regional Bashneft Tatneft Total Source: Petroleum Argus. which might suggest that a new development phase is opening up in the wake of the reforms.S. AND EXPORTS.4 percent. Russian production was around 7.87 million b/d in 2007) and the first annual decline in output in 2008 (9. According to the 2009 World Energy Outlook.4 0.2 million b/d in 2004). 8.7 and 12 million b/d for 2030. .6 1. The latest official forecasts (Energy Strategy 2030 endorsed in 2009) place output at 10. National Rosneft 2.38 0.0 million b/d by 2030 in contrast to the 10.9 million b/d for 2020 and between 9. This outlook in terms of production naturally will have repercussions in terms of exports.1 million b/d in 2002. exports could vary between 6. Uncertainties Concerning Russian Oil Production in the Medium Term: Forecasts for 2020 to 2030 show the scale of the uncertainty surrounding Russian output.5 8.3 million b/d by 2030. with estimates varying between 9 and 11.85 million b/d. BY TYPE. bottoming out in 1998 at some 5.6 million b/d forecast in the Agency’s 2004 World Energy Outlook.3 and 7. equivalent to an average annual growth rate between 2008 and 2030 of no more than 0.8 and 8.1 0. Group owned by banks Yukos TNK-BP Sibneft 2.71 million b/d) are rekindling the debate about Russia’s contribution to world oil supply.1 0. In 1992. February 28. 2005.12.4 0.7 decline even before the breakup of the U.2 0. The slowdown in oil output growth (9. depending on the scenario (table 2). According to the available ‘‘Russian’’ scenarios.41 2. However.R.6 1.58 0.
P. 2004. 2008. 2008 Innovative High level hydrocarbon prices Ecological oriented scenario Institute of Oil & Gas Geology Energy Strategy 2020 Optimistic variant Moderate variant Critical variant 2015 2020 2030 185 9.0 10.9 11.3 10. ‘‘Russian energy policy and the global crisis.8 12.8 11.9 11. are likely to have a significant impact on the balance of the international markets.6 10.RUSSIAN OIL-SECTOR REORGANIZATION Table 2 ESTIMATES OF RUSSIAN OIL PRODUCTION. The factors that have enabled production to increase since the beginning of the 2000s are disappearing.3 10.0 10.0 - 10.2 10.4 10. Future increases in output (or even maintenance of present levels) will depend on implementation of development policies different from those that have driven the revival of this industry.0 - 10.0 10.’’ Laboratoire d’economie de la production et de l’integration ´ ´ international (LEPII). and 2009).’’ Energy Economist.2 10. this new approach will require other types of strategies from the main private actors in this sector.’’ Seminar on Le futur des marches du gaz en Europe.7 12.4 9.2 11. International Energy Agency (IEA).3 11. World Energy Outlook (Paris: OECD/IEA. 2010.1 9.7 9. A.4 10.2 10.7 10.2 2007) 10.0 9.6 10. These low projections. October 2009. AND 2030 (in million barrels per day) 2010 World Energy Outlook.3 10.8 8.9 10.8 10.9 10.6 10.6 9. 2009.0 10.9 7. ‘‘Strategic Development of the Russian Gas Industry for the Year 2030. Gromov. Hanson.4 10.7 11. 5-7. pp. . whether for 2020 or 2030. 2007 Energy Strategy 2030 approved in 2009 Projections of Energy Strategy 2030 (Bushuev Inertia scenario Raw energy scenario Innovative scenario Institute of Energy Strategy. despite a slowdown in world demand linked to the 2008-2010 economic crisis. April 24.0 10. 2015.6 10.3 10.2 10. Consequently. Renewal of Reserves: A Matter of Growing Concern The significant differences between the various estimates bear witness to the uncertainties characterizing the Russian oil industry despite the sweeping reforms of the 1990s. 2020.0 6.3 Sources: Organization for Economic Cooperation and Development (OECD).0 9.6 10.6-10.6 10. University of Grenoble. IEA 2009 2008 2004 Makarov.
6 Despite individual differences among them. and longer time frames. and 4. with investment being made in enhanced recovery techniques to produce oil from the most accessible resources at the expense of a balanced drilling program. Strategies expose the development of the oil resource to stripping practices. this figure was 5 percent. Yukos is the best example of this type of development. Between 2000 and 2002.5 The strategy of maximizing output and thus of rehabilitating (the most profitable) deposits during the Soviet era was accompanied by very low investment in exploration. In other words. riskier strategies. The strategies of vertically integrated companies are characterized by two aims: maximization of exports. Investment in exploration has been falling steadily since the early 1990s. Russia’s hydrocarbon deposits currently in production are 50 percent depleted. and its corollary.9 Companies have increased their reserves essentially through asset stripping made possible by operating huge mergers and creating an extremely concentrated industry. which is a way of obtaining a much higher unitary income than that obtained from domestic sales. Significant differences exist depending on the type of vertically integrated company. vertically integrated companies have invested very little in exploration. the additional 2. But taken as a whole.8 Cash stripping was brought about by the behavior of actors born of the privatization movement. Management of the oil industry thus is extremely unbalanced.186 THE JOURNAL OF ENERGY AND DEVELOPMENT The Period of Intensive Exploitation of Existing Deposits: Most of the additional output from 1999-2005 can be attributed to two main sources: oil that was not extracted during the transition period in the 1990s (in 1994. 28 percent of Russia’s oil wells had ceased production) and oil left in the ground because of the extraction practices of the 1980s. particularly when the main shareholders of these private companies are ‘‘outside banks. their aim being to increase the value of their shares.7 Only Surgutneftegaz and Lukoil have maintained a real strategy of investment in the exploration of new oil-rich areas. less than 2 percent of investments made by Yukos and Sibneft were in exploration.90 million b/d in 2000 to 4. the increase has come from the rehabilitation of existing deposits.’’ The essentially financial rationale of these private groups means that their sole concern is financial performance.43 million b/d in 2007. which they did even during the period of reorganization.98 million b/d in 2004.4 million b/d lifted between 1999 and 2003 came from deposits already being worked at the end of the Soviet era. This company’s increase in production (0.4 Thus. These companies had adopted a short-term strategy of seeking immediate liquidity by maximizing exports in order to rapidly increase the value of current assets. In the case of TNK. maximization of production. The substantial increases in oil output since 1999 has enabled Russia to boost its exports from 2.8 million b/d between 1998 and 2004) has been achieved through use of enhanced recovery techniques to extract oil . although exports to Europe have always been high despite the decline in production between 1990 and 1998.
In fact. low population density. the problem of ensuring the efficient management of existing reserves must be addressed.15 This development will require investment and therefore considerable financial commitment given the production conditions (climate. around 4 percent for Eastern Siberia. according to the IEA. namely in Eastern Siberia. a few comments should be made. additions to reserves have no longer exceeded production.RUSSIAN OIL-SECTOR REORGANIZATION 187 from the most profitable deposits while.12 Second.11 From the mid-1990s.5 percent in 2000. and geological complexities).13 The low level of exploration since the beginning of the 1990s raises questions concerning the start of production in the new oil-rich areas in light of exhaustion of deposits in the large Western Siberian basins.16 Unexpected Results of Privatization A key question still remains unanswered today: why has privatization failed to achieve its stated aim of creating a more efficient and balanced (ensuring its longterm future) oil industry in Russia? Why has privatization led Russian oil companies to adopt short-term strategies? The principal goal of reform was to create Western-type private enterprise and thereby encourage the development of . in contrast to the situation during the Soviet era. the contribution of these regions to oil production (except the Vankor’s field) is marginal. the increase in output seems to have been achieved without any control from the Russian authorities concerning the conservation of deposits or reservoir management. 35 percent of its oil wells have closed and investments in exploration have been among the lowest of the Russian oil firms. Probable Long-Term Effects: Even if we do not wish to enter into the debate over the true extent of Russia’s estimated reserves. or even be maintained at its present level. this was mainly due to the reassessment of the potential of developed oil fields in the light of new technologies. Furthermore. Two factors in particular are likely to be problematic in this respect. new production capacity and thus considerable investment will be needed. the proportion of total proven reserves in all explored reserves has dropped considerably (categories A + B in the Soviet classification). and offshore with Sakhalin. First. Although in 2005 and 2006 additions were once more in excess of production. at the same time. Yukos has made extensive use of the tax reduction schemes set up by the federal government and regional authorities. geographical constraints. The country has potential production areas. 60 percent of these proven reserves are in the ‘‘difficult to recover’’ category. long distance between points of consumption and production areas.8 percent in 1958 to only 26. the northern territories (Timan Pechora and the Komi Republic).14 Despite the significant reserves. falling from 67. which are much more difficult than those in Western Siberia.10 While there is no denying the productivity gains from re-opened wells. If Russian oil production is to increase.
First.19 Second. and particularly the lack of investment in exploration. They resulted more specifically from the incompatibility between the ‘‘liberal oil model. Despite a legal framework based for the most part on Western standards and rules. The purchase of shares at rock-bottom prices. Privatization of the hydrocarbons sector has led to a lack of security concerning the right to use assets.’’ born of the reforms and focusing on private property rights. manipulation of the bankruptcy law linked to the weakness of the rule of law (in other words. This practical approach gave a kind of legal recognition to the exploitation of deposits that the Soviet Union had de facto granted to production associations that were used as the basis for creating . Privatization of the oil industry essentially has attenuated the former Soviet system of ownership rights. In order to rapidly reorganize and privatize the oil industry. the State blocked the transaction knowing that the transfer of strategic assets was at stake. participation of banks in auctions they themselves have organized and won. the way in which exploration and development licences are granted is creating extreme uncertainty over access rights to Russian oil resources. giving holders of private ownership rights temporary and partial access rights to asset ownership.20 In such conditions. the way in which the law is applied) has taken away the traditional function of the bankruptcy process and made it into a tool for stripping. along with a redefinition of ownership rights through privatization. Privatization was based on two main rationales: organizational reform centered on a principle of vertical integration in order to determine the optimum boundaries of a company. the State does not feel bound to respect ownership rights.17 So the investment strategies adopted by Russian oil firms in the 1990s can be explained by the institutional architecture of this industry. the privatization processes have been widely perceived as illegitimate. Uncertainties Surrounding Ownership Rights: The short-term strategies of oil companies. most of the licences granted to companies were not subject to a tendering procedure. as required by law. these rights are still subject to considerable uncertainty.18 The right to sell assets is coordinated by the state. Despite a reform program aimed at establishing a clearly defined and secure system of ownership rights. as would happen in market economies—the Yukos affair offers a good example of this. the lack of tendering procedures. and the failure of the successful bidders to realize the investments they were supposed to realize in the company all bear witness to the lack of transparency surrounding these privatizations. There are uncertainties over access rights to resources. When Yukos was negotiating the sale of 40 percent of its shares to ExxonMobil in 2003. and the Russian institutional environment. stem from the unexpected results of a privatization process that has taken place in an institutional environment characterized by weakness of the rule of law.188 THE JOURNAL OF ENERGY AND DEVELOPMENT management methods and behavior in the oil industry that were more efficient than those prevailing in the Soviet centrally planned economy.
23 This internal pricing system is seen as a way of reducing the tax burden from hydrocarbon sales through offshore subsidiaries of oil companies established abroad. the State does not exercise efficient control over its tax revenues (table 3). The authorities thus organize ‘‘offshore zones’’ within their regions and play a very significant role in these tax evasion schemes. Sibneft. The tax system is a vital tool in the hands of the state for influencing the strategies of oil companies. at the same time. TNK) of the tax exemption schemes set up by certain regional authorities (the regions of Chukotka. Certain doubts surround the right to income from ownership. In the first instance. Russia’s fiscal regime is organized around two main taxes. The most powerful vertically integrated companies thus have been able to develop a wide variety of tax evasion schemes.25 The extreme use by some companies (Yukos. it has not really provided the economic incentives needed to persuade players to help the state achieve its objectives. and Kalmykia) is part of this rationale. In theory. It is struggling to get the large industrial groups to pay their tax debts. In the 1990s. given the considerable difference between domestic market prices and those of export markets. based on the value of the oil production. This shows that it was hardly appropriate to transpose the most advanced institutional models of market economies in to the Russian environment of the early 1990s. Finally. Mordovia.21 But. . oil companies have had the right to export 25 percent of their production. it should be pointed out that the quota system for gaining access to the Transneft transportation network.RUSSIAN OIL-SECTOR REORGANIZATION 189 holdings. In Russia. Sharing the Oil Rent: A Battle between the State and the Major Companies: The weakness of the formal market institutions has stood in the way of operation of classic market economy mechanisms with respect to the State’s payment as owner of underground natural resources. The extremely complex structure of certain vertically integrated companies makes it possible to practice transfer prices. The first concerns the mining of mineral resources (Mineral Extraction Tax) and imposes a tax akin to a royalty. and thus to export markets.22 Inspired by practices in Western economies. limits access to revenues (particularly in hard currency). The second is a tax on exports. it offered the State the perfectly legal option of reallocating certain licences.24 Transfer prices also provide a way of limiting tax pressure in that crude oil prices are undervalued. In practice. The discretionary practices of Transneft (depending on the objectives of the State) are creating an unstable environment for Russian companies and making any kind of contractual relations largely ineffective. A further tax is levied on profits (table 3). Yukos) have been able to ‘‘bargain’’ for much higher percentages while other companies have been unable to access the Transneft network. some of the most powerful (Lukoil. the state was unable to persuade private operators to take its own interests into consideration through the use of classic market economy incentives like tax regimes.
in a context marked to a greater or lesser extent by corruption. it seems in many respects to be fairly basic or at least to pay little attention to the particular exploration and development conditions of the various oil fields (especially differences in costs related to geographic location and geological conditions). 18-21. Information asymmetry between the State and Russian oil companies is particularly marked in this area. and the fields of Timan Pechora and the Yamal peninsula (for 7 years). February 5. No details have been released yet on when this tax break will be introduced or for how long it will be effective.190 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 3 MAIN CHARACTERISTICS OF RUSSIA’S OIL-SECTOR TAXATION POLICY: TWO PRINCIPAL OIL TAXES . 2008. Second. and the Yamal peninsula. . Yet differentiation is essential to stimulate exploration. 2. Furthermore. the State is incapable of setting up an effective taxation system based on the quality of deposits. However. oil companies pay between 75 and 80 percent of their revenue in taxes.26 But perhaps the State is not in a position to specify in detail the exploration and production licences to be granted.’’ Argus FSU Energy.An export duty that varies with the international price of crude oil Today. 2010. Russia’s oil taxation system has offered very little in the way of incentives to induce oil companies to commit themselves to the higher-risk investments required for developing areas with the most adverse production conditions. 2009. it probably would be very difficult for the State to implement an elaborate system of differentiated taxation. fields of East Siberia (for 10-15 years). 2009.’’ Petroleum Intelligence Weekly. offshore fields. April 2009. on the order of $17. ‘‘Duty Calls.’’ Oil and Gas Journal. especially in areas where production costs are high such as Eastern Siberia. A list of oil fields already has been approved by the government. the mineral extraction tax would be applied only above the threshold of $15 per barrel compared with $9 at present. a zero export tax for certain fields in Eastern Siberia.40 per barrel and . The use of a single tax. although different rates could be introduced according to the quality of the petroleum products. since it does not have the necessary information. a ‘‘tax holiday’’ for oil companies developing offshore fields (for 15 years). since adjustments should reflect oil price trends. irrespective of the quality of the deposits. The export duty remains unchanged. ‘‘More Tax Breaks for Offshore Fields. ‘‘More Fields Lined Up for Zero Duty. ‘‘Russia Redesigns Fiscal Policy to Boost Oil E&P. and 3. pp. Given this situation and the urgent need to renew investment in exploration. the government has agreed to a certain number of tax breaks. These high levels of taxation are often quoted as one of the reasons for the lack of investment from oil companies. November 20. Compared with the tax regimes in place in market economies such as Norway or the United Kingdom.The Mineral Extraction Tax. at least has the merit of simplicity and. September 22. Sources: ‘‘Petroleum Moscow Urged to Clarify Output Policy.’’ Argus FSU Energy. The main ones include: 1. It could be lengthened to include other fields. Given its particularities.’’ Argus FSU Energy. July 31. to a certain extent. they would be made more rapidly to avoid having the highest tax rate at the moment when prices fall. prevents large-scale fraud.
this must involve. which allows legal and fiscal regulations to be circumvented and market institutions to be manipulated.27 The Russian oil firms to a great extent have tried to maintain a certain opacity in their manner of operation in order to ensure that the rent continues to be shared in their favor. and where privatization has not produced the desired behavior). notably Yukos. The State must now define a coherent. greater investment in exploration than in the past. for a wide variety of reasons. J. is something that the dominant actors do not want to see disappear insofar as the uncertainty and lack of transparency in the institutional environment enables them to conserve their financial gains. the rent industries must feed the State budget more substantially.29 The State must also arrange with the oil companies for a new way of dividing and sharing the hydrocarbon rent so that this sector can be used to help achieve the economic growth objectives announced by Vladimir Putin. While Russian growth remains largely driven by international hydrocarbon prices. it was important for them to avoid any legal provision that would imply greater transparency (in terms of information) and compliance with fiscal regulations. In a study carried out in 2002. and redistribution of the oil rent to provide a basis for economic growth are factors justifying the State’s determination to regain control of the hydrocarbon sector. which may explain the strong opposition from certain Russian companies. But such a revival will only come from a compromise among the various interest groups.g. notably between the State. Specifically. in particular via the tax regime. In the Russian institutional context.. A revival of the reform process might have been seen as a way of getting out of this institutional impasse. possibly slower growth). and the regional authorities. better management of oil production growth (e. In fact. An analysis of the institutional context reveals a vital requirement: this new oil arrangement must be compatible with Russia’s current institutional endowment (where market institutions are in their infancy. to some extent. where the rule of law is difficult to implement. the large vertically integrated companies.28 The weakness of the rule of law. Will Taking Back Control of the Oil Industry Provide a Way Out of the ‘‘Institutional Deadlock’’? The State must attempt to find a way of getting the oil in- dustry out of the ‘‘institutional impasse’’ in which privatization has more or less locked it. to the production-sharing agreement regime. it seems that neither the regions nor the oil companies have any interest in following this path or in strengthening the market institutions. a desire to contribute to maintaining high international prices. Rautava showed that a 10-percent rise in the price of oil would . centralized oil strategy to serve its goals both at home and abroad. The development of strategies to enable more balanced management of the Russian oil industry is crucial for its long-term future.RUSSIAN OIL-SECTOR REORGANIZATION 191 Why Does the State Want to Regain Control of the Hydrocarbon Industry? The need to orient strategies toward investment in exploration in order to conserve oil resources. and stricter State control over reserves in order to guarantee replacement of capacity.
The 2003 amendments to the 1992 Subsoil Law give the federal government (the Ministry of Natural Resources) exclusive control over granting exploration and development licences.31 In this context. Surgutneftegaz) and re-examination of the conformity of a certain number of licences concerning major deposits are part of this movement.192 THE JOURNAL OF ENERGY AND DEVELOPMENT lead to an additional 2. which in the past had considerable power in the industry. The challenge is to create a system that maximizes efficiency through private management while allowing tighter State control in order to set up a market economy that probably will be more in line with Vladimir Putin’s vision of Russia’s place and role on the international scene. the final objective of a hydrocarbon industry. Nevertheless. the gradual shifting of ‘‘core’’ output to Eastern Siberia could lead to a substantial increase in production costs. the government’s position might appear ambiguous in the sense that it is trying to reconcile contradictory goals.32 Consequently. In our opinion.33 The State’s discretionary reallocation of exploration and development licences to companies in which it is the main shareholder (Rosneft. Today. Russian oil output is certainly not insensitive to crude oil price levels. The State holds 30 percent of the Russian oil production with a huge modification of the industry structure (table 4). In addition.2 percent increase in GNP.35 A list has been drawn up of so-called strategic fields for which exploration and development licences are to be awarded directly by the State without the tendering procedure required by the law (Gas Law of 2006).34 This renewed control also is being achieved at the expense of the regions. In particular. is not called into question as the deregulated trading in Gazprom shares would tend to suggest. international prices will have to remain fairly high and Russia thus should avoid contributing to a possible period of decline in international prices by exporting excessively large amounts of oil. a private foreign investor can hold no more than a 10-percent share in a hydrocarbons firm or 5 percent if the foreign . It is important therefore for the Russian State to be able to maintain control over oil company export strategies. Stricter conditions of access to Russian natural resources and the State’s desire to exercise tighter control over this access are the first important signs that the central authorities are regaining control of the sector. all the ‘‘optimistic’’ production scenarios are based on relatively high prices in international markets. the Russian State is seeking to strengthen its control of the hydrocarbons sector while avoiding total re-nationalization of the oil industry.30 According to a recent World Bank report. whereas in the past they had joint power with the federal government to allocate licences. In fact.5 percent.36 Under the law on foreign investment in strategic industries that was adopted in May 2008. whose organization and regulations are in conformity with those of a market economy. the future of Russia’s oil policy is largely tied to a policy in favor of defending prices. Regional authorities simply have a consultative role. only high oil prices in the past have enabled Russia to achieve economic growth of over 5. Gazprom) or which benefit from State support (Lukoil.
50 percent public) RussNeft Yukos Companies with State majority stake Rosneft Gazprom Including GazpromNeft Regional companies Tatneft Bashneft Others (including production-sharing agreements) Total 193 Output 1.38 1. One significant question arises. The new role that the Vladimir Putin-led government intends to give to hydrocarbons in the country’s relations with its major partner countries similarly will be an important factor.52 0. and from Russia’s desire to become part of the world economy.73 0.’’ Petroleum Intelligence Weekly.RUSSIAN OIL-SECTOR REORGANIZATION Table 4 THE MAIN RUSSIAN OIL COMPANIES AND OUTPUT.89 1. the Group of Eight (G8) and the World Trade Organization (WTO). the role that foreign investors will be allowed to play is a major unknown. For greater participation. 3. investor is a state-controlled company.44 9. Further.23 0. p. Will there be one or several companies in which the State has majority control?38 Will Gazprom and Rosneft be at the center of the arrangement? The presence of two state-owned companies makes this model highly original. Pressure will mount in particular from international oil companies that wish to gain access to Russian resources.g. on the need to adapt to market rules..37 The final form of the new organization of the oil industry that the Russian authorities wish to establish has not been completely defined as of 2010.29 0.18 2. 2007. special permission must be granted by a commission headed by the prime minister.71 Source: ‘‘Russia’s Output Surge Slows to a Crawl. they very likely will be subject to restrictions or at least to the approval of . and on Russia’s foreign strategy.39 0.17 0. all the more so since these national companies could actually be competitors in numerous projects.98 0. January 28. from the European Union (to which Russia always has been a major hydrocarbon supplier). It will depend to a large extent on the current conflicts between the various pressure groups. e. Even if foreign oil companies are not excluded.24 0. 2008 (in million barrels per day) Company Type Private Companies Lukoil Tyumen Oil Company-BP (TNK-BP) Surgutneftegaz Slavneft (50 percent private. from the United States.
in particular its interest in participating in the Sakhalin liquefied natural gas (LNG) development projects. South Korea). Thus. clearly shows the ambiguity of the Russian government’s position. a state-owned firm. This means reinforcing its control over export networks via Transneft. China. Gazprom now has clearly established its intention of defining a truly global strategy. Russia can undoubtedly aspire to a more decisive role in price formation for this commodity. this would be the sign of a new power relationship emerging on the Asian energy scene. It is a question of restricting. . On the one hand. with the globalization of the natural gas markets. it is important to highlight the new relations that India is establishing with a few large Russian oil companies.S. The decision of the Russian authorities to choose the Japanese option via Nakhodka. and possibly even the North American market. where Total and StatoilHydro operate alongside Gazprom).41 It is a matter of maintaining or even increasing its market share in the European Union and positioning itself in the Asian and even the U. markets. the construction of private pipelines that would be owned by the oil companies. On the other hand. as far as possible. Russia can play on competition between Europe and Asia in its role as a reliable source of supply for liquids and natural gas alike. This source of financing would seem to have facilitated Rosneft’s purchase of Yuganskneftegaz. Moreover. Furthermore. the government intends to maintain control over the exports of the Russian oil companies. without excluding the possibility of a branch to China. The Russians are seeking to exert their influence through a strong presence in the energy supply sector for the large European and growing Asian markets.194 THE JOURNAL OF ENERGY AND DEVELOPMENT the highest authorities in the country (for example. the case of Shtokman. International Aspects of the Russian Oil Strategy: In addition to developing the oil sector. Russia can use its oil and—more importantly—its gas resources to play a major geostrategic role with respect not only to the European market (where it has a determining influence) but also to the major Asian countries (Japan.42 These developments are accompanied by bilateral oil supply agreements between China and Russia.39 Rivalry between Transneft and the Russian oil companies over pipeline routes implicitly involves the important stake of the export capacity of these oil enterprises. it is tending as well to bring the major Asian players into competition with one another in its program to develop the resources of Eastern Siberia. the policy of the Russian authorities appears to be aimed increasingly at setting up a coherent centralized strategy that provides the sector a future ‘‘comparative advantage’’ in international competition. The differences between China and Japan concerning the first Russian oil pipeline to Asia are an example. the Chinese National Petroleum Corporation has advanced a payment of $6 billion in exchange for a supply of crude oil from Rosneft until 2010. If the Chinese really played a key role in Rosneft’s acquisition of that Yukos subsidiary. Finally.40 At the international level and in the context of constrained world energy supply.
particularly with regard to the transport of Kazakh oil through Russian territory. It reflects the inability of the State to regulate a rent industry via the classic institutions of a market economy. particularly concerning the creation of a large hydrocarbon company with majority public capital. While the final goal is to set up a market economy that is totally integrated in the world market. This recent combination of public and private forms of governance in the industry can be seen as an attempt to escape the institutional deadlock in which this sector has found itself since the privatization movement. This renewed control also raises a number of crucial questions. The conditions and form of this control have yet to be defined.45 This international policy also could explain the redeployment and participation of the Russian oil companies (close to the State) in other oil-producing regions. can this hybrid model. and replacement of resources to slow depletion. notably in the Middle East and North Africa.46 Conclusion The State’s attempt to regain control of the oil sector is an important new factor in the development of the oil industry as it could lead to greater control over production.RUSSIAN OIL-SECTOR REORGANIZATION 195 In a context where there are tensions in world oil supply. which enhances the complementarities (rather than the competitiveness) between these two zones. Privatization alone has not allowed consolidation and security of ownership rights. a sort of third option. The general configuration of the oil industry and the opportunity given to international investors remain major unknowns. hydrocarbons represent a structuring element in the Russia’s foreign policy with members of the Commonwealth of Independent States—its ‘‘near abroad’’—and also with the southern European countries and those of Eastern Europe. Russia undoubtedly has a trump card to play in the context of the proposed ‘‘strategic partnerships. The numerous agreements signed between Russia and Kazakhstan. Gazprom and Lukoil are increasing their presence in these areas by securing holdings in firms undergoing privatization or through joint ventures.44 This is particularly true in Central Asia and the Caspian region. Finally. oil exports. and the ‘‘calls’’ from Russia to coordinate the oil policy of the two countries demonstrate the extent to which the Russian State intends to ‘‘reinvest’’ in the economic space of Central Asia and expand its influence in the region. whether they be tax regimes or regulations governing access to resources and development of deposits. a transition phase is now opening.43 The major Russian energy companies must be the principal vectors of this strategy through a policy of internationalization. serve as a form of governance for the hydrocarbons sector in the transition phase and enable Russia to become truly integrated into the G8 and the WTO? .’’ From this point of view. The major private players have had an interest in maintaining institutional uncertainty in order to increase their share of revenues.
Loukashova. 10 . In 2000. ´conomies Markets. The U. ‘‘Russian Economy: Trends and Perspectives.’’ Eurasian Geography and Economics. p.’’ Petroleum Intelligence Weekly. 5 6 4 3 2 1 Petroleum Intelligence Weekly.’’ Institute for the Economy in Transition. the transition envisaged by the Washington Consensus is based on a combination of neo-classical price theory. and Surgutneftegaz—the first two having made huge investments in enhanced oil recovery technologies (hydrofracture. It is opposed to the more institutionalist view of the transition. 9 M. and IHS Energy estimated reserves of 140 barrels at the end of 2001. September 8. according to BP. 2003. August 17. For example. Roland. p. p. 2009. La mutation des e ´conomique alternative (Paris: L’Harmattan. ‘‘Observations on the Problematic Potential of Russian Oil and the Complexities of Siberia. 45 percent of Surgutneftegaz production came from new deposits. and Firms (Cambridge: MIT Press. Russia’s oil reserves are of the order of 60 billion barrels. Recall that under the Soviet regime. 45. vol. and the experience of stabilization policies. 312. L. 2004. postsocialistes: une analyse e 2003). 148..196 NOTES THE JOURNAL OF ENERGY AND DEVELOPMENT According to G. horizontal drilling). standard macroeconomic theory. Investment in exploration in the oil sector fell by more than 30 percent in 2002 compared with 2001. Roland. Andreff. 2003). ‘‘Back to Earth. ‘‘Saudi Pact Shows Russia’s New Strength.’’ Special Report. International Energy Agency (IEA).S. Dienes. 321. 8 7 While Russian oil reserves are known to be substantial. no. Otherwise the shares had to be repurchased through a tender procedure (which was supposed to open up the trading of shares in the companies). Finam Investment Company. 366. Organization for Economic Cooperation and Development (OECD). cit. Geological Service evaluation is 207 billion barrels. Dienes. 40. This trend continued in 2003. Collection Pays de l’Est. In such systems. 5 (2004). The Loans for Shares program gave Russian banks control of some of the State’s shares in the capital of the holding companies for three years in exchange for credit facilities. pp. For a presentation of the two views of the transition. Over half of the increase in production is attributable to three oil companies—Yukos. At the end of this period. the government could take back the shares in return for repayment of the loans. the oil industry was organized like a government ministry that carried out the classic economic functions of a company. 2000) and W. Transition and Economics: Politics. Moscow. p.6 billion barrels. Sibneft. Oil and Gas Journal puts the figure at 48. between 1988 and 1994. there is considerable debate as to their estimated volume. investment in exploration fell by 60 percent. World Energy Investment Outlook 2003 (Paris: OECD/IEA. Lukoil has developed a strategy of investment in the exploration of new oil-bearing areas mainly in the North Caspian region and the Timan Pechora basin. p. 1-2. September 2003 and July 2003. L. For example. public or private oil companies do not exist. Production was the responsibility of technical production associations regulated by the Oil Ministry. see G. Monthly Bulletin. October 12. op.
‘‘The Regional Dimension of Russian Oil Production: Is a Sustained Recovery in Prospect. p. Back to the Future? Thoughts on the Political Economy of Expanding State Ownership in Russia.. Scenarios projecting output of close to 12 million barrels per day by 2020—in other words the top end of available forecasts—are based on the assumption that there will be significant development of these new areas. op. B. although it is difficult to put precise figures on the amounts involved. Sagers. should account for between 4. p. FSU Energy. no. 47. 1731-808. p. A.000 barrels per day. 3 (2007). Undervaluation is practiced by different oil companies to varying degrees. 17. Black. Kraakman. 328. 1992). 5 (2006). Transfer prices are associated with the creation by the company of trading companies that purchase oil from the company’s production units at undervalued prices and then sell it through an intermediate network to subsidiaries that for the most part are established in offshore zones. Petroleum Argus. The bankruptcy of Sidanko’s main production units in 1999 and their purchase by TNK is a perfect example of this type of procedure. 2008. Tompson. no. cit. Tucson. bankruptcy proceedings are only initiated against ‘‘entities’’ that keep an economic value. ‘‘Russia’s Oil Industry: Risk Aversion in a Risk-Prone Environment. 2009. op. FSU Energy.9 percent of Russian oil production by 2013. pp. Les cahiers Russie. 2004. V. vol. vol. A. Kryukov and A. p. CERI-Po.’’ Eurasian Geography and Economics.’’ Eurasia Geography and Economics. International Energy Agency.’’ Eurasian Geography and Economics. 2008). Runov. no. Walde. 16 17 15 14 13 L. R. vol. Centre For Petroleum and Mineral Law and Policy. 3 (2006).. op. 148. cit. 27. The investment company Finam has reported that certain companies have been able to buy crude oil from their subsidiary at $7 a barrel and resell it at between $20 and $23 a barrel. 48. ‘‘Russian Privatization and Corporate Governance: What Went Wrong?’’ Stanford Law Review. no. Arizona. Oil and Gas Legislation in Russia . 6 (Paris: Centre d’etudes et de recherches inter´ nationales. Organization for Economic Cooperation and Development. ‘‘Russia’s Energy Policy: A Framing Comment. T. J. pp. Tarassova. August 28. 505-45. W. Moe.. pp. Scotland: University of Dundee. 24 23 22 21 20 19 18 . 5 (2000). 47. 321-28.From Texas to Siberia: Is a Russian Model Emerging? Professional paper 6 (Dundee. pp. around 420. Dienes.RUSSIAN OIL-SECTOR REORGANIZATION 11 12 197 L. In fact. ‘‘Demand for Private Property Right in Post-Soviet Russia: Causes and Effects in Manufacturing and Extractive Industries.’’ 8th Annual Conference of the International Society for New Institutional Economics (ISNIE).3 and 4. August 15. exploited by Rosneft. op. M. that is. no. Petroleum Argus. Dienes. September 30–October 3. cit. This Eastern Siberian oil field. cit. Loukashova. Aslund. 25. and A. 341-57. p.
34 33 . Rautava. the substantial investments required for opening up deposits in more difficult and more remote areas. The Russian oil majors successfully lobbied the Duma against this particular system of investment in exploration-production. September 2003. Vishny. and Firms (Cambridge: MIT Press. 2000). ‘‘PSA Debate Not Over. Transition and Economics: Politics. P. According to these authors. and the inclusion of capital cost in the calculation.198 THE JOURNAL OF ENERGY AND DEVELOPMENT 25 A single tax on mining resources is applied.: The World Bank. Shtokman. 23-24. Vishny. pp. however. C. p.’’ FSU Energy. 1998). Four main factors are likely to push up these costs: harsher climatic conditions.’’ World Bank Policy Research. Hoff and J.’’ Petroleum Economist. 44. February 20. 2004.’’ BOFIT discussion papers. Bank of Finland. 2-3. whereby the creation of additional market institutions to consolidate ownership rights would result spontaneously from privatization. July 2003 p. Shleifer and R. this system has become the exception rather than the rule. p. ‘‘Dramatic Changes to Production-Sharing Regime. Working Paper 2934 (Washington. 26 27 ‘‘A Taxing Question. Russia Economic Report (Washington.: The World Bank. Talakan. Shleifer and R. Stiglitz. J. The Minister of Natural Resources believes that these licences are not forceful enough in establishing development and exploration obligations.C. made it a condition of their huge investment in the Russian hydrocarbons sector. 667-700. The re-allocation of licences for the Shtokman. Menard and M. Following amendments in 2003 to the Production Sharing Agreement Law. 9. and Sakhalin III deposits is an illustration of this movement. Konoplyanik. D.cfm? Newsletters__Ref=7224 K.internationallawoffice. Markets. it is true that there is—and will continue to be—considerable uncertainty surrounding the cost of producing oil from Russia’s reserves. December 2002). ‘‘After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies. Roland. This position is based on the critique of the thesis developed by A. Nonetheless. Konoplianik. The Netherlands: Springer. ‘‘A Struggle for Mineral Rent. and North Astrakan deposits are cases in question. ‘‘The Role of Oil Prices and the Real Exchange Rate in Russia’s Economy. P. Institute for Economies in Transition (BOFIT).’’ International Law Office. and G. A.’’ in Handbook of New Institutionnal Economics. The Kovytka. 3 (2002). 2005 at www. D. Accessed on March 21. Petroleum Argus. ‘‘Institutions and Firms in Transition Economies. p. The more stringent conditions for obtaining production sharing agreements are an illustration of this type of control. ´ Shirley (Dordrecht. pp. 2005).C. 21. International oil companies. 2004. less productive deposits. Bakoulev. Numerous authors have pointed out that mass privatization in Russia gave ownership rights to groups that had no interest in reinforcing market institutions. the new holders of rights of control over assets following an initial privatization process would be strongly motivated to encourage the definition of new legal regulations to guarantee their ownership rights. August 2003. no. eds. A. Helsinki. February 2004).com/ld. as are the discussions on Gazprom’s possible participation in the development of Kovytka. pp. A. Murrell. The Grabbing Hand – Government Pathologies and Their Cures (Cambridge: Harvard University Press. largely ignored under the Soviet regime due to methods of calculating the provision for depreciation. 12 and July 19. p. deterioration in the quality of Russian reserves that necessitate the opening to production of smaller. making it possible to define a stable legal framework. Energy/Natural Resources.’’ Petroleum Economist. 3. 31 32 30 29 28 The World Bank.
Moldova. Bogdanchikov.’’ Foreign Affairs. 45 ‘‘Kazakhstan Oil to Flow East. Lamb. Miller announced the merger of Gazprom and Rosneft while S. Locatelli. 5. 2008. Legvold. 70. March 28. January 20. Greene & MacRae. and Uzbekistan. 2005. 2004.P. a spur or offshoot from the line under construction to Nakhodka on the Pacific. 21-23. Boussena and C.RUSSIAN OIL-SECTOR REORGANIZATION 199 35 LeBoeuf. who also was chairman of the board of Rosneft). pp. This opposition reflects the power struggles in Moscow at high state levels and. August 30.’’ FSU Energy. actually was opened on August 29. October 2004. Rice University.com/subsoil3. 44 43 42 ‘‘Broadening Export Strategy. ‘‘Russia Opens China Oil Pipeline. The Energy Dimension in Russian Global Strategy: Russian pipelines Strategies: Business Versus Politics (Houston: The Baker Institute for Public Policy. October 2004). Belarus.’’ The Financial Times. Petroleum Argus. Lukoil) in development of the gas sector in Saudi Arabia. ‘‘Vers une plus grande co´nergie. the ‘‘energy pact’’ signed between Russia and Saudi Arabia in September 2003. 38 Gazprom CEO A. following the visit of then-Prince Abdullah Bin Abdel-Aziz to Moscow. available at www. Medvedev (President of Russia since May 2008 and formerly chairman of Gazprom’s board) and I. May 2004. 1-2.’’ Petroleum Economist. Komarov. 2010. 23. in particular. ‘‘It’s a Long Time since We Have Been Analyzing Implications of Gas Market Liberalization in Europe. 2005. and R. 2008. 505-15. herence de la politique petroliere de la Russie?’’ Revue de l’e ´ ´ ` 41 Y. accessed on March 21. Tajikistan. the official members of the Commonwealth of Independent States included Armenia. The reserves of this field situated in Eastern Siberia (Sakha-Yakutie) are estimated at 1. I.html. Kazakhstan. 26-27. declared that he was in favor of keeping the two entities separate.’’ Gazprom. Russia. ‘‘Saudi Pact Shows Russia’s New Strength. In 2009. For example. ‘‘Russia’s Unformed Foreign Policy. and More. Sechin (Deputy Chief during Vladimir Putin’s presidency and Deputy Prime Minister since 2008. L. 37 36 BOFIT Weekly.’’ Petroleum Economist. Gorst. September-October 2001. December 2004. see S. Russian Law News: Subsoil Law Amendments: Two-Key to One Key. pp. p. September 8. p. Azerbaijan. between D. January 25.russianlaws. is expected to lead to a certain number of joint projects and the participation of Russian companies (Gazprom. CEO of Rosneft. 2003. April 18. ‘‘Gazprom Given Licence to Drill. It is according to this principle that Gazprom was granted the licence to develop the Chayandinkoye natural gas field and qualified as a strategic reserve. pp. Kyrgyzstan.L.26 thousand trillion cubic meters. 46 . 2010.’’ Petroleum Intelligence Weekly. 40 39 Editor’s note: The 67-kilometer pipeline from Skovorodino in east Siberia to China’s northeast frontier. For a more detailed analysis. p. pp.
2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). Vol. where he held the Saudi Aramco Chair in Energy Economics. Professor of Finance and Econometrics at the Global University in Islamic Finance. in economics from the University of Wisconsin. candidate in economics at Macquarie University. Al-Sahlawi. His publications have appeared in. Northern University of Malaysia. In addition to visiting appointments with the Universities of Pennsylvania. Dr. he worked as a research associate to the Saudi Aramco Chair in Energy Economics at KFUPM and was a lecturer in finance at Curtin University of Technology. Perth. for their comments and to the KFUPM Center of Research Excellence in Renewable Energy for its support. Rhode Island. PacificBasin Finance Journal.D. Energy Economics. served as a member of the advisory board of the Saudi Arabian Supreme Economic Council. among others. His papers have appeared in journals such as Global Finance Journal. November 2008. holds a master’s degree in finance from Edith Cowan University and an economics honors degree from Curtin University of Technology. Australia. Even though Saudi Arabia is the world’s largest *Mansur Masih. e. Journal of Financial Research. earlier was Dean of that college. The author. Economic Modelling. The Journal of Energy and Development. Department of Finance and Economics in the College of Industrial Management of KFUPM. Professor of Economics.D. Mohammed A. he taught at Australian and British universities and at King Fahd University of Petroleum and Minerals (KFUPM). Japan & the World Economy. The authors are grateful to the participants at the 2nd IAEE Asian Conference. and OPEC Review. holds a Ph. Malaysia. All rights reserved. National University of Malaysia. No. and the Tun Ismail Ali Chair of Finance and Investment. His publications have appeared in Energy Economics. Journal of Business Finance & Accounting. Mohammed A. 201 . The Energy Journal. Journal of International Money and Finance. he established and was the first Director of the Saudi Human Resources Development Fund. Previously. Australia. Energy Economics. Al-Sahlawi. and Lurion De Mello* S audi Arabia ranks sixteenth among nations based on 2002 fossil-fuel carbondioxide emissions per capita. European Journal of Finance. Lurion De Mello. Al-Sahlawi sits on several editorial boards of international journals in energy economics and economic development/human resources management. Australia. the author has held the Bumiputra Commerce Bank Chair of Finance and Banking.. Journal of Policy Modeling. in applied financial econometrics from Leeds University.D. The Journal of Energy and Development. 33. Earlier. Ph. Oxford.g. and Australian National. and Energy Policy.WHAT DRIVES CARBON-DIOXIDE EMISSIONS: INCOME OR ELECTRICITY GENERATION? EVIDENCE FROM SAUDI ARABIA Mansur Masih. and International Economics/Economia Internazionale. who holds a Ph.
it is important to measure the impact of electricity generation (rather than electricity consumption) on carbon-dioxide emissions because most of the power is produced by burning fuel oil to generate the electricity. we use electricity generation measured in billion kilowatt-hours . the country’s real gross domestic product (SAGDP).202 THE JOURNAL OF ENERGY AND DEVELOPMENT exporter of oil. and electricity generation (LEGEN). Carbon-dioxide emissions from gas flaring fell sharply and now account for less than 1 percent of total emissions. Use of natural gas increasingly has become important since the mid-1980s and in 2008 accounts for 31. energy consumption.3 They justify their significant findings based on a high R2. we use nominal gross domestic product (GDP) in a bid to capture the macro contribution to carbondioxide emissions. Yucel use liner regression analysis to test the impact of total ¨ energy consumption and country population on total carbon-dioxide emissions in Turkey. not surprisingly consumption of petroleum products represents the bulk of the country’s fossil-fuel carbon-dioxide emissions (65. energy consumption. in order to gauge the contribution of the overall economy. So the question we pose here is: from where are Saudi Arabia’s emissions coming? Are there many meaningful measures available that could capture the contributing factors to these emissions? Our conjecture here is electricity generation and. These are well above the global average. In 1974.4 Saudi Arabia has very few renewable resources in place that play a part in electricity generation and there is a need to measure the impact of the use of fossil fuel used in electricity generation on carbon dioxide. In this paper. Ninomiya look at the relationship among energy demand. In order to measure the impact of energy consumption on carbon-dioxide emissions. it became possible to refine or reinject these gases. As new technologies were incorporated into the oil fields. Only a handful of studies have modeled the relationship among economic growth. Hunt and Y.6 percent in 2002). Per-capita emissions have grown tenfold since 1950 at 4. gross national product (GNP). real energy prices. however. gas flaring accounted for 85 percent of Saudi Arabia’s fossil-fuel emissions. M. we test the dynamics between total carbon-dioxide emissions (CO2).3 percent of total fossil-fuel carbon-dioxide emissions. and the environment around the world.22 metric tons of carbon per person. P. Our model also gives us the opportunity to test whether there is unidirectional or bidirectional causality between GDP and these emissions if any significant relationship is found between them. and the estimation of carbon-dioxide emissions. The striking feature of the time series on carbon-dioxide emissions for Saudi Arabia is the emissions resulting from flaring gas in the oil fields. Zhidong investigates the relationship among economic growth. the studies generally have focused on electricity consumption and growth. Say and M. The major component of fossil-fuel emissions is from electricity generation. In the Saudi Arabian context. C. L. Al-Sahlawi provides electricity planning for the country.1 L. and environmental considerations and makes recommendations for sustainable development. Since there are no data available on the quantity of fossil fuels used.2 N.
) are not valid. in the case of pooled cross-section times series. and electricity generation with a view to understanding the main driver of carbon-dioxide emissions through the application of a recently developed time-series technique known as long-run structural modeling (LRSM). a major assumption of the cross-sectional studies is that the slope parameters are homogeneous or equal across units/countries. etc. If the variables are nonstationary. Methodology In testing the relationship between carbon-dioxide emissions and income in environmental studies.5 The cross-sectional approach has major shortcomings in testing any relationship. Moreover. The application of the traditional regression methodology in time-series data has the following major limitations.6 This assumption is not realistic in the context of developing countries with different institutions. structures. however. This is due to the fact that the ‘‘differenced’’ time-series variables have no information about the long-run relationship between the trend components of the original series since. Also by now. these approaches are not appropriate in capturing the dynamics of the variables involved. mostly cross-sectional or pooled cross-section time-series approaches have been adopted. it is well established that most economic time series are non-stationary in their original ‘‘level’’ form. However. Finally. Our paper is a first attempt to investigate the Granger causal relationship among emissions. the data in the time-series dimension are likely to be non-stationary and require estimation methods that will take care of the non-stationary nature. First. The time-series studies of individual countries over time are more appropriate for testing the relationship between variables.SAUDI ARABIA: CARBON-DIOXIDE DRIVERS 203 (kWh) as an indicator. it is difficult to draw any policy conclusions on a particular country on the basis of results of a group of countries. If the variables are non-stationary but cointegrated.7 In time-series studies. By now. by definition. and stages of development. but the conclusions drawn from such an analysis will be valid only for the short run and no conclusions can be made about the (long-run) theoretical relationship among the variables since the theory has typically nothing to say about the short-run relationship. the traditional regression approach has been applied mostly in environmental studies. it has become almost a standard procedure (aided by easy access to standard software packages) that any regression analysis should start off not mechanically but by testing the stationarity and cointegration properties of the time series involved. then an ordinary regression with ‘‘differenced’’ variables (which will be stationary) can be estimated. real income. the conventional statistical tests (such as R2. Second. t. these . the ordinary regression without the error-correction term(s) derived from the cointegrating equation is misspecified. if the variables are non-stationary but not cointegrated.
either spurious or not testing theory) has been addressed by the recent and ongoing cointegration time-series techniques. After examining the unit root tests and the order of the vector autoregression (VAR). the regression analysis that has been applied for many decades in timeseries studies is now considered to have either estimated a spurious relationship (if the original ‘‘level’’ form of the variables was non-stationary) or estimated a shortrun relationship (if the variables were ‘‘differenced’’ to make the original variables stationary). to test the Granger causal relationship among carbon-dioxide emissions. The long-run co-movement between the variables cannot be captured by ‘‘differenced’’ variables. Although these time-series techniques are an improvement on the cross-sectional studies and the traditional regression approach in testing relationship over time.9 LRSM endeavors to estimate theoretically meaningful long-run (or cointegrating) relations by imposing on those long-run relations (and then testing) both identifying and over-identifying restrictions based on theories and a priori information of the economies. by definition. Granger are now well recognized. Engle and C. Thus. if the variables taken are ‘‘non-stationary’’ at their original ‘‘level’’ forms. Hence.8 The recent time-series studies based on cointegration have applied either vector error-correction and/or variance decomposition methods for testing the long-run relationship among variables. and the relationship estimated gives only the short-run relationship between the variables. The test of cointegration is designed to examine the long-run theoretical or equilibrium relationship and to rule out spurious relationships among the variables.e..’’ the long-term information contained in the trend element in each variable has been removed. The cointegrating estimated vectors . The recently developed long-run structural modeling technique takes care of that major limitation of the conventional cointegrating estimates. The significant contributions made by the time series cointegration techniques starting with the publication of the seminal paper by R. and electricity generation we would apply the following most recent procedures based on LRSM. This damaging limitation of the traditional regression analysis (i.204 THE JOURNAL OF ENERGY AND DEVELOPMENT have been removed. which are ‘‘atheoretical’’ in nature. income. the Johansen cointegration tests will be applied.’’ On the other hand. the regression does not test any theory. if the variables taken are turned ‘‘stationary’’ by ‘‘first-differencing. Hence. the conventional statistical tests are not valid because the variances of these variables are changing and the relationship estimated will be ‘‘spurious. on the one hand. one of the major limitations of error-correction/ variance decompositions methods is that they are based on the estimates of the cointegrating vectors. For testing each restriction the results are presented in tables and one should check the likelihood ratio (lr) statistic in each case whether the null of restriction/s should be rejected or accepted.
Empirical Results. The VECM. there is a theoretical relationship among the variables and that they are in equilibrium in the long run (although they could deviate from each other in the . That can be done by the test of the vector error-correction model (VECM) that can indicate the direction of Granger causality both in the short and long run.11 In this paper. The evidence of cointegration. one could find out the persistence profiles. which traces out the effects of a variable-specific shock on the long-run relationship). We applied the standard Johansen cointegration test (table 1) and found them to have one cointegrating vector at the 95-percent significance level on the basis of maximal eigen value and trace statistics. They are designed to map out the dynamic response path of a variable due to a one-period standard deviation shock to another variable. An evidence of cointegration implies that the relationship among the variables is not spurious. Finally. however. however.SAUDI ARABIA: CARBON-DIOXIDE DRIVERS 205 then will be subjected to exactly identifying and over-identifying restrictions based on theoretical and a priori information of the economy. They are designed to estimate the speed with which the variables get back to equilibrium when there is a systemwide shock to the long-run equilibrium (unlike the IRF.. which variable is leading and which variable is lagging. We also found the optimal order of the VAR on the basis of Akaike information criterion (AIC). Oak Ridge National Laboratory in Oak Ridge. including its own. The variance decomposition (VDC) technique is designed to indicate the relative exogeneity/endogeneity of a variable by decomposing (or partitioning) the variance of the forecast error of a variable into proportions attributable to shocks (or innovations) in each variable in the system. Tennessee. cannot tell us which variable is relatively more exogenous or endogenous. i. The proportion of the variance explained by its own past shocks can determine the relative exogeneity/ endogeneity of a variable. we test the dynamics between total carbon-dioxide emissions (CO2).e. i.10 All other data are from the Thomson Reuters Datastream data service. the variance decompositions also can be represented equivalently by the impulse response functions (IRFs). real gross domestic product (Real GDP). If required. Data. The variable that is explained mostly by its own shocks (and not by others) is deemed to be the most exogenous of all.. We tested the unit roots of all the variables and found that they could be taken as I(1) on the basis of augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests. and Discussions The data used in our study are annual and span from 1982 to 2003. The carbondioxide emission data is from the Carbon Dioxide Information Analysis Center. All the variables are transformed into logarithms to achieve stationarity in variance. The IRF is a graphical way of exposing the relative exogeneity or endogeneity of a variable. cannot tell us the direction of Granger causality among the variables. and electricity generation.e.
Non-cointegration. Since the number of the cointegrating relationship is one. therefore. we applied the ‘‘long-run structural modeling’’ procedure. A test of cointegration. we imposed an over-identifying restriction of ‘‘zero’’ on the coefficient of GDP (table 2. cointegration has implications for the coordination of the policies of the multinational firms.48 177.18 R >= 1 R >=2 Maximum LL 161.94 156. vector 2). also can be considered as a test of the extent of the level of arbitrage activity in the long term. REAL GDP.51 159.30 181.48 159. in theory.08 HQC 147. the possibility of gaining abnormal profits in the long term through diversifying investment portfolio is very limited indeed. To test the significance of real GDP. income.34 23.206 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 1 SAUDI ARABIA: JOHANSEN MAXIMUM LIKELIHOOD RESULTS FOR MULTIPLE COINTEGRATING VECTORS – CO2 EMISSIONS. Maximum LL = Maximum Log Likelihood.10 17.13 11. AIC = Akaike Information Criterion. Cointegration implies that these variables are interdependent and highly integrated (as if they are constituents of one integrated market). vector 1). Moreover. In a cointegrated market.99 156. HQC = Hannan-Quinn Criterion. However. the evidence of cointegration has implications for portfolio diversification by the investors.12 Cointegration also implies that each variable contains information for the prediction of other variables. we imposed an exact identifying restriction of ‘‘unity’’ on the coefficient of CO2 (table 2.34 25.42 19.05 43.94 149.49 AIC 149.30 159.96 Based on the eigen value and trace tests. SBC = Schwarz Bayesian Criterion.51 183.51 145. The results tend to indicate that the null restriction of zero on income . in order to make the coefficients of the cointegrating vector consistent with the theoretical and a priori information of the economy.77 SBC 142. AND ELECTRICITY a GENERATION.05 level of significance. short run). implies that the arbitrage activity to bring the markets together in the long term is zero.48 147.05 b 42. The evidence of a cointegrating relationship implies that there is a common force (such as arbitrage activity) that brings the CO2. the results show that overall there is one cointegrating vector amongst the variables.42 25. Finally.63 8.95 39. and electricity generation together in the long term. b Both statistics reject H0 at 0.68 155. BASED ON ANNUAL DATA 1982 TO 2003 Ho H1 Statistic b 95% Critical 90% Critical Maximum Eigen Value Statistics R=0 R=1 R <= 1 R=2 Trace Statistic R=0 R <= 1 Rank R=0 R=1 R=2 R=3 a 31.22 23.
300 None The output above shows the ML estimates subject to exactly identifying (Vector 1) and overidentifying (Vector 2) restrictions.766 (0.SAUDI ARABIA: CARBON-DIOXIDE DRIVERS Table 2 MAXIMUM LIKELIHOOD (ML) ESTIMATES SUBJECT TO EXACTLY AND a OVER-IDENTIFYING RESTRICTION Vector 1 CO2 Real GDP Electricity Generation Trend Log Likelihood Chi-Square a 207 Vector 2 1.024 (0.764] 1.421[0.029 (0.212) -0.190) -0.149) 0.057) 0.173 (0.024] 0.636] 0.079) 0. whereas CO2 and Electricity Generation are both endogenous.402) -1.592] 0.000 (None) -1.783] 0. The above within-sample results tend to indicate that in the long-term Real GDP is exogenous. based on the evidence of a significant cointegrating relationship as well as strong theoretical reasons.561) -0.396] 0.168 (0.686] 7.090[0.30 0.770] SC(1) FF(1) N (2) Het(1) CO2 = total carbon-dioxide emissions.172 (0.413 (0.289[0.000 (None) 0.009) 177.490[0.527] Real GDP 0.720[0.134) -0. * Implies significance of error-correction term (making CO2 and Electricity Generation weakly endogenous).323) 0.222] 0.446* (0.491[0.904[0.212* (0.209) 0.0174 (0.113 (0.080) -0.076 (0. .164[0.086[0.391[0.001[0.401[0. However.055) 0. we proceed with vector 1 for the remainder of the analysis.029 (0.532] a Electricity Generation -0.751 (0. Real GDP = real gross domestic product.504) 0.965] 1.399 (0.000 (None) 0.491[0.213) -0.009) 177. The above results tend to indicate that the null restriction of zero on income (Real GDP) stands.970] 0. Table 3 Dependent Variables DCO2(1) DReal GDP(1) D Electricity Generation(1) ECM(-1) Chi-sq Chi-sq Chi-sq Chi-sq a VECTOR ERROR-CORRECTION ESTIMATES CO2 -0.764 (0.148 (0.314) 0.
The diagnostics of all the equations of the error-correction model (testing for the presence of serial correlation. however. Cointegration. which variable is exogenous and which variable is endogenous). whereas the other variables. we find that the GDP variable is the only exogenous variable. we had to apply the generalized variance decomposition technique (table 4) to discern the relative degree of endogeneity or exogeneity of the variables. The error-correction term stands for the long-term relations among the variables. These out-of-sample variance forecast results given by the generalized variance decompositions are consistent with our earlier within-sample results given by the error-correction model: the income variable leads (rather than lags) the CO2 .e. The error-correction term in the CO2 equation is significant. But in the case of the income variable. Looking at the significance or otherwise of the coefficient of the errorcorrection term. The speed of short-run adjustment to bring about the longterm equilibrium is given by the coefficient of the error-correction term. at the end of the forecast horizon number 5.208 THE JOURNAL OF ENERGY AND DEVELOPMENT (Real GDP) stands. the error-correction model also helps us distinguish between the short-term and long-term Granger causality. cannot tell us the direction of Granger causality between the variables as to which variable is leading and which variable is lagging (i.. normality. The results tend to indicate that if the long-term equilibrium between the variables is disturbed by any shocks. That tends to indicate that the real GDP is the driver and the CO2 variable responds to the income variable. it will take about two and a half years to restore the equilibrium. For discerning the endogeneity/exogeneity of the variables. It implies that the deviation of the variables (represented by the errorcorrection term) has a significant feedback effect on the CO2 variable that bears the burden of short-run adjustment to bring about the long-term equilibrium. functional form. However. and heteroscedasticity) tend to indicate that the equations are more or less well-specified. are endogenous. we proceed with vector 1 for the remainder of the analysis. including CO2 and electricity generation. Additionally. That tends to indicate that the income variable is the most exogenous. and in the case of electricity generation that proportion is only 50 percent. The impact of each variable in the short term is given by the ‘‘F’’ tests of the joint significance or insignificance of the lags of each of the ‘‘differenced’’ variables. In table 4. 74 percent of the forecast error variance of that variable is explained by its own shocks. Although the error-correction model tends to indicate the endogeneity/ exogeneity of a variable. we find that 63 percent of the forecast error variance of CO2 is explained by its own shocks. The relative exogeneity or endogeneity of a variable can be determined by the proportion of the variance explained by its own past. based on our earlier evidence of a significant cointegrating relationship as well as strong theoretical reasons. The variable that is explained mostly by its own shocks (and not by others) is deemed to be the most exogenous. we applied the vector errorcorrection modeling technique (table 3).
it will take about three periods for the equilibrium to be restored.97 1. However.85 45.07 79. Finally.50 0. 2.89 49. b CO2 = total carbon-dioxide emissions.96 D Electricity Generation 23. and 3) and found that.87 0.79 2.91 61.75 29.56 54.77 36. We then applied the generalized impulse response functions (figures 1.62 1.32 D Real GDP 9.69 64. the real income variable is the least sensitive to a one standard deviation shock to other variables.10 68.97 29. consistent with the earlier results.06 24. unlike the error-correction model.43 20.95 71.22 0.51 32. variable. an application of the persistence profile analysis (figure 4) indicates that if the whole cointegrating relationship is shocked.07 74.07 3.SAUDI ARABIA: CARBON-DIOXIDE DRIVERS Table 4 GENERALIZED VARIANCE DECOMPOSITION (GVDC) ANALYSIS Percentage of Forecast Variance Explained by Innovations in: CO2 Years 1 3 5 10 Years 1 3 5 10 Years 1 3 5 10 a b a 209 Real GDP b Electricity Generation D CO2 66.47 34.84 1.84 2.92 The out-of-sample GVDCs show the relative exogeneity and endogeneity of the variables. the variance of CO2 and the variance of electricity generation explain a lot of each other. However.92 1.33 1. Real GDP = real gross domestic product. the variance of electricity generation and that of CO2 explain a lot of each other in the out-of-sample forecast period beyond 2003.69 62.95 4.82 43.93 53. Concluding Remarks Both the error-correction model and the variance decomposition analysis applied in this paper tend to indicate that the income variable is relatively more exogenous or leading and the CO2 variable relatively more endogenous or . The elements along the principal diagonal tend to indicate GDP is the most exogenous relative to CO2 and electricity generation.26 48. which is consistent with the recently observed behavior during the last five years (2004-2008).11 89.
such as input mix and output mix. Through proper policy measures. the scale effects of pollution could be reduced.13 The Clean Development Mechanism (CDM).14 S. and carbon capture and storage (in which carbon dioxide is removed from petroleum and then injected into oil fields to enhance oil recovery) can play a useful role in reducing emissions. Dasgupta et al.210 THE JOURNAL OF ENERGY AND DEVELOPMENT lagging. under free trade developing countries would have a comparative advantage and specialize in the production of those goods that are intensive in the factors in which they are most endowed. in the out-of-sample forecast period beyond 2003. gave evidence that the environmental improvements are quite possible in the developing countries and there also is evidence that the peak levels of environmental degradation could be lower than that experienced in the developed countries in the past. emissions trading. According to Hecksher-Ohlin trade theory.15 Much of the evidence Figure 1 VECTOR 1: IMPULSE RESPONSE FUNCTION WITH SHOCKS TO TOTAL CARBON-DIOXIDE EMISIONS (CO2) . it appears that the electricity generation also started playing a significant role in explaining carbon-dioxide. However. A well-planned policy of emissionsreducing technological change (or the time effect) could outweigh the scale effect of rising income per capita on emissions. emissions which is consistent with the recently observed behavior during the last five years (2004-2008). Since Saudi Arabia would have a comparative advantage in energy-intensive industries. the carbondioxide emission stemming from the energy-intensive industries is likely to have an increasing trend unless government policies are pro-active in containing the emission level by resorting to environmental regulations and technological innovations.
SAUDI ARABIA: CARBON-DIOXIDE DRIVERS Figure 2 VECTOR 2: IMPULSE RESPONSE FUNCTION WITH SHOCKS TO REAL GROSS DOMESTIC PRODUCT (GDP) 211 Figure 3 VECTOR 3: IMPULSE RESPONSE FUNCTION WITH SHOCKS TO ELECTRICITY GENERATION .
NOTES Zhidong Li. pp. 3870-876. 325-47. 173-96. 9. such as Saudi Arabia. ‘‘Evidence from Panel Unit Root and Cointegration Tests that the Environmental Kuznets Curve Does Not Exist. pp. is based on China. September 2003. R. 431-55.18 These are only some of the lessons that are worth considering by other developing countries.212 THE JOURNAL OF ENERGY AND DEVELOPMENT Figure 4 PERSISTENCE PROFILE OF THE EFFECT OF A SYSTEM WIDE SHOCK TO THE COINTEGRATION VECTOR in S. September 2003. Yucel. pp. 1409-424. Al-Sahlawi. ‘‘Environmental Kuznets Curve Hypothesis: A Survey.’’ Energy Policy. vol.16 Additionally. C. ‘‘Primary Energy Demand in Japan: An Empirical Analysis of Long-term Trends and Future CO2 Emissions. Hunt and Y. pp. Say and M. 1137-150. ‘‘An Econometric Study on China’s Economy. 82-8. Perman and D.’’ Ecological Economics. L.’’ Australian Journal of Agricultural and Resource Economics. ‘‘Electricity Planning with Demand and Forecasting in Saudi Arabia. ‘‘Energy Consumption and CO2 Emissions in Turkey: Empirical Analysis and Future Projection Based on Economic Growth. and D. 2 1 M.’’ Energy Policy. there is evidence that China reduced sulfur emissions and even carbon emissions in the recent years of the 2000s. pp. August 2004. 6 5 4 . Dinda. no. S.’’ Energy Policy.17 China also is adopting European Union standards for pollution emissions from cars with about an 8. July 2005.1 (1999). pp. Stern. Energy and Environment to the Year 2030. ‘‘Progress on the Environmental Kuznets Curve?’’ Environment and Development Economics. Dasgupta et al.to 10-year lag.’’ Energy Studies Review. 3 N. May 1998. December 2006. pp. Ninomiya. P. Stern.
pp. 49-87. 14 13 12 D.dat. Carbon Dioxide Information Analysis Center. pp. D. and B. op. 16 17 18 Ibid. pp.’’ The Journal of Futures Markets.’’ paper presented at the United States Society for Ecological Economics. Robert Engle and Clive Granger. Oak Ridge National Laboratory. pp. cit. March 1987. Gallagher. 2003. op. and D.. 21.ornl. Stern. and the Time Interval of Analysis. Florida. pp. Auci and L. Stern.’’ Ecological Economics.’’ Ecological Economics.SAUDI ARABIA: CARBON-DIOXIDE DRIVERS 213 7 S. Estimation and Testing. Szakmary. ‘‘Co-integration and Error Correction: Representation. Perman. and S.’’ Econometric Reviews. ‘‘Confronting the Environmental Kuznets Curve. 15 S. Schwarz and A. K. Wheeler. 11 Thomson Reuters. ‘‘Sustainable Development in China. 1 (2002). November 2006. Dasgupta. 282-96. vol. available at http://cdiac. Friedl and M. M. no. 147-68. 10 9 8 T. April 2003. ‘‘The Instability of the Adjusted and Unadjusted Environmental Kuznets Curves. January-March. C. 147-67. data service available at http://thomsonreuters. Getzner. 1419-439. H.’’ Econometrica. Saratoga Springs. pp. 133–48. Dinda. V. ‘‘Price Discovery in Petroleum Markets: Arbitrage. April 1994. Cointegration. Laplante.’’ World Development. 2nd Biennial Meeting. com/products_services/financial/financial_products/investment_management_research/portfolio_ management/datastream). Wang. ‘‘Determinants of CO2 Emissions in a Small Open Economy. ‘‘Long Run Structural Modeling. ‘‘The Rise and Fall of the Environmental Kuznets Curve.’’ China Connections. Shin. 251-76. ‘‘The Rise and Fall of the Environmental Kuznets Curve. B. Datastream.gov/ftp/trends/emissions/sau. Tennessee. August 2004. Becchetti. ‘‘Development of Cleaner Vehicle Technology? Foreign Direct Investment and Technology Transfer from the United States to China. May 2003. Oak Ridge.’’ and R.’’ Journal of Economic Perspectives. M. . S. Pesaran and Y. H. cit. pp. winter 2002. Diesendorf.
No.2 Along with economic growth.1 The partnership also includes a number of international organizations. Joanne Evans.K. particularly in sub-Saharan Africa. are not. and World Health Organization. International Monetary Fund. All rights reserved. committing their nations to a new global partnership to reduce extreme poverty and setting out a series of time-bound targets—with a deadline of 2015—that have become known as the Millennium Development Goals (MDGs). This research is based on her M. Economics Lecturer from the University of Surrey. for valuable suggestions and comments on earlier drafts of the paper. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). 215 . Although some countries are on track to meet the goals. a Principal Power Systems Engineer at Parsons Brinckerhoff. such as the World Bank and other organizations. The Journal of Energy and Development.D. Hunt. 33. This is acknowledged by the United Nations member states that adopted the Millennium Declaration. for his guidance with data sources. Principal Economist at Parsons Brinckerhoff. including the World Bank. Vol. and international clients. The views expressed are those of the author. others. Ian Harlow. P *Oona Nanka-Bruce. sponsored by Parsons Brinckerhoff.Sc. has 19 years of experience in the power industry working on the analysis of transmission and distribution systems for U. and Mr. Professor of Energy Economics from the University of Surrey. in control engineering from the University of Sussex as well as a master’s degree in energy economics and policy from the University of Surrey. tackling poverty therefore has become one of the main objectives of multilateral donors. International Fund for Agricultural Development. thesis and supported by Professor Lester C.THE SOCIOECONOMIC DRIVERS OF RURAL ELECTRIFICATION IN SUB-SAHARAN AFRICA Oona Nanka-Bruce* Introduction overty is a major obstacle for sustainable development. Together. The author holds an undergraduate degree in electronic engineering and a Ph. not only for developing countries but also the entire world. Dr. Nanka-Bruce wishes to thank Ms.
however. Shiu and P. in recent years there has been a shift in the methodology for assessing the benefits of RE to include its impact on social welfare. their contribution to the economy is muted due to inadequate policies. extended hours for small businesses. and institutional frameworks for development. which brings benefits of increased study time and improved study environment for school children. Thus. Lam use time series data from 1971 to 2000 to examine the causal relationship between electricity consumption and real gross domestic . The authors conclude that an increase in the literacy rate above six years could be explained by household electrification rate.6 The majority of the research to date on electrification in developing countries considers how (rural) electrification projects should be evaluated. the rural population makes up a significant proportion of the total population.000 square kilometers. A significant number of studies focus on developing nations in Asia. the use of energy demand modeling to assess the relationship between electricity consumption and socioeconomic factors such as economic growth and the quality of life (education. Nakata develop an energy economic model on rural areas for one state in India. e. and road density per 1. M. using energy modeling to examine the relationship between rural electrification and rural development. predominantly China and India. using cross-sectional data. Electrification is seen as a crucial element in the sustainable development of the rural areas. emphasizing how educational improvements could be attained through access to electricity. RE projects have been assessed purely on financial terms and therefore deemed not viable. Another common use is for television. sex ratio. how to assess the impact of electrification on poverty reduction. strategies. or tracking the progress of electrification projects in developing countries. and/or economic development. such as GDSP (gross domestic state products) and literacy rate.4 One major use of rural electrification (RE) is for lighting.5 In the past. and greater security.7 The research assesses the relationship between access to electricity and the advancement of the socioeconomic conditions in the rural areas.g. where in most of the countries over 60 percent live in rural areas. Kanagawa and T.. Although the paper provides a good assessment of the relationships between electricity consumption and other socioeconomic factors. the focus is at the household level and based specifically on the electricity consumption of lighting appliances. which provides both entertainment and information. which makes RE projects more acceptable. in particular to electricity. There is also a greater willingness of health and education workers to stay in communities that have electricity.3 In sub-Saharan Africa. The rural communities are key to increased economic production and social progress.216 THE JOURNAL OF ENERGY AND DEVELOPMENT one way of alleviating poverty is to promote access to modern energy. electrification is thought to bring an improved quality of life. health programs. However. with a focus on poverty reduction. A. health).
C.SUB-SAHARAN ELECTRIFICATION 217 product (GDP) using the error-correction model for the whole of China. M. The literature on rural electrification on countries in sub-Saharan Africa focuses on the assessment of existing policies or assessing field trials. unlike for China. and the implications for other developing countries based on the South African experience. which show that for some countries. These multiple objectives for electrification cause confusion when formulating policy as reviews of electrification programs based on socioeconomic objectives have shown that the projects do not always meet all the objectives. Ilskog for the evaluation of rural electrification projects with respect to sustainable development. Yang analyzes the impact of rural electrification on poverty reduction and rural economic development. real GDP drives energy consumption whereas in others there is a bi-directional relationship between energy consumption and real GDP. The paper recommends that the government accelerate rural electrification.8 Shiu and Lam find that for China there is a unidirectional Granger causality going from electricity consumption to real GDP but not the other way.and least-developed provinces. and leastdeveloped rural provinces. The authors conclude that one of the reasons for the unidirectional relationship in China results from the lack of electricity access to a large number of the rural population due to insufficient capital investment in power-sector infrastructure and high tariffs. medium-developed. The methodology considered the use of 39 . The research finds that financial constraints and a better understanding of customer requirements lead to innovative research and development and the adoption of revised procedures and new technologies. using panel data on six provinces in China over a 20year period to provide recommendations to government and investors on how best to use their limited capital on rural electrification investment. This produces cost-effective electrification programs and prompts the extension of access to electricity in rural areas. Kjellstrom11 conducted field studies based on a methodology ¨ 12 developed by E. Yang concludes that rural electrification has the largest impact on economic growth in well-developed rural provinces and the least impact in the least-developed provinces. The paper summarizes the empirical findings of causality tests between energy/electricity and income for 11 Asian countries. financial. With respect to poverty reduction. institutional. the largest impact was evident in the medium-developed provinces with limited impact in the well. E. The paper provides guidance on how to formulate policy on rural electrification depending on what the primary objectives are: economic growth or poverty reduction. Gaunt finds that electrification usually is carried out as a social objective to alleviate poverty and for political reasons.10 Although electrification programs are planned and evaluated on financial or socioeconomic models. Gaunt examines the progress of electrification in South Africa and the impact that decisions taken to meet social objectives of poverty alleviation has on electrification by considering technology. 9 The six provinces are categorized in pairs into well-developed. and ethical aspects. Ilskog and B.
13 The policy paper examines different types of energy demand modeling techniques: econometric. Bhattacharyya and Timilsina consider end-use models to be more appropriate for developing countries and conclude that models for these countries should include factors such as rural energy. scenario. The focus of this paper is on energy supply rather than energy demand modeling. The authors concluded that government utilities performed better from a social/ethical perspective whereas the private organizations managed client relationships better. poverty reduction. input-output. It is also not clear how the conclusions drawn could be translated at the macro level to assist policy makers in decision making. Rural electrification is a developmental issue and therefore the proposed methodology. The literature review highlights the factors that are important in developing a model.14 social development.15 institutional development. Bhattacharyya and G. investment decisions. rural-urban divide. and institutional. is a better way of evaluating a project compared to a pure financial assessment. Timilsina conducted a survey to establish the most appropriate energy demand models for developing countries when modeling energy demand. economic. the work by Bhattacharyya and Timilsina provides useful insight into the difficulties associated with energy modeling of developing nations. which takes into account various aspects of sustainability. end-use approach. such as equity. There are many facets of (rural) electrification: impact on economic growth. technological diversities. informal economies. there is no evidence from literature that an econometric study has been conducted on the sub-Saharan Africa region. S. They ascertain that although most of the mentioned models may be suitable for developed countries. structural economic change. they are not suitable for developing nations because of factors such as poor quality of information and the fact that usually the past and future are not on the same trajectory due to structural changes and economic transition. and technology.16 However. improvement in the quality of life. and inequity. The methodology is also at the micro level and therefore there will be greater confidence in the accuracy of the data used for the assessment. and the complexity in project evaluation. including economic factors. However. The objective of this paper is to determine the socioeconomic drivers that . social/ ethical. and hybrid. but also social factors. however.218 THE JOURNAL OF ENERGY AND DEVELOPMENT indicators that covered five aspects of sustainability: technical. environmental. the significant amount of information required for the evaluation process will present difficulty in most cases. they pointed out that it is difficult to draw general conclusions from the studies due to the size of the sample used and the conditions under which the studies were conducted. The field studies were conducted for seven rural areas in Eastern and Southern Africa to assess whether the contribution of rural electrification projects by the private sector or non-governmental organizations were more effective with regards to sustainable development than where rural electrification was the responsibility of government utilities. such as GDP and capital investment. However.
economic.SUB-SAHARAN ELECTRIFICATION 219 have a significant impact on rural electrification in sub-Saharan Africa. educational attainment. Methodology To determine the socioeconomic factors that have an impact on the rate of rural electrification in sub-Saharan Africa. NAIi . literacy. the econometric model for rural electrification uses cross-sectional data and takes into account institutional. Bearing in mind the difficulties associated with energy modeling for developing countries. In line with the literature. GI (Gini index) is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. therefore. RE is higher in developed than developing countries. However. we develop an econometric model on 24 countries and go on to conduct a policy survey on four nations selected from the econometric analysis. GIi . FDIi . One would therefore expect a positive relationship with RE. because technology is usually a time-varying factor with no way of measuring technical progress across countries. HDIi . and social factors.17 The significance of conducting a study for the whole region is that the experiences obtained on countries over-performing the general trend would assist other states in the region in improving rural electrification development. IDi . The general form of the econometric model used in the regression is REi = f ( Yi . .18 Technological factors are excluded from the model. a high Gini coefficient indicates a more unequal income distribution and is usually associated with a developing state. and GDP per capita for countries worldwide and is also a measure of a nation’s development. therefore. one would expect a positive relationship with RE. A low Gini coefficient indicates more equal income or wealth distribution and is usually associated with developed countries.’’ The HDI combines normalized measures of life expectancy. one would expect a negative relationship between GI and RE. Y (GDP/capita) is an economic measure of a country’s income per person and is used to measure the economic development. the paper also conducts a policy survey on four nations that are atypical from the norm to corroborate the econometric modeling and to provide additional information that shows good practice in the region. It is expected that the greater the development of a nation the higher will be the level of rural electrification. HDI (human development index) is used to rank countries by their level of ‘‘human development. UPi ) ð1Þ where RE (rural electrification) is the percentage of rural population who have access to electricity and is the dependent variable.
220 THE JOURNAL OF ENERGY AND DEVELOPMENT An increase in FDI (foreign direct investment) would enable a country to have more funds available to implement growth poverty reduction strategy programs. b2 > 0. one would expect a positive relationship with RE. which are considered outliers from the general trend of rural electrification. b3 < 0. donor organizations. and the like. Thus. The residuals from the preferred equation identified by the econometric study will be used to select countries. NAI (net aid inflows) is usually associated with poverty reduction and. b7 > 0 assuming ui . An increase in UP (urban population) could lead to an increase in revenue for the country. One would expect a positive relationship with RE..e. since rural electrification is seen as one way of alleviating poverty in the rural areas. a positive relationship with RE would be expected. NGOs (nongovernmental organizations). the ð2Þ . i denotes a country in the sample. it is expected that b1 > 0. This variable is based on the Country Policy and Institutional Assessment (CPIA) ratings calculated by the World Bank’s International Development Association (IDA). In theory. b6 > 0. one would expect a positive relationship with RE. heteroskedasticity. In addition. coefficients are dimensionless). therefore. NID ( 0. The method of assessing the regression results will include (a) checking the statistical significance of the coefficients and their signs with respect to prior expectations. b4 > 0. and (b) conducting a series of diagnostics tests (RAMSAY reset. b5 > 0. Various forms of equation (2) will be estimated to establish the preferred equation to be used to explain the factors that determine the rate of rural electrification in sub-Saharan Africa. based on the above descriptions. which usually involve development of rural areas. for further study in order to verify the appropriateness of the socioeconomic factors determined by the econometric model. The level of ID (institutional development) in a country is indicated by the policies and regulatory framework in place that would encourage investment in rural electrification by private investors. FDI also may have a social welfare element associated with it. and normality) to confirm the preferred equation. s2 ): The common approach in the literature is to use natural logs because this enables the impact of the independent variables on RE to be observed in terms of percentage changes (i. The regression will start initially with equation (2) Ln( REi ) = b0 + b1 *ln( Yi ) + b2 *ln( HDIi ) + b3 *ln( GIi ) + b4 * ln( FDIi ) + b5 *ln( IDi ) + b6 *ln( NAIi ) + b7 *ln( UPi ) + ui where.
This is not surprising since a third of HDI is derived from GDP per capita. and Ln(UP). i. table A. the Country Policy and Institutional Assessment (CPIA) ratings are for 2008.1 percent was entered for Chad and an FDI value of not available (N/A) was entered for South Africa. The percentage of urban population used in the model is calculated from the total population and percentage of rural population. The strongest correlation is with Ln(HDI). and it provides a good coverage of each region.20 The sample can be considered representative of sub-Saharan Africa because the sample size is approximately half the total number of countries.1 were revised as follow: a rural electrification value of 0.22 Empirical Findings: The correlation matrix in table 2 gives an indication of the relationship between the variables and shows that there is a strong correlation between the independent variable Ln(Y) and the independent variables Ln(HDI). The results of the study are then analyzed to verify the suitability of the socioeconomic factors determined by the econometric model. However. The policy survey will assess the external drivers that impact the development of rural electrification in each country by focusing on ‘‘PESTE’’ factors: Political/ institutional.SUB-SAHARAN ELECTRIFICATION 221 residuals of a regression are considered random. varying levels of development. and Environment. The data used in the model are presented for economies as constituted in 2006.. i. those with the largest negative residuals are considered under-performing. country-specific information. The regression analysis was conducted in EViews Version 6.e.e. Ln(GI). in this case it is expected that the residuals also would contain information not explicitly explained by the explanatory variables in the equation. white noise. and thus there is a high . Sub-Saharan Africa is divided into four regions: West. The nations with the largest positive residuals are considered over-performing. Econometric Model Data: There are 47 nations in sub-Saharan Africa. East. with any exceptions noted. This study is based on 24 nations due to limited availability of the necessary data on the remaining countries.21 However.. Central. The original data are presented in the Appendix. the numbers highlighted in table A. The assumption here is that the residuals would provide information on how nations differ from the average rural electrification trend in sub-Saharan Africa. 19 The residuals furthest from zero are used to determine the outliers.. Technological (focusing on the electricity sector).e. The countries to be investigated are grouped in table 1 according to the regional location of each country as classified by the United Nations Statistics Division. Social (rural development and specifically rural electrification).1. i. and South. countries significantly different from the norm. and the range of incomes. Economic. Since it is not possible to take natural logs of values less than or equal to zero.
2026 1 RE = rural electrification. GI = Gini index.0099 0.4934 0. the regression coefficients may be determined. HDI = human development index. however.3554 0.0984 0. ID = institutional development. NAI = net aid inflows.5211 0. albeit not very strong. they possess large standard errors.2461 1 0.1437 0. There is significant correlation between the dependent variable Ln(RE) and the independent variables Ln(Y).5647 1 0.4916 1 0.23 In the case where there is multicollinearity. UP = urban population. which means that the coefficients cannot be estimated with great accuracy. Table 2 CORRELATION MATRIX OF THE VARIABLES LnRE LnRE LnY LnHDI LnGI LnFDI LnID LnNAI LnUP a a LnY LnHDI LnGI LnFDI LnID LnNAI LnUP 1 0.0987 0. and Ln(UP). and minimal correlation between the independent variables due to the issues of multicollinearity noted earlier. Rep. The strongest correlation between Ln(RE) and the independent variables is with Ln(HDI) followed by Ln(UP).24 The large standard errors can lead to some of the coefficients being statistically insignificant. one would prefer to have strong correlation between the dependent variable and the independent variables.6990 1 0.2553 -0. Ln(HDI).3978 -0.6609 1 0.2238 0.2220 0.3487 -0. they may be the best linear unbiased estimators (BLUE).0976 0.6971 0.0723 -0.1004 0. .1563 0.222 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 1 SUB-SAHARAN COUNTRIES BY REGION West Africa Benin Burkina Faso Ghana Guinea Mali Mauritania Nigeria Senegal East Africa Ethiopia Kenya Madagascar Malawi Mozambique Rwanda Tanzania Uganda Zambia Central Africa Cameroon Chad Congo. Gabon Southern Africa Lesotho Namibia South Africa degree of collinearity between the two variables.6958 0. FDI = foreign direct investment.0196 0.3620 1 -0. Y = gross domestic product per capita.4315 -0. Ideally. There also is correlation between Ln(HDI) and Ln(UP).7760 0. that is.
1760 (-1.9427 (-1.5838 (1.0377 (3.0499) 1.1652 (-1.8948 (3.2481 p=0.5281 p=0.17) = 2.5392) 2.8619 (0.5719) 2.4346 p=0. R Akaike criterion Hetero (White) 23 23 23 24 23 23 24 0.5934 (1.2743 (0.4390 2.7308) 2.1305 (-2.6062) -2.17) = 0.1285 (-0.1565) -2.7592) 0.9957 2.8099 F(7.1978) -0.6659 p=0.3408) LNHDI LNGI 4.9468 (0.7172 0.6722 (1.5855) -1.0257) 4.4246 2.6206 2.0835 (1.4249 (3.7983) 4.5938 0.5969 (-1.8970 (1.5503 0.801 F(2.5305 0.6691 (3.16) = 1.3701) 2.6077) -0.6595 (3.2961 (0.15) = 0.1237 (-0.3153 p=0.3023) -0.024 F(4.0257 (-1.1840) 4.5823) LNNAI 1.19 p=0.7581 (3.6907) -0.15) = 0.2115) -6.1029 (0.1728) 0.160 F(6.5463 0.5757 (2.4022) -2.0845) Diagnostics Sample 2 Adj.3818) LNID 4.8947) 4.7698 p=0.3796) -2.8220) SUB-SAHARAN ELECTRIFICATION LNUP 3.3171 p=0.9750 (-2.0665 (-1.557 F(5.0494 1.9645 (2.1751 (3.6711) 1.15) = 1.3131) -0.6019 p=0.4616 p=0.13) = 1.8348 (-1.3360 (0.3472 Ramsay reset F(2.7401 223 .7808) 1.9113 2.7595 p=0.532 F(2.5569 0.3783) -0.Table 3 REGRESSION RESULTS HDI Model (by equations) 2B 3.256 F(2.4212 p=0.1437) 0.315 F(2.4053) 2.0605 (1.6483 (1.7572 p=0.7334 (2.068 F(5.17) = 1.936 p=0.5761) -1.2932) 0.9701 (0.1651) 0.3653) -2.4886 2.649 F(4.728 F(2.0905) 1.4117 Normality (Jarque Bera) 0.7579 p=0.7431 p=0.1290 p=0.14) = 1.255 F(2.9756 p=0.1640 (1.19) = 1.17) = 0.16) = 0.7419 0.0607 (2.1728 (2.6291 (2.7237 0.5377) LNFDI 3.14) = 0.2718) -6.5233 0.4993 p=0.8227 (4.8261) 3.4541) 2C 2D 3A 3B 3C Y Model (by equations) 2A C LNY -6.9002 (3.4682 p=0.0931 (-0.19) = 1.2033) 1.5569) 2.1272 (1.5733 2.6991 0.5564 0.905 F(6.6264 (1.3593 p=0.2788) 0.
The preferred equation was determined from further estimations.or 10-percent level for the initial equation. The coefficient for Ln(Y) had the highest probability of being zero and. Further estimations were then conducted. with the exception of urban population (UP).’’ The initial equation for the Y model is defined in equation (3). ln( REi ) = b0 + b1 *ln( HDIi ) + b2 *ln( GIi ) + b3 *ln( IDi ) + b4 *ln( UPi ) + ui ð2DÞ This equation also produced the highest adjusted R2 value and passed all the diagnostic tests defined in the methodology section previously. ln( REi ) = b0 + b1 *ln( Yi ) + b2 *ln( GIi ) + b3 *ln( FDIi ) + b4 *ln( IDi ) b5 *ln( NAIi ) + b6 *ln( UPi ) + ui ð3Þ The results of the Y model presented in table 3 show that for the initial equation.25 Ln(Y) therefore was eliminated from the subsequent regression. . However. The statistical significance of each variable and the adjusted R2 were assessed following each regression. This alternative form will be referred to as the ‘‘Y model’’ and equation (2D) as the ‘‘HDI model. and the variable with the highest probability of having a coefficient equal to zero was eliminated in the subsequent regression. although this could lead to specification error. which in this case included Ln(Y) but excluded Ln(HDI). its value was negative. With the exception of HDI and UP (percentage of urban population). This is probably due to the problem of multicollinearity highlighted earlier. which was not as predicted in our methodology section.224 THE JOURNAL OF ENERGY AND DEVELOPMENT The results of the regression are presented in table 3. Institutional development (ID) was statistically significant at the 10-percent level. The strong correlation between the independent variables Ln(HDI) and Ln(UP) and the dependent variable Ln(RE) shown in table 2 is further confirmed by their presence in the final equation. all the other coefficients were statistically insignificant at the 5. One method of resolving this problem is to drop one of the variables. Equation (2D) was selected as a preferred equation since all the coefficients were statistically significant at the 5-percent level and were of the expected sign. Therefore another form of equation (2) was considered. table 2 also shows a strong correlation between Ln(Y) and Ln(RE). each time eliminating the variables that were statistically insignificant. Further estimations led to equation (3C) as the preferred equation. all the coefficients were statistically insignificant at the 5-percent level. in addition. The insignificance of Ln(Y) in the initial equation was attributed to its strong correlation with Ln(HDI). to establish if that equation would provide a better explanation for the rate of rural electrification.
and (3C). therefore. respectively. The only difference between the two models is whether HDI or Y should be selected. The adjusted R2 value is 0. in determining the rate of rural electrification as highlighted in the literature. then equation (2D) with a constant coefficient of 2. such as equity. and UP. adjusted R2. making the assumption that some information could be obtained from this term.or 10-percent level. that is not the case for the Y model. albeit with the coefficients of Ln(GI) and Ln(Y) statistically significant at the 15.64 estimates an average rural electrification rate of 0. Alkaike criterion. Given a data set. rather.and 20-percent level.or 10-percent level for both equations (2D) and (3C). for both equations the dominant socioeconomic variables were GI. to be discussed further. the HDI model. The points considered in assessing which model provided the best explanation of the development of rural electrification in sub-Saharan Africa were the following: statistical significance. functional form.SUB-SAHARAN ELECTRIFICATION ln( REi ) = b0 + b1 *ln( Yi ) + b2 *ln( GIi ) + b3 *ln( IDi ) + b4 *ln( UPi ) + ui 225 ð3CÞ The coefficients of Ln(GI) and Ln(Y) were not statistically significant at the 5.0013 percent. As discussed earlier. However. it is a tool for model selection. as mentioned and discussed earlier. however. . and non-nested tests. The models have confirmed the importance of economic factors as well as social factors. Equation (3C) passed all the diagnostic tests and the sign of the coefficients were as predicted. In this case. one would expect the standard errors to be large.74 for the HDI model and 0.34 percent. with a constant coefficient of -6. The coefficient of the constant could be used as a measure of the average rate of rural electrification. The average rural electrification rate in subSaharan Africa as determined from table A.62 for the Y model. The AIC is not a test on the model in the sense of hypothesis testing. However.34 estimates an average rural electrification rate of 10. The coefficients of the independent variables in the HDI model are all statistically significant at the 5-percent level. The Akaike information criterion (AIC) is a measure of the goodness of fit of an estimated statistical model. and institutional development.1 is 10. and this can be explained by the high correlation between the two variables. social development. several competing models may be ranked according to their AIC. the HDI model appears to provide a more realistic estimate of the average rural electrification rate. which would affect the t-statistic. Comparison of equations (2D).13 percent. indicate that in addition to either HDI or Y. the Y model. which indicates that the HDI model better explains the rate of rural electrification compared to the Y model. Equation (3C). heteroskedasticity. average rate of rural electrification. ID. Equation (3C) therefore was considered a suitable equation for the Y model. the constant term is statistically insignificant at the 5.
2537) 1.81. (I) and (II). To conduct the test for equation (I). Similarly. a comparison of equation (3C) was made with equation (2D). When you have two non-nested equations. thus indicating that with respect to the Y model.0493 (2. by including the estimated fitted values of Ln(RE) from (2D) as follows: ln( REi ) = b0 + b1 *ln( Yi ) + b2 *ln( GIi ) + b3 *ln( IDi ) + b4 *ln( UPi ) + u*ln(^REiHDI ) + ui ð5Þ and the null hypothesis u = 0 was tested. indicating that with respect to the HDI model no additional information can be obtained from the Y model. once again pointing to the HDI model being the better. additional information can be obtained from the HDI model.9251) . However. This shows that of the two equations. If the coefficient for the fitted values is statistically significant. The regression results for c (equation 4) and u (equation 5) are presented in table 4. The test is then repeated for equation (II) using the fitted values of the dependent variable from equation (I). one cannot reject the null that c = 0. function form. the non-nested test can be used to determine if additional information from equation (II) is not captured in equation (I) and vice versa. From the results. (2D) provides a better explanation of Table 4 RESULTS OF NON-NESTED TESTS (t-statistics in parentheses) c u -0. by including the estimated fitted values of Ln(RE) from (3C) as follows. with the t-statistics in parentheses.26 The Akaike criterion for the HDI model is 2.226 THE JOURNAL OF ENERGY AND DEVELOPMENT with the one having the lowest AIC being the best. the fitted values of the dependent variable in equation (II) is included as a variable in equation (I) and the coefficients re-estimated.1904 (-0. both models passed the heteroskedasticity.27 A comparison of equation (2D) was made with equation (3C). one can reject the null that u = 0. and normality tests. ln( REi ) = b0 + b1 *ln( HDIi ) + b2 *ln( GIi ) + b3 *ln( IDi ) + b4 *ln( UPi ) + c*ln(^RE Y i ) + ui ð4Þ The null hypothesis c = 0 was tested using the conventional t-test for c. then there is additional information from equation (II) that is not captured in equation (I). The rejection of the null hypothesis in either case suggests that there is additional information from the alternative model not captured in the original model whereas acceptance suggests the opposite. However.42 and for the Y model is 2.
2.66*Ln(UP). To verify the suitability of using both models. Table 5 presents the initial countries selected for further study based on the rankings (table A. it is believed that taking into consideration the residuals from both the HDI and Y models would enhance the country-specific information and reduce the impact of white noise. UP) Ln(RE) =2.SUB-SAHARAN ELECTRIFICATION 227 the socioeconomic factors that determine the rate of rural electrification in subSaharan Africa. ID. Table 5 also includes information on country location and population.13*Ln(GI)+3. Madagascar.1 is 18 million. GI. However. and Tanzania. Chad. it is believed that the Y model has additional information that could enhance the selection of the countries for the detailed study.824 was calculated. The additional factors of population and location also were taken into consideration to ensure that the countries selected for the detailed survey were representative of the sub-Saharan African region.2) for both models. the Spearman rank correlation coefficient was calculated for the residuals from both models. However. excluding Nigeria. The rankings of the residuals are shown in the Appendix.576*Ln(ID)+1. table A. respectively. it is assumed that the residuals contain white noise as well as additional information that can be used to explain the rate of rural electrification in sub-Saharan Africa. Ethiopia was not selected because. The average country population in sub-Saharan Africa. Figure 1 shows the residuals obtained from equations (2D) and (3C). is approximately 15 million.34+4. the selected countries for detailed study were Nigeria. The average based on the countries presented in table A. which shows that there is a strong correlation between the ranking of the residuals for both the HDI and the Y models and confirms that using the residuals from both models should enable more accurate countryspecific information to be determined. which points to the fact that the socioeconomic factors significantly impacting the rate of rural electrification are: RE = f (HDI. although it ranks third in the HDI model. it ranks ninth in the Y model. excluding Nigeria. Although the HDI model has been shown to be the preferred model for determining the rate of rural electrification. Madagascar ranks fourth and second in the HDI and Y models. . The series of tests suggest that the HDI model is preferred.175*Ln(HDI)–2. A Spearman rank correlation coefficient of 0. Assessment of National Policy Selection of Countries for Further Analysis: In the methodology described. Taking average population and location into account.
7 19. Nigeria: Political/Institutional: Nigeria held elections in April 2007.2 10. Madagascar Chad Tanzania Mauritania Location West Central East Central East West Population (millions) 144. which was the first democratic political transition since independence in 1960.7 3. nevertheless.228 THE JOURNAL OF ENERGY AND DEVELOPMENT Figure 1 RESIDUALS FROM REGRESSION ANALYSIS OF EQUATIONS 2D (HDI MODEL) AND 3C (Y MODEL) Review of Country Information The purpose of the detailed study was to determine if additional information could be obtained from the error term to augment the results of the econometric study. Rep. There were widespread allegations of fraud and intimidation.5 39. The detailed study was based on information up to 2008 and assessed the external drivers that impacted rural electrification in each country in relation to PESTE factors.5 3.0 Under-performing . the new president assumed office Table 5 INITIAL SUB-SAHARAN COUNTRY SELECTION FOR FURTHER ANALYSIS Countries Over-performing Nigeria Congo.
It was expected that the huge drop in external debt and debt-servicing would make more resources available for investment in infrastructure.9 percent).30 Economic: The leading sectors are oil (37.3 percent) and agriculture (31. and water. ‘‘by 1999 corruption was practically institutionalised. NEEDS quotes. with 70 percent living in 34 the rural areas. education. and achieving the Millennium Development Goals (MDGs). The government established the Independent Corrupt Practices Commission in 2000 and the Economic and Financial Crimes Commission in 2003 to fight corruption.1. The agriculture sector comprises predominantly small farmers with low and declining productivity.36 The National Rural Electrification Program started in 1981 with the aim of connecting all local government headquarters and a number of important towns to the national grid. poverty alleviation.’’ It pervaded both private and public institutions.SUB-SAHARAN ELECTRIFICATION 229 peacefully and with a commitment to continue with the economic reforms of the previous administration. which is significantly lower than the World Bank datum of 35 percent in table A. The guiding framework for economic reforms is the National Economic Empowerment and Development Strategy (NEEDS). reducing poverty. it requires effective coordination among all the tiers of government with clearly delineated roles and responsibilities for each level of government.32 Nigeria’s external debt was greatly reduced in 2007.28 which focuses on driving economic growth. 33 Social: Nigeria has the largest population in Africa. The 2007 Progress Report shows the improvement in the agriculture. and security improvement. The Program was constrained by several factors. For the program to be successful. there is emphasis on state and local government developing their own programs. These sectors received 60 percent of the total capital budget in 2004. 35 As part of implementing NEEDS. benchmarks and targets. is seen as essential to the whole process. plagued all levels of government. education. and local governments. ensuring an integrated approach to rural development that will be effective in poverty reduction. The Energy Commission of Nigeria (ECN) states that the rural electrification rate in 2006 was 15 percent. electricity. and discouraged foreign investment in the country. including the operational difficulties of the National Electricity Power Authority and rural electrification being driven by political rather . One of the main constraints to economic growth is the extremely high level of corruption in Nigeria. and implementing guides to reduce inefficient resource allocation.29 NEEDS provides a framework for a nationally coordinated program of action by the federal.31 Agriculture is considered the dominant economic activity in terms of employment and linkages with the rest of the economy. The sectors that were identified as key to poverty reduction were health. state. including telecommunications (12 percent) and general commerce (14. and health sectors since the implementation of NEEDS.7 percent) with other services. roads. An Independent Monitoring Committee. coordinated by the business community.
inefficiency in transmission and distribution. desertification.2 by 2012. which are at various stages of completion. solar. such as the creation of the Independent Bureau against Corruption. a number of institutional and policy reforms have been established. the discredited opposition won control of the capital. 45 The government is aiming for a score of 5. and air pollution from cooking that poses health hazards. The 2005 Electricity Act also led to the creation of the Rural Electrification Agency (REA) and the Rural Electrification Fund with a more expansive agenda of providing reliable and affordable electricity supply to all rural dwellers.42 Since 2004.230 THE JOURNAL OF ENERGY AND DEVELOPMENT than social and economic reasons. environmental protection and conservation have been scaled-up. and a pilot wind power project. One of the goals under NEEDS was to deregulate and liberalize the electricity industry to encourage private-sector participation. In addition.40 The 2005 Electricity Power Sector Act abolished the monopoly power of the National Electricity Power Authority (NEPA).7 in 2002 to 2. collaboration with international governments and institutions for SHPs. and small hydro plants (SHPs). and the slow pace of privatization.37 However. attract investment. Various types of rural renewable projects are documented: public-private partnership of SHPs.43 Madagascar: Political/Institutional: The incumbent president was re-elected in December 2006 with firm parliamentary support for implementing the 2007–2012 Madagascar Action Plan (MAP). Increased penetration of renewables into the energy mix is seen by the Energy Commission of Nigeria (ECN) as the solution to improving the quality of life and untapped economic potential of the rural population. improved its Corruption Perceptions Index (CPI) from 1.8 in 2005. which was adopted in November 2006. and encourage the use of alternative energy sources. Technological: The main sources of existing electricity generation are natural gas (70 percent) and hydro (30 percent).39 Nigeria’s power system was deemed unreliable and incapable of meeting demand to the point of holding back economic progress.41 Environment: More than 60 percent of the rural population depend on wood fuel for domestic and commercial uses. which adversely impact the rural population in particular. Despite the recent changes.46 . Antananarivo.44 However.500 uncompleted grid extension projects. Nigeria has an abundance of renewable energy sources: biomass. A national anti-corruption council was set up in 2003 to fight corruption. there remain difficulties in the power sector: supply/demand imbalance.38 The Sokoto Energy Research Center in Nigeria has implemented several pilot solar electrification systems sponsored by the ECN in collaboration with state governments and private organizations. in the December 2007 local elections. the stateowned company. The REA inherited 1. wind. allegations of fraud by the REA management could hinder the progress of rural electrification projects. which led to its unbundling. This and other efforts. This leads to deforestation.
and spices. The main agricultural activities include litchi. ecotourism. International Labour Organization.52 Social: Over 70 percent of the country’s population lives in rural areas (a range of 70 to 80 percent is noted in various literature). coffee. All stakeholders (government. and tourism) that contributed roughly 50 percent of GDP in 2006. it has retained a monopoly position in transmission and distribution. UNDP—to promote growth in the agricultural sector and agro-based industry.N. both grid extensions and off-grid systems. 54 The majority of existing rural electrification is decentralized. insurance. World Bank. and monitoring tools. vanilla. power.49 Political crisis since January 2009 has had a negative impact on developmental efforts. However. The Rural Electrification Development Agency (Agence pour le Developpement ´ de l’Electrification Rurale). There is also evidence of several planned public-private electrification projects. Public-Private Alliance for Rural Development. transport. The strategies and measurable targets defined in the MAP were made with specific agencies responsible for each target.. with most living on less than $1 per day. and telecommunications are important elements of rural infrastructure essential for rural transformation.50 Economic: The dominant economic activity is in the tertiary sector (i. rice. and the private sector) were involved in the development of priority indicators selected to reflect the level of achievement of objectives under the MAP. service industry as banking.SUB-SAHARAN ELECTRIFICATION 231 The driving force behind the MAP was the government’s commitment to achieving the Millennium Development Goals. Agriculture (primary) is the next key sector.51 There is significant economic activity in the rural areas comprising agriculture. Madagascar was selected as one of the pilot countries for the U. Implementation of the MAP involved the development of a monitoring system. It considers that the provision of roads. There are several partnerships with international agencies for rural development. and handicrafts. . The Malagasy government is involved with a number of international agencies—The International Fund for Agricultural Development. including the National Integrating Monitoring and Evaluation System. Rural development is one of the key objectives of the MAP. which contributed 27 percent of GDP in 2006. which promotes an integrated approach to rural development for poverty eradication and sustainable development.47 The first year of the implementation of the MAP (2007) involved the development of different management. is responsible for implementing government policy on rural electrification.53 The Rural Electrification Development Agency website lists the existing and planned rural electrification projects.e. jatropha. created in 2002.48 JIRAMA is the national energy company for water and electricity and is solely owned by the government. it is not the only source of electricity production as there is now private participation in power generation. implementation. Since liberalization in 1999. technical and financial partners. water and irrigation. telecommunications.
the targets set for rural electrification in the MAP have not been met. Its main role is to promote and facilitate improved access to modern energy services in rural areas in mainland Tanzania.61 . steps are being taken to resolve the problem ahead of the next presidential elections in 2010. As of 2006 the restructuring of JIRAMA was still ongoing. This resulted in power shortages with severe consequences to business activity. which was going through parliament during 2009.58 Tanzania: Political/Institutional: Tanzania is politically stable but there are growing concerns over the effectiveness of the government to fight corruption. international financial organizations.59 A National Energy Policy was adopted in 2003 with an objective to aid the development process of the country by establishing an efficient energy sector in an environmentally sound manner.55 The 2009 International Monetary Fund paper indicates that the energy demand is still not being met due to technical issues (dilapidated equipment) and the continued financial issues of the company. One of the key goals of the MAP is to protect the environment by developing industries around it such as eco-tourism and sustainable farming. is responsible for providing grants to qualified project developers. has pushed for accountability.57 Environment: Globally.60 One of the objectives of the National Energy Policy was to encourage private-sector participation in the energy sector. REF receives funds from government. transmission. However. Madagascar is one of the richest nations in terms of biodiversity. Civil society. multilateral and bilateral agencies. nonetheless. the power-generation sector was deregulated to allow the participation of independent power producers and by 2009 accounted for 290 megawatts of generation. a number of independent power producers and private investors have emerged that have enabled an increase in installed power between 2006 to 2007. became operational in 2007. The Tanzania Electric Supply Company Limited (TANESCO) is a state-owned monopoly company responsible for generation. The major unresolved issue is the political impasse between the government and the major opposition party in the Zanzibar islands. an autonomous body under the Ministry of Energy and Minerals. and distribution. severe poverty could have a negative impact on the environment where poor management of agricultural resources could lead to increased poverty and a greater need for agricultural expansion. established at the same time. The Rural Energy Fund (REF). with the help of the media. As a result of the problems faced by JIRAMA. In 2000. Fluctuations in oil prices resulted in high production costs for thermal plants and a financial crisis for JIRAMA. and other development partners. Parliament has backed these efforts where opposition parties have challenged alleged corruption by government officials.56 However. The Rural Energy Agency (REA).232 THE JOURNAL OF ENERGY AND DEVELOPMENT Technological: The sources of electricity production are mainly hydropower (64 percent) and thermal (36 percent) as of 2005 (percentages are with respect to energy produced).
biomass. all of which are grid extensions to unelectrified commercial centers with TANESCO.64 TaTEDO rural development initiatives include. Drought conditions led to a severe power crisis in 2006 resulting in power shortages.66 This has the combined benefit of the provision of modern energy services for the rural community plus income generation from growing jatropha to alleviate poverty. particularly for the rural population. among others. focusing on off-grid electrification. Thus. Mining is one of the fastest growing economic sectors in Tanzania. plans. Hydro accounts for roughly two–thirds of the electricity supply and thermal (natural gas/diesel generation) constitutes the remainder. The U. Artisanal and small-scale mining has been an alternative source of income for rural communities. Poverty in the rural areas is highest among households that depend on agriculture. employing 82 percent of the work force and accounting for 60 percent of all exports.S. the implementation of the energy policy would require synchronization with the policies.62 The contribution of agriculture to GDP varies in literature (ranging from 27 to 45 percent). Only 2 percent of the rural population has access to electricity. Through the REF. and mini-hydro). The strategy is to use low-cost electrification for remote rural areas and apply renewable energies (solar. The target is for 15 percent of the rural population to have access by 2015. REA is currently collaborating with TANESCO on future projects that comprise both grid extensions and isolated systems based on renewable sources for rural electrification.67 TaTEDO collaborates with other international NGOs and companies through the Enabling Access to Sustainable Energy (EASE) network. nonetheless. it remains the dominant economic activity.65 One of these initiatives is the use of jatropha oil to power energy services platforms. however. with the majority subsisting below the poverty line.SUB-SAHARAN ELECTRIFICATION 233 Economic: Agriculture is a key economic activity. and strategies of other sectors if they are to achieve their development goals.68 Technological: The electricity supply comprises both grid and off-grid (isolated) systems. wind. the REA has funded 10 projects by 2009 since its inception. there are potential problems with large-scale operators over land rights.4 million for the development of jatropha farming in rural areas. as the project developer. which is supported at ministerial level in government. the state-owned utility.5 percent to GDP and is a crucial source of income. Diversification into non-farm activities in the rural areas has not been effective because it has been on a small scale. Agriculture contributes 26. A 2006 article in the EASE newsletter suggests that there is no consistency between the national energy policy (which aims to ensure availability of reliable and affordable energy supplies for all in a sustainable manner) and plans relating to national economic planning.63 Social: Over 75 percent of the country’s population lives in rural areas. the productive uses of sustainable energy for income generation and social services improvement. This was further compounded by high oil prices. government through its Agency for International Development (USAID) has given Tanzania $5. .
Despite being oil-rich. and ensure food security in the rural areas. there has been some improvement in production and the dissemination of new techniques. which is seen as corrupt and inept in its management of the oil revenue. The 1996 Constitution was amended in 2005 to enable the President of the Republic to be elected several times. environment. and water resources. This has not materialized and has created growing resentment toward the government. with prices fixed by ministerial order according to a price structure. Chad: Political/Institutional: Chad is a landlocked nation. little of the other energy resources have been commercially exploited. a number of issues still remain such as insufficient resources and lack of proactive policies to improve the performance of the rural sector and particularly rural electrification. 69 The negative impacts of this on rural communities are several: the use of wood fuel for cooking creates indoor pollution that leads to poor health particularly for women and children. coal. Although the pace of implementation is slow. wind. But with the exception of hydro and natural gas. environmental issues of deforestation and climate change. Environment: The majority of the energy consumed is traditional biomass. was financed partly by the World Bank. A National Rural Development Strategy was presented to the international community in 1999 to help increase productivity. social services. have not formed part of institutional and sectoral priorities and budgets.74 For any real change to be effected. natural gas. leading to political tensions with attempts to overthrow the regime. sharing its borders with six countries and considered one of the poorest in Africa.72 There are plans to privatize the company. a state-owned enterprise. However. which constitutes about 90 percent of the total primary energy consumption. Chad is a poor country with limited resources and . the national policies have to be incorporated into specific institutional and sectoral programs with realistic performance indicators.71 Chad Water and Electricity Company.234 THE JOURNAL OF ENERGY AND DEVELOPMENT Tanzania has significant energy resources that include hydro. One of the objectives of the energy policy is to address the environmental concern. biomass. More than 80 percent of the total primary energy. predominantly wood fuel. which started in 2003. holds a monopoly on the distribution of water and electricity.70 Significant oil reserves were discovered in the Doba region. infrastructure. reduced productivity. education. is consumed in rural areas. which is mainly in the form of biomass. and solar. Some 80 percent of the project royalties and dividends were to be used to reduce poverty in priority areas such as health.73 The objectives of the 2003 International Monetary Fund paper have not been integrated fully into the daily management of national institutions and. and therefore income from the inefficient use of energy. consequently. crop diversification. It achieved independence in 1960. rural development (agriculture and livestock). Oil production.
Major exports apart from oil are cotton. Fully 100 percent of power generation is from fossil fuel. each with different agricultural capabilities. however. and livestock breeding. accounting for 40 percent of GDP and employing 80 percent of the active population. Next was the primary sectors of agriculture (e. water. cotton. Despite being a crude oil exporter. its electricity prices are among the highest in the world. cereal production. electricity.7 percent of GDP in 2006. some of which have been implemented such as a refinery at Farcha to supply fuel for power stations and a power station at Farcha. electricity) between the capital city and other towns and between urban and rural areas. A national energy strategy and rural electrification plan are in the planning stage. and the poor road infrastructure makes Chadian cotton uncompetitive and adversely impacts the income of the rural population. the majority of whom lives in the rural areas. and Sudanese or tropical. However.79 Traditional methods are still used in farming and livestock breeding (extensive pasturing and herding are the norm). This results from institutional and human shortcomings and from poor political choices.83 A number of crisis measures were proposed to reduce the cost of electricity and expand access. Most health and educational facilities are found in the urban areas with the majority of rural areas having no schools or health facilities. difficulties at Cottonchad (the state-owned cotton company). and prisons— are only in urban areas. .75 Economic: Oil represented roughly 47 percent of GDP in 2006. limited training. courts.80 There is uneven distribution of basic social services (health. which contributed approximately 18. a national plan is required to resolve the energy problem. Other services—telecommunications.76 Before 2003. gum arabic).SUB-SAHARAN ELECTRIFICATION 235 still requires extensive international assistance to finance its development and help in implementing the sectoral strategies. the landlocked position of the country..82 Technological (Electricity Sector): Only 2 percent of the total population has access to electricity.g. education.77 Cotton is produced by small farmers and is the main source of income in rural areas. and gum arabic. the majority of whom live in the capital N’Djamena. As a result. water. and inadequate materials. both continue to be plagued with problems such as lack of suitable personal and resources.84 No information was found on alternative energy sources in Chad although the 2007 International Monetary Fund paper does indicate that solar and wind energy need to be investigated for rural electrification. the rural sector was the driver of the Chadian economy.78 Social: Chad is divided into three distinctive climatic zones: the Saharan desert. live cattle. both activities are heavily dependent on climatic conditions but are damaging to the environment. Chad imports refined petroleum for power generation. Consequently. the fall in international cotton prices.81 Although some progress has been made in the education and health sectors. Sahelian.
The economic reforms started in 2004 placed rural development at the top of the political agenda. which is seen not only as a social function to eradicate poverty (i. and telecommunications). JIRAMA. particularly with regard to the Rural Electrification Agency fraud allegations currently being investigated. However. and local levels to ensure effective implementation of programs. Madagascar: There has been significant progress in rural electrification because government policies for rural development are at the national level. Rural electrification is considered an important indicator in the monitoring process. There is integration of policies at the national.. and protect the agricultural sector. the indication is that the majority of the planned rural electrification is off-grid. there is collaboration with international governments and institutions with regard to rural electrification. In addition. particularly rural electrification. education. but also for economic development due to extensive agricultural opportunities. Therefore. There is the emphasis to further develop rural electrification to drive growth in the whole economy. and the need to . the inconsistencies in the data for the rural population and rate of rural electrification create some doubt in the performance of Nigeria in its push for rural electrification. including rural electrification. water. Tanzania: Government policies indicate the awareness of the low level of electrification in the country. recognizing that development of the rural areas would reduce poverty. Madagascar benefits from extensive public-private partnerships with international agencies and private investors for rural development.e. ensure food security for the country. the unreliability of grid-connected supplies and the level of corruption in the country. However.236 THE JOURNAL OF ENERGY AND DEVELOPMENT Environment: Traditional biomass (wood fuel and charcoal) provides 90 percent of the energy consumed in Chad and is a major contributor to deforestation. Traditional methods in farming and livestock breeding also contribute to deforestation and desertification. Environmental policies are being put in place to protect the environment as this is seen as essential to the continuation of core economic activities and to the reduction of poverty. health.85 Analysis Nigeria: Nigeria is politically stable as of 2009. One of the constraints is the poor quality of supply by the national carrier. which is the second source of the nation’s wealth. The reduction in Nigeria’s external debt in 2007 should release more resources for investment in rural development. state. may hinder the progress of rural electrification. The increase in rural electrification is one of the objectives of the Madagascar Action Plan. it is expected that the increase in rural electrification would continue provided there is political stability in the country. In addition. In addition. improved access for individuals.
Political tensions in the country also hinder progress since resources are then diverted to providing security for the incumbent. Rural development and electrification is at the top of the political agenda because it is perceived as both an economic (increasing the wealth of the nation) . Agency for International Development support for jatropha). Chad is a very poor country where the majority of the population. The national energy and rural electrification plans are now being developed. have limited access to basic services: education. there are some common factors that differentiate over-performing (OP) countries from the under-performing (UP) states. health. there could be significant improvement in the rate of rural electrification in the years to come. U. therefore. and electricity. Unlike Madgascar.. as a result of the poor political and institutional environment. The majority of the existing rural projects are owned or supported by TANESCO and tend to be grid extensions. there are significant economic opportunities in the rural areas of Tanzania. especially the rural population. it is doubtful how effective developmental programs for the whole country—and particularly the rural population—will be in the near future. Findings of Policy Assessment Over-Performing Countries: Despite the concern with regard to data from Nigeria. International involvement is limited. public-private partnerships with international agencies and private investors are limited. which enables the government to consider extending electrification to rural areas.S.g. Chad: There is virtually no rural electrification in the country. Improving energy access is considered an important aspect of rural development. particularly private investors. However. with better national coordination in the policies of different sectors and improved international partnerships. The government is seen as corrupt and having mismanaged oil revenue to be used for poverty reduction.SUB-SAHARAN ELECTRIFICATION 237 develop plans and strategies for rural development to alleviate poverty and improve the quality of life. Despite being oil-rich. water. The Rural Energy Agency only became operational in 2007 and has implemented a number of projects with several in the planning stages. and specific targets for rural electrification are stated in the 2006 International Monetary Fund paper. there is limited international private-investor involvement. it is unlikely that rural development will become a priority. Until there is significant improvement in the development and implementation of institutional and sectoral programs. Thus. This may improve with the privatization of TANESCO. The countries are politically stable and an appreciable proportion of the urban population has access to electricity. although this is starting to improve (e. There appears to be no integration of policies at the national or sectoral level and. Similar to Madagascar.
Nigeria and Madagascar are further ahead in dealing with the problem. economic. education. There is significant use of traditional biomass in all the countries with its negative impact on the environment. Rural electrification is not seen as the sole responsibility of government. but its rural electrification agency is in its infancy compared to the OP nations and there is less collaboration both nationally and internationally. The off-grid systems comprise mini-grids and isolated systems usually based on renewable energy sources. has a lot of work to do in all areas assessed: institutional. it is expected that the rate of electrification would significantly improve. health.. the current level of electrification in the country is low. social. specifically bio-fuel technology. It is unlikely that the rate of rural electrification would change appreciably in the next few years. a mental shift is required by a majority of the population in all countries. There also is greater collaboration between national and sector departments because of the awareness that lack of energy access impacts other basic services. however. Evaluating performance of the rural electrification programs is key to ensuring continued development. Most of the nations are committed to achieving the Millennium Development Goals by 2015. the rural electrification agencies have been in operation for much longer. in particular. on the other hand. it is in the initial stages of using off-grid renewable energy sources. Corruption is perceived to be greater in sub-Saharan Africa compared to developed nations. and water resources. The institutions in OP countries are further developed. Under-Performing Countries: Tanzania has some of the characteristics of the OP countries. rather. To that end.238 THE JOURNAL OF ENERGY AND DEVELOPMENT and social (reducing poverty and meeting MDGs) function. and technological. as these factors improve. Rural electrification in OP countries involves both grid connected and off-grid systems. the majority living on less than $1 per day. with the nations showing greater application and experience of alternative energy sources. e. the OP countries have independent monitoring bodies to assess the progress of program objectives. In addition. This is particularly evident in Madagascar. which . Chad. Most of the selected countries appear to recognize the detrimental effect of corruption and are taking steps to tackle the problem. Conclusions The rural population exceeds 60 percent in most countries in sub-Saharan Africa. there is the understanding of the importance of international public-private partnerships on rural electrification projects. However.g. All Countries: There are some factors that are common across these nations.
including public-private partnerships. An econometric model. economic. Tanzania. It also suggests that the use of renewable energy sources and international/national collaboration plays an important role in increasing the rate of rural electrification. the benefits of which are twofold by reducing environmental degradation as well as extending electricity access to areas beyond the grid and possibly at lower cost. The policy survey supports the findings of the econometric study.SUB-SAHARAN ELECTRIFICATION 239 includes halving the population living below $1 per day and improving health and education. the focus on poverty reduction by concentrating on both social (provision of basic services in health and education) and economic aspects. technological. The supplementary detailed policy survey conducted on four countries from the sample (Nigeria. the level of institutional development. The research has shown that rural electrification has both economic and social benefits. further research could consider whether the use of panel data would be beneficial.e. and the size of the urban population. .. Most of the countries are considering a form of structural reform of the industry to provide reliable supplies for both the urban and rural population. further research could assess the impact of structural reforms on rural electrification. The policy survey indicated a number of issues important to the development of rural electrification: the level of institutional development. Recommendations for Further Research: The literature search indicates this is the first attempt at this type of study for sub-Saharan Africa. Hence. and technological factors needed to be considered when assessing rural electrification. wealth distribution. social. and the emphasis on sustainable development (i. Thus. the use of alternative energy sources). and Chad) examined the external drivers (political/institutional. was developed based on variables that took into account the above factors with the exception of technology. The literature review indicated that a combination of institutional. Access to electricity is seen as an essential element in the development of the rural areas to eradicate extreme poverty and improve the quality of life. and environmental) that impacted rural electrification. The detailed study indicates that the provision of electricity by the incumbent electricity utility is inadequate. the involvement of the international community. The results of the econometric study indicate that the factors having a significant impact on rural electrification are the Human Development Index. Madagascar. social. It is therefore recommended for other countries in sub-Saharan Africa to adopt policies that take the findings in this paper into consideration. economic. including the collaboration of policies and strategies of different sectors. The objective of this paper is to assess the socioeconomic factors that have a significant impact on rural electrification in sub-Saharan Africa. the concern of government to improve wealth distribution. using cross-sectional data for 24 countries.
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Basic Econometrics. 28 27 International Monetary Fund.oecd. K. December 2005.’’ Paper no. 2nd edition (New York.’’ Country Report no. ‘‘Nigeria: Poverty Reduction Strategy Paper. ‘‘Nigeria: Poverty Reduction Strategy Paper.gov. 1–107).htm. O. Web Page. National Economic Empowerment and Development Strategy. World Bank Group. Quantitative Micro Software. U. pp.. The Little Data Book on Africa 2008 (Washington. 2008.org/unsd/methods/ m49/m49regin. Anderson. National Economic Empowerment and Development Strategy. regulator OFGEM. 29 Organization for Economic Cooperation and Development. International Monetary Fund. November 5. Office of Gas and Electricity Markets (OFGEM). National Economic Empowerment and Development Strategy. pp.SUB-SAHARAN ELECTRIFICATION 241 19 An assumption that the estimated residuals from a cross-section equation provide additional information is also used by the U. Model Selection and Multimodel Inference: A Practical Information-Theoretic Approach. I. Irrespective of that. 265/04. London.’’ 31 32 30 Organization for Economic Cooperation and Development.ofgem. D.’’ Energy Economics. a cost function for a cross-section of electricity distribution countries. D. Burnham and D. ‘‘Modelling OECD Industrial Energy Demand: Asymmetric Price Responses and Energy Saving Technical Change. See ‘‘Electricity Distribution Price Control Review Final Proposals. chapter 10.’’ 34 .en_2649_15162846_39963489_1_1_1_1. 4th edition (New York: McGraw-Hill. International Monetary Fund. available at www. United Nations. National Economic Empowerment and Development Strategy. July 2007. available at www. P.C. available at http://unstats.C.un.html. Ó 19942007. 2002). accessed September 2009. 2007 built. the rural population remains substantial. Springer-Verlag.org/document/61/0. cit. op.K. November 2004. 2003). N. ‘‘Nigeria: Poverty Reduction Strategy Paper. 24 25 26 22 21 20 D. Adeyemi and L.: The International Bank for Reconstruction and Development/The World Bank. International Monetary Fund (IMF). Hunt. C. Standard edition. 693–709.uk. 05/433.’’ 33 The World Bank data detailed in table A. IMF. 2008). 23 United Nations Development Program. ‘‘Nigeria: Poverty Reduction Strategy Paper. with the assumption that the residuals contain information about the relative (in)efficiency of the companies.00. African Economic Outlook. R. Statistics Division. pp. 219–383.1 specifies the rural population as 53 percent in 2006. African Economic Outlook 2008. an indication of inconsistency in the data. They use the corrected ordinary least squares (OLS) method to assess the efficiency of the Distribution Network Operators by estimating OLS. EViews 6. Washington. Human Development Report 2007/08 – Human Development Indicators (New York: Palgrave Macmillan. Africa Region.3343. Gujarati. EViews 6. 2007).K.
S.’’ International Association of Energy Economics (IAEE) Energy Forum. accessed September 15. 39 Ibid. Annual Progress Report for 2007 and First Semester of 2008. Washington. cit. IMF.’’ Country Report no. August 2007.’’ 41 40 International Monetary Fund.reang.’’ A. International Monetary Fund. ‘‘Nigeria: Poverty Reduction Strategy Paper. ‘‘Nigeria: Poverty Reduction Strategy Paper–Progress Report. 2009. 2009 Substantive Session.’’ Country Report no.0. ‘‘Strategic Developments in Renewable Energy in Nigeria. 36 International Monetary Fund (IMF). 47 International Monetary Fund (IMF). 37 There were plans to implement several other projects before the end of 2007. December 2006.. ‘‘Nigeria: Poverty Reduction Strategy Paper–Progress Report. Abuja. However. 50 United Nations Public-Private Alliance for Rural Development. ‘‘Report to the Secretary-General.’’ Country Report no.C.’’ International Monetary Fund. 9–15. ‘‘Republic of Madagascar: Poverty Reduction Strategy Paper. D. htm. 48 United Nations Public-Private Alliance for Rural Development (UNPPA).242 THE JOURNAL OF ENERGY AND DEVELOPMENT 35 A. op.’’ available at www. with Madagascar ranked 99th of 180.C.. 09/10. Sambo. World Wide Corruption Perceptions Index. Nigeria. Shehu Musa Yar’adua Center. Washington. ‘‘Republic of Madagascar: Poverty Reduction Strategy Paper. Washington. The 2009 CPI score was 3. www. 07/270. ‘‘Renewable Energy Electricity in Nigeria: The Way Forward. ‘‘Nigeria: Poverty Reduction Strategy Paper–Progress Report. 2009. African Economic Outlook 2008.C. pp. accessed September 24. D.org.org .. 49 United Nations Development Program. Sambo. National Economic Empowerment and Development Strategy. January 2009. ‘‘Strategic Developments in Renewable Energy in Nigeria. Organization for Economic Cooperation and Development. 38 A. ‘‘Growing Sustainable Business Initiatives in Madagascar. The scores are out of 10. February 2007.’’ 42 43 44 International Monetary Fund (IMF). third quarter 2009. S.transparency. IMF. there is no information on completed projects on the web site.’’ July 6-13. Madagascar Action Plan (MAP) 2007 – 2012.org/esa/coordination/Alliance/UNDP%20GSB%20In%20Madagascar.’’ paper presented at the Renewable Electricity Policy Conference. 07/59. African Economic Outlook 2008.un. Sambo. Transparency International. 2009. available at www. 46 45 Organization for Economic Cooperation and Development. 51 . D. IMF. These include 85 projects proposed as constituency projects and 407 classified as priority projects. S. The E8-fund is comprised of nine leading electricity companies from the G8 (Group of 8) countries.
2009. 2008 and ‘‘Productive Uses of Energy from Energy Services Platforms–The Case of Jatropha Oil/Diesel Powered Energy Services Platforms (ESPs).’’ paper presented at the Biodiesel/MFP Business Planning Workshop.’’ available at http:// pdf. Sawe. 67 .’’ paper presented at Workshop on Energy and Environment Partnership in Southern Africa.bbc. Washington.3343. accessed September 2009. African Economic Outlook Report 2006.oecd. Agence pour le Developpement de l’Electrification Rurale. ‘‘Decentralised (off-grid) Rural Electrification through Biofuels.rea. ‘‘Republic of Madagascar: Poverty Reduction Strategy Paper. IMF.tz. 2009. available at ´ www.html. ‘‘Republic of Madagascar: Poverty Reduction Strategy Paper. html. 66 E. available at www. International Energy Statistics. B. 2009. published 2006/ 02/17 09:38:39 GMT. H. 2009. accessed September 2009.uk/go/pr/fr/-/1/hi/world/Africa/4719680. August 15.’’ 58 57 56 55 United Nations Public-Private Alliance for Rural Development. available at http://tonto. tatedo.en_2649_15162846_36563539_1_1_1_1. available at www. available at http://allafrica.ader.’’ Country Report no. accessed September 21. 2009. January 19-20.org/document/0/0. August 2004-August 2008.com/stories/ 200908171438. National Strategy for Growth and Reduction of Poverty. op. accessed September 2009. Agency for International Development (USAID).SUB-SAHARAN ELECTRIFICATION 243 52 United States.S. N. Energy Information Administration. Madagascar Action Plan (MAP) 2007-2012. 2009 61 62 60 Tanzania. African Economic Outlook 2008. Roughly 30 percent of total generation of 957 megawatts in 2006. accessed September 14.go.pdf. accessed September 15. ‘‘Madagascar Business and Market Expansion (BAMEX).mg.usaid.co. South Africa. Msofe.’’ Antananarivo. cit. accessed September 25. 2009. June 9-12. ‘‘United Republic of Tanzania: Poverty Reduction Strategy Paper. 64 Article by Happy Lazaro. available at www.00.aid=7. 63 International Monetary Fund (IMF). op. Botswana. Madagascar. 59 Organization for Economic Cooperation and Development. Annual Progress Report for 2007 and First Semester of 2008.’’ paper presented at the African Electrification Initiative Workshop.doe. Sustainability Institute. available at http//news. 65 TaTEDO. Cape Town. ‘‘Powercuts and Candlelight in Madagascar.cfm?tid=2&pid=2&. . Department of Energy.C. see U. ‘‘Opportunities for Investments and Partnerships in the Rural Energy Sector in Tanzania.gov/cfapps/ipdbproject/IEDIndex3. April 2006. Centre for Sustainable Modern Energy Expertise. Tim Cocks. Madagascar. Tanzania.eia. Final Report. cit. International Monetary Fund.org.’’ International Monetary Fund.gov/pdf_docs/Pdacd355. March 12. Rural Energy Agency. Organization for Economic Cooperation and Development. BBC News.stm. 53 54 United Nations Public-Private Alliance for Rural Development.. Mozambique. Maputo. D. accessed September 2009. 06/ 142.
03/209.’’ WT/TPR/G/174.ease-web.’’ 85 84 83 Ibid. 69 70 Ibid. August 2007. Washington.C. ‘‘Chad Poverty Reduction Strategy Paper-2005 Annual Implementation Progress Report. World Trade Organization. D..’’ 76 77 78 79 80 81 Organization for Economic Cooperation and Development. available at http://www.244 THE JOURNAL OF ENERGY AND DEVELOPMENT 68 Jensen Shuma. 2006. International Monetary Fund. ‘‘Trade Policy Review – Report by CHAD. Newsletter of Enabling Access to Sustainable Energy (EASE).’’ Ibid. 72 71 World Trade Organization. African Economic Outlook 2008. Article by Raymond Thibodeaux. Washington.’’ Energy Access. ‘‘Rural Energy Agency: Opportunities and Challenges in Tanzania. ‘‘Trade Policy Review – Report by CHAD.html.C.. IMF.51voa. IMF.com/ VOA_Standard_English/VOA_Standard_5459. ‘‘Trade Policy Review – Report by CHAD.’’ International Monetary Fund. December 11.’’ Ibid. D. World Trade Organization." 73 International Monetary Fund (IMF). Ibid. ‘‘Chad Poverty Reduction Strategy Paper. . February 2006. 2009. April 27. ‘‘Chad: Poverty Reduction Strategy Paper. African Economic Outlook Report 2006. ‘‘Chad: Poverty Reduction Strategy Paper-2005 Annual Implementation Progress Report. 2006. accessed September 23.’’ Organization for Economic Cooperation and Development. ‘‘Chad: Poverty Reduction Strategy Paper-2005 Annual Implementation Progress Report.’’ Country Report no. 82 International Monetary Fund.org. July 2003 and ‘‘Chad: Poverty Reduction Strategy Paper-2005 Annual Implementation Progress Report. International Monetary Fund. 74 75 International Monetary Fund. 07/282. available at www.’’ Country Report no. ‘‘Chad: Poverty Reduction Strategy Paper.
4 f 3.7 39.499 0.2 36.2 b 30 a 60 b 40.5 13.263 294 406 439 528 238 145 290 483 330 2.8 14.389 0.372 53 8 3.4 6.8 39.Appendix Table A.166 454 263 Country Population (in millions) Rural Population (% of total population) Country Foreign Policy & Net Aid Human Direct Development Investment Institutional Per FDI Per g Assessment Capita Capita Gini Index (FDI) j f Index (HDI) ($ million) Rating (in $) (in $) 6.7 9.7 3.533 0.7 7.459 0.3 2.6 3.423 0.7 (continued) SUB-SAHARAN ELECTRIFICATION Benin Burkina Faso Cameroon Chad Congo.6 3.3 a 56.2 2.9 2.7 43 61 93 27 69 25 24 51 18 26 36 39 49 69 62 77 71 79 62 323 258 686 266 1.4 0.145 161 4. Ethiopia Gabon Ghana Guinea Kenya Lesotho Madagascar Malawi Mali Mauritania Mozambique Namibia Nigeria Rwanda 8.514 0.6 2 19.013 26 3.435 21 d 710 724 545 344 435 79 27 78 85 6 82 e 119 153 5 2.389 0.619 0.7 77.4 3.3 7.457 0.2 67.533 0.532 0.3 23 9.5 3.366 0.6 2.2 1.0 0.7 3.6 1.557 0.3 44 47 0.2 10.1 COUNTRY DATA Gross Domestic Product Per Capita (in 2000 $) Access to Electricity (% of rural population) 6 1 16 h 0 16 2 31 21 3 4 1 10 2 3 3 1 10 35 1 45 a 52.4 3.6 0.392 0.7 36 40 0.2 47 39 40 39 47 b 74.5 3.496 0.8 39 b 42.634 0.4 3.0 4.729 0.4 60 81 18.1 265 18.6 f 4 3.4 4 3 3.5 b 63.2 13.6 12 3 21 2 144.5 45 74 39 84 16 51 67 79 76 71 82 69 59 65 64 53 82 245 .9 8.6 195. Rep.7 3.
com/indy/powr/af/sa/p0005.9 11. the overall country score is referred to as the IRAI.0 13. Human Development Report 2007/2008 (New York: Palgrave Macmillan.2 percent of GDP in 2005. Human Development Report 2007/2008. and so on. HDI is then calculated as a simple average of the dimension indices. i Since this is negative number it implies that South Africa invests more in other countries than the FDI it receives. World Bank Group.. D.9 3. 2008).g. on the scores for indices under ‘‘Capable states. h Values are displayed as 0 or 0. c .htm. f The World Bank’s International Development Association (IDA) Resource Allocation Index (IRAI) is based on the results of the annual CPIA exercise that covers the IDA eligible countries. 2009.5 68 15 46 52 122 499 3. knowledge and education.’’ e.5 29. Gabon. 6.1 (continued) COUNTRY DATA Gross Domestic Product Per Capita (in 2000 $) Access to Electricity (% of rural population) 19 c 50 2 3 3 41 58 35 41 51 0.1 52.C. e Ibid. 2009.900 million in 2005.500 million in 2005. Africa Region. 2007). The criteria are focused on balancing the capture of the key factors that foster growth and poverty reduction. as the summary measure based on three basic dimensions of human development: life expectancy at birth. An index is created for each dimension.1 47. Available at http://www.7 58 40 75 87 65 a b THE JOURNAL OF ENERGY AND DEVELOPMENT Based on the Global Peace Index.: World Bank.562 339 274 371 Country Population (in millions) Rural Population (% of total population) Country Foreign Policy & Net Aid Human Direct Development Investment Institutional Per FDI Per g Assessment Capita Capita Gini Index (FDI) j f Index (HDI) ($ million) Rating (in $) (in $) 5. Technical note 1 Addendum. Namibia.mbendi.0 when they are zero or the number is so small that it will round to zero in the display shown. values were estimated for these states based on a comparison with other countries in the program. United Nations Development Program. government effectiveness.3 i -142 12.67 0. with the need to avoid undue burden on the assessment process.502 0.493 0. as an index of population health and longevity. available at http://en.453 64 -6. j HDI is defined in the United Nations Development Program. Human Development Report 2007/2008 12. accessed July 15.9 percent of GDP in 2005. (c) policies for social inclusion and equity. control of corruption.org/wiki/List_of_countries_by_income_ equality. To fully underscore the importance of the CPIA in the IDA performance-based allocations. and South Africa are not included in the CPIA assessments. (b) structural policies. table 15.wikipedia. and (d) public-sector management and institutions. as measured by the natural logarithm of GDP per capita. as measured by the adult literacy rate. and standard of living.503 0. accessed on July 15. corruption perception index. g FDI per capita data calculated from FDI and population values.719 474 393 616 3.. regulatory law.4 39. The CPIA rates countries against a set of 16 criteria grouped in four clusters: (a) economic management. GDP = $1.246 Table A. The Little Data Book on Africa 2008 (Washington. GDP = $5.9 3. d United Nations Development Program. thus.6 Senegal South Africa Tanzania Uganda Zambia 12.7 f 4 3.
. Rep. Y = gross domestic product per capita.SUB-SAHARAN ELECTRIFICATION Table A. Ethiopia Madagascar Senegal Cameroon Uganda Guinea Malawi Mali South Africa Namibia Burkina Faso Zambia Kenya Rwanda Ghana Lesotho Benin Mozambique Gabon Chad Tanzania Mauritania a 247 HDI Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Y Rank 1 3 9 2 7 8 4 12 5 19 13 11 20 14 6 15 10 16 18 24 17 23 22 21 HDI = Human Development Index.2 a RANKING OF RESIDUALS FOR THE HDI AND Y MODELS Country Nigeria Congo.
and it has the fastest growing need of energy resources.4 With the sixth longest international border that stretches thousands of kilometers. Los Angeles.2 When it was first suggested in 1994. During 2006-2007. Woods’s current research concerns China’s hegemonic growth in Southeast Asia. the numbers will only partially tell the story—history and geopolitics are major threads in this tapestry. But we are getting ahead of ourselves.1 When the 2009 construction finally began on the pipeline that will carry oil from East Siberia to China. But this is not unexpected given the region’s history and what is at stake. if Russia has what China wants (oil) and China has what Russia wants (money). the author served as an American Council on Education Fellow at Indiana University/Purdue University-Indianapolis.OIL FOR CHINA: THE SINO-RUSSIAN WALTZ Shelton Woods* t has been called the biggest ‘‘soap opera’’ in oil transfer history. Philippine Studies. is in need of export revenue to keep its economy stable. The Journal of Energy and Development. it was after more than a decade of negotiations that included broken promises. earned his master’s degree in modern Chinese history from California State University-Northridge and his Ph. in Southeast Asian history from the University of California. Vol. rich in oil and gas reserves. and Business Horizons. the pipeline appeared like a perfect solution to the needs of Russia and China. He has authored four books and numerous articles in journals such as Contemporary Southeast Asia. and insults and accusations between nations. All rights reserved. No. careers that ended in prison. Born and raised in the Philippine’s highlands. why did it take 15 years to come to an agreement on the pipeline? It is a complicated answer with a somewhat surprising twist in the end. 249 . 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED).3 Russia. Professor of East Asian History and Associate Dean of the College of Social Sciences and Public Affairs at Boise State University (Idaho). China’s economy is expanding rapidly. China and Russia are *Shelton Woods. 33.D. much of Dr. I Historic Sino-Russian Relations Sino-Russian relations have never been simple. So.
S. this close proximity has resulted in real and perceived historical slights. China’s Nationalist Party. the North Vietnamese leaders understood the Sino-Soviet rivalry and played the two countries against each other. taking a train to Moscow in search of desperately needed aid for the embryonic PRC government. In fact.5 At times.S. the reality was quite the opposite.S. Mao and Nikita Khrushchev despised each other.250 THE JOURNAL OF ENERGY AND DEVELOPMENT geographically joined at the hip.S. Russia also sent aid to the GMD.S.)—appeared to be one country whose anti-imperialist ideology favored a China that was at the mercy of foreign exploiters. enjoyed support from Russia. While the West might have assumed that these issues proved a Sino-Soviet/ Russian chumminess. just months after proclaiming the formation of the People’s Republic of China (PRC). During the 1960s. sent advisors to the Nationalist’s Whampoa Academy. and the division between the two leaders eventually caused Soviet engineers in China to tear up all their blueprint plans for Chinese factories and return home. Russia also advised the CCP to abandon its revolution plans in Shanghai and move to Canton and join the Nationalists. Joseph Stalin and Mao mistrusted each other. China became embroiled in a civil war that ended with a convincing victory by the Communists in October 1949. Russia—as the then-new Union of Soviet Socialist Republics (U. During Japan’s war against China (1937-1945). deteriorated to the point of armed conflict in 1969.9 Given this volatile history. for example. it is a testament to short memories and pragmatism that Russia and China signed a massive $25-billion Russia-to-China oil pipeline .R. Sun Yat-Sen. the first economic paradigm that the PRC followed was the U. during the Korean War China accused the Soviet Union of being a ‘‘merchant of death’’ with regard to encouraging Kim Il-Sung to attack South Korea. industrialized economy.R. Even the threat of a common enemy on the Korean Peninsula did not unite the two countries. a 56-year-old Mao Zedong left his homeland for the first time. even at the expense of the Chinese Communist Party (CCP). eventually leading to U. Russian engineers and economic gurus were sent to the PRC to help the Chinese build a vibrant. support of a united Vietnam and China’s support of Cambodia’s anti-Vietnamese Khmer Rouge. some in Russia blame China for the Mongol invasions of Russia in the thirteenth century because the incoming hordes came from the east.S.’s five-year model.R. Several centuries later.S.8 The world took notice that.R. Cold War anti-Communist nations saw this as a particularly bad omen: the Soviet Union and the People’s Republic of China represented a volatile block of two enormous civilizations now bound together by Marxist ideology.’’6 Following its 1917 Revolution. relations between China and the U. Furthermore.S. Russia/ U. In the same decade. After World War II.S. China took the unprecedented step of negotiating a treaty with barbarians to protect its northern borders from ‘‘foreign devils. as Sun Yat-Sen organized the GMD Army.S.7 During the mid-1920s. the Guomindang (GMD) led by Dr. as Russia’s population pushed east to the Amur River and eventually to the Pacific Ocean.R.
the 1991 dissolution of the Soviet Union and the increased threat of terrorism. primarily to European markets. is part of this growing genre centered on China’s spectacular economic growth. Russia’s economy is rooted in its oil and gas exports. Oil and natural gas are two energy forms that China increasingly pursued during the 1990s. China imported 1 million tons of oil.15 With a reported 13 percent of the planet’s petroleum reserves and an astounding 45 percent of the world’s natural gas reserves. it was a surprising twist of fate and a global economic downturn that sealed the successful Sino-Russian deal. In the end.13 On the oil supply side. The Numbers China’s dynamic economic growth that began after its decade-long Cultural Revolution (1966-1976) has continued largely unabated despite internal crises. seven years later it imported 50 million tons. China’s dependence on the Middle East has grown over the past decade to the extent that nearly 50 percent of its imports come from that region. Yet there were too many economic. .10 Such growth is fueled by energy. the European markets have matured and demand growth has slowed. historical. Martin Jacques’ recently published volume. The momentum of two decades of economic expansion exploded at the turn of the twenty-first century.14 The volatility of these regions and the reliance on safe passages through the Malacca and Hormuz Straits have encouraged the Chinese to explore other sources for oil— enter Russia. This accord is even more startling in light of Russia’s internal dissent over the project. Africa supplies another 20 percent of China’s oil imports.SINO-RUSSIAN OIL POLITICS 251 agreement in 2009. Thus. Japan’s tempting offers for Russia to bypass China in building the pipeline. with no slowdown in sight.12 By 2020 Northeast Asia is projected to consume 20 million barrels of oil a day. for example.11 Environmental concerns. up until the 1990s. When China Rules the World: The End of the Western World and the Birth of a New Global Order. geopolitical. such as the 1989 Tiananmen protests. and global tectonic shifts. and it is a testament to China’s ingenuity that. and China’s accusation that the United States tried to scuttle negotiations between China and Russia. This unprecedented economic dynamism sent pundits and prognosticators in multiple directions. Half of Russia’s export revenue is derived from its energy sector. In 2007 China imported 160 million tons of oil. and international implications of this resource transfer to make it a simple story. it is not surprising that China is the world’s largest producer of coal. economics. and applications of coal supplies have led China to diversify its energy sources. coal accounted for up to 90 percent of China’s energy sources. Russia began exploring the possibility of exporting oil to China. In 1993.16 While only about 5 percent of Russia’s exported petroleum makes its way to an energy-starved Northeast Asia. the first year as a net importer of oil.
Japanese citizens were told by the government to discard the customs of the past. the Great Leap Forward (1958-1961). Coal is an attractive fuel for China because it is the world’s largest producer of coal. particularly coal. The call to ‘‘get rich’’ resonated with the Chinese. China in 1976 emerged from a political paradigm that limited economic entrepreneurship and external financial/business ventures. and it annually accounts for one-third of global coal use. Chinese leaders removed restrictive customs from the past and borrowed examples from free-market systems. But even that is not sufficient to supply the country’s needs.’’ The bulk of the Anti-Rightist Movement (1957-1958). more than 12 Chinese . China’s economy grew so fast that from 1979 to 2009. China’s insatiable thirst for energy has affected its entire global outlook and its domestic and foreign policy priorities. and oil. Coal dominates China’s energy resource consumption: 70 percent of its electricity is generated from coal.18 Like Meiji Japan. with Vietnam as its largest supplier. the U.’’ Some overt economic policies instituted by Chinese officials included replacing inefficient state-owned enterprises with private companies and creating special economic zones on China’s eastern seaboard. economy has doubled once during that same time period (admittedly from a much larger base). natural gas. While China might enjoy an impressive amount of coal reserves. In 1868 the Japanese were emerging gradually from more than two centuries of economic and political isolation. In 2008 China became a net importer of coal.17 By 1919 Japan was the world’s only nonWestern industrialized country and considered one of the five Great Powers at the Paris Peace Conference. Tokugawa (1600-1868) merchants and farmers were progressive and created a protoindustrialized economy upon which Meiji Japan built. the Meiji Emperor declared that the Japanese would travel the planet to learn from more economically advanced states. Deng Xiaoping returned to China with a practical message about adopting different systems to make China rich: ‘‘It doesn’t matter whether the cat is white or black as long as it catches a mouse. Worn out ideological slogans were replaced with more pragmatic mottos. On average. Mao’s emphasis was on ideological purity: ‘‘Better to be red than expert. Fortunately for the Japanese. the environmental and human toll that it exacts on the country is incalculable. it has doubled every eight years.’’ But once this revolution ended in the months and years following Mao’s death. who were kept down for generations by foreign exploiters and domestic ideologues. But China’s continued economic growth and rising standard of living is only possible by increased use of energy sources. Coming out of isolation. and the Cultural Revolution (1966-1976) confirmed Mao’s maxim: ‘‘Revolution is not a dinner party. such as ‘‘Seek truth from facts’’ and ‘‘Practice is the sole criteria for testing truth.’’ After his 1979 visit to the United States.252 THE JOURNAL OF ENERGY AND DEVELOPMENT China’s Growing Need: China’s meteoric economic growth since the death of Mao Zedong in 1976 is somewhat comparable to the history of Meiji Japan (18681912).S.
In 1993. China now (2009) consumes an estimated 8 million barrels of oil a day. has produced history’s largest rural-to-urban migration. it will broker deals with countries considered as rogue regimes. uses 7 percent of the annual global oil supply. This has the potential to undermine attempts to isolate pariah states and enrich totalitarian and human rights-abusing nations.SINO-RUSSIAN OIL POLITICS 253 die every day in mining accidents. 15 years before it began importing coal. which has an oil reserve that covers over three months usage. particularly on the African continent. So it is not surprising that Africa provides one-third of China’s crude imports and almost 20 percent of its total oil imports. and this is projected to increase to 60 percent by 2011. which leaves petroleum (oil) as an energy source keenly sought by the country. in China’s desire to secure energy resources. by 2003. building on a modest base. China became a net petroleum importer. China walks a tightrope in its oil consumption as it has only a seven-day reserve on hand compared with Japan. with 20 percent of the world’s population. Peter Navarro notes the underlying philosophy of China’s energy strategy is not immoral but rather amoral. China. For example.21 There is a dark side to China’s investment in foreign countries and its outright purchase of oil fields in foreign lands. trailing only the United States (it is projected to surpass U. China has extended educational scholarships for thousands of African students to study in the rapidly expanding Chinese universities. But this will change. All of this is only sustainable if China continues to import massive amounts of oil. it was the world’s second largest oil consumer. With less than 5 percent of the world’s population. this compares with an annual coal-extracting human cost of 30 lives in the United States. It already imports almost half of its oil consumption.20 Chinese economists and politicians are keenly aware of these challenges. Israel has become an important . the United States consumes around 25 percent of the world’s oil. Second only to Russia in supplying arms to China. and the Chinese are responsible for building almost all of the main roads in Rwanda. oil consumption in 2031). The geopolitics of oil remains complicated as control of energy resources enables certain leaders to gain access to hard currency through energy exports while continuing unacceptable behavior. China’s expanding economy.22 A concern to the international community is that. It is for this reason they have moved to diversify their oil suppliers through a variety of strategies. China has developed strong ties with many African countries and has invested heavily in projects on that continent. A decade later. It has made car ownership a reality to millions of people. Sudan alone sent more than two-thirds of its oil production to China. by comparison. which represents 5 percent of Chinese oil needs. China’s search for oil and allies has even strained relations between the United States and two of its primary allies in the Middle East: Israel and Saudi Arabia. Even these statistics need contextualization. About these relationships.S. Chinese companies are constructing railroads in Nigeria.19 Natural gas supplies about 2 percent of China’s energy needs. such as the government of Sudan.
Russia is now a net exporter of grain yet its technology sector still lags behind more advanced economies. Russian Supply: Since the Soviet Union ceased to exist in 1991. State-owned enterprises have been joined by thriving private businesses. Trade accounted for a large portion of Russia’s economic boom. negotiations began between China and Russia regarding construction of a pipeline from East Siberia to China. Beginning in 1998 and for the next decade. overnight. Closer to its own shores. then. But again. the middle class mushroomed in Russia’s society.23 As for the other U. primarily oil. In 2000 the United States intervened and blocked the sale of four Phalcon early warning aircraft from Israel to China. Russia’s economy grew at an annual rate of 7 percent. During that decade. Middle East ally.24 Startled Southeast Asians have woken up to find that. And like China. post-Soviet Russia has loosened its stance on a centrally planned economy to one that is more open to foreign and domestic entrepreneurial endeavors. the year when Mikhail Gorbachev traveled to China. and steel. Chinese soldiers have planted Chinese flags and built make-shift housing on these small parcels of land. It was an ambitious plan that ran into many detours before its surprising resolution. For example.S. Russia has experienced severe growing pains in trying to replace an old model with something more in step with the globalized free-market system. Russia holds 13 percent of the global petroleum reserves and an astounding 45 percent of its conventional natural gas reserves. post-Soviet Russia deemphasized agriculture as a viable economic sector to the extent that the country became a net grain importer. it should not be unexpected that China would look to its adjacent neighbor—Russia—for oil and natural gas. Russia became economically dependent on commodity exports.25 Given this context. But since 2007.254 THE JOURNAL OF ENERGY AND DEVELOPMENT trading partner with China and something of an irritant to the United States. In short. Furthermore. China has flexed its muscles in the Parcel and Spratly Islands—tiny specks of land in the potentially oil-rich waters that are claimed by Japan and Southeast Asian countries. Like the capricious winds that blow in Siberia. A primary mover of Russia’s post-Soviet Union economic boom is its exports of energy commodities. Russia has tried to balance an economy that emphasizes both sophisticated technology and agriculture. ‘‘Big Brother’’ is always watching. natural gas. Russia’s economy has undergone tremendous change. Soon after 1989. Saudi Arabia. The results have been mixed. Russia has played ‘‘roulette’’ with global market prices. China uses historical maps to claim that the islands and waters fall under Chinese jurisdiction. there was a dark side to this growth. Russia’s economy is tossed up and down based on the fluctuations in global markets. Like post-Mao China. one can never be certain that the government will not decide to arbitrarily insert itself in so-called private enterprises. making it . the kingdom is able to hold a China-as-a-major-oil-consumer card should the United States threaten to change its policies toward Saudi Arabia.
R. While Russia did not use tanks and weapons to demonstrate its displeasure with former Soviet states ‘‘siding’’ with Western Europe.27 In short.2 million barrels a day in the same period. While it was costing Russia a great deal to prop up the weaker states within the U. historical. Yet China may be a bit wary of relying on Russia for the bulk of its energy needs since Russia has been accused of using energy resources as a diplomatic weapon. While a complicated story with many unanswered questions and numerous ambiguities. it did use the weapon of energy resources. if not fear. in 1991 former Soviet states declared their independence. One telling statistic is that during the first five years of the 21st century. ‘‘The fact that Russia has been using pipelines as a foreign policy weapon is clear from the fact that in February 2003 it decided to bypass Latvia in exporting oil.’s power. and ideological ties between the former Soviet entities would serve to keep these new. Russia’s economy is dependent on energy exports. Russia viewed Kiev as more part of Russia than a piece of the Soviet Union. many observers still wonder why Russia’s leadership allowed the disintegration of the Soviet Union. represents a mature market. Europe. the overarching narrative is as follows.’’28 Despite Latvia’s claim that Russia’s action violated previous agreements. Indeed. which leaves it vulnerable to vagaries on the demand side and of global prices.’’26 Russia is the world’s second leading oil exporter and the undisputed leader in natural gas exports. As noted earlier.R. Fortunately for Russia. of the U. Once one of the world’s superpowers. One analyst noted. Russia’s reputation as a reliable energy supplier to Europe was severely damaged due to its policies and reactions to actions taken by former Soviet states such as Latvia and Ukraine. the primary destination for Russian oil and natural gas. many thought it was worth the cost. 2006. Russia increased oil exports by 2.. Nonetheless. while European imports of oil increased 1. half of Russia’s export revenues are from the energy sector. Latvia.SINO-RUSSIAN OIL POLITICS 255 what one observer calls ‘‘a natural gas superpower.S. So it came as an unhappy surprise to Moscow when the three Baltic states of Estonia.S. Moreover. expensive and extensive infrastructure development.2 million barrels a day. in exchange. shut-off of gas supply from Russia to the Ukraine. The more public and dramatic energy spat was the January 1.S. its neighbor to the southwest enjoys what is arguably the world’s most dynamic economy with a desperate need for oil and natural gas. there was global respect. and Lithuania applied (in 2002) and were admitted (in 2004) to the North Atlantic Treaty Organization (NATO) and then to the European Union. including . Russia declared that it had the right to close export markets as it saw fit. There are ambitious goals by European leaders to reduce fossil-fuel consumption by nearly 30 percent within the next decade (by 2020).S. It is probable that Moscow believed the sentimental. During the days of the Cold War. Ukraine was a cornerstone of the old Soviet Union. independent countries closely allied with the Russian Federation.
S.’’32 These recent acts on the part of Gazprom and Russian political leaders are not lost on China’s leadership. John Negroponte. The 1994 Ukrainian elections and the Orange Revolution swept pro-Russian leaders out of office and ushered in the pro-West Viktor Yushchenko. Gazprom.’’31 There was condemnation of Russia for its act of turning off the energy spigot at such an inopportune time. To show its seriousness. As Rafael Kandiyoti wrote. but the implications of the January 1. In mid-2005. the Director of U. Ukraine is not expendable. Gazprom tried to negotiate a $230 per thousand cm price with Ukraine.S. to publically discuss an appropriate response to Ukraine’s intransigence.S. a token of friendship. it does not intend to become solely dependent on its neighbor’s supply. Russia and Ukraine were. the Russian producer and supplier of gas. and in some respects still are. some suspect. In vital issues concerning energy supplies. national security risks or foreign policy challenges. government in Ukraine. For the Russians. Gazprom President Aleksei Miller and Russian President Vladimir Putin appeared on Russian state television on December 31. which heretofore was selling natural gas to Ukraine far below market prices as. Later in 2006. at the end of 2005. Obviously displeased. Indeed. and in the midst of a brutal winter. 2006 actions were clear. 90 percent of the natural gas imported to Ukraine (3.R. as gas prices in the world market jumped. Gazprom decided to stop supplying gas for Ukrainian use. Russia lashed out at Ukraine for ‘‘stealing’’ and for behaving as an ‘‘unreliable transit country. 2006. Ukraine siphoned off gas meant for other markets.30 The Ukrainian growing courtship with the West was viewed as a slap in Russia’s face and even a threat to the flow of exports.8 billion cubic feet in 2004) from Russian and Turkmen sources finds its way to countries outside of Ukraine. National Intelligence.S. armaments and other industrial production. 2005. noted that Russia’s behavior was ‘‘an example of how energy can be used [by Russia] as both a political and economic tool [which could] pose significant U. warned Ukraine that it was going to raise the price of natural gas slated for Ukraine from $50 per thousand cubic meters (cm) to $160 per thousand cm. The next day. Four days into 2006. Thus. a new agreement was concluded between Ukraine and Russia. the selection of political and military elites. was made by the central U. Russia had to be careful in its response to these developments since Ukraine serves as a conduit for Russia’s exports of natural gas to Eastern and Western Europe. parts of a long-united whole.256 THE JOURNAL OF ENERGY AND DEVELOPMENT pipelines.’’ and vice versa. on January 1. Ukrainian officials balked at the suggested price increases and claimed they had an agreement with Russia on a fixed price out to 2009. No one really 29 expected Ukraine to exchange all that for a breath of fresh air. To meet its domestic requirements. . tying ‘‘Great Russia’’ with ‘‘Little Russia. while China seeks to receive energy resources from Russia.
The oil would come from the Angarsk area in East Siberia and flow through pipelines to Daqing. who rose to become the richest man in Russia and the sixteenth richest man in the world. he presented himself as a loyal citizen while in college. the new oligarchs in Russia like Khodorkovsky were on their way to becoming millionaires. With parents who were rank-and-file factory workers. Importing items such as cheap liquor and taking advantage of black market dollar-to-ruble exchange rates. the Russian government was in such financial and economic difficulty that the once-untouchable oil and metal government companies were opened to private investors. Within two years his investment was worth 20 times his initial investment. In May 2003. Yukos agreed to supply 5. which is in northern Irkutsk Oblast. an agreement was reached between Yukos and the China National Petroleum Corporation (CNPC). These preliminary discussions opened the door for much more serious considerations of future SinoRussian partnerships. one of Russia’s largest oil companies. making deals and eliminating those in the way.13 billion barrels of Russian oil to China between 2005 and 2030. Khodorkovsky’s plans included placing Yukos on the London Stock Exchange and bringing in Western engineers to help with the upstream activities of oil exploration and production.33 These discussions occurred at the same time that Russia was being transformed from a society governed by aged. One of the most fascinating characters in this new economic environment was Mikhail Khodorkovsky. Finally. Khodorkovsky invested $350 million in Yukos. China’s petroleum-center in Heilongjian Province (see map 1). During the mid-1990s. Khodorkovsky began creating small businesses. Khodorkovsky had a rather conventional childhood and graduated from Moscow’s Mendeleev Institute in 1986 with a degree in chemical engineering. With the fall of the Soviet Union and new economic opportunities. Ineffective state-owned companies were replaced by hard-nosed Russians. Menatep. For its part. Khodorkovsky worked on procuring a massive deal with China. keen to make money in this new world. entrenched bureaucrats to one where oligarchs in designer suits and expensive cars zoomed around Moscow.SINO-RUSSIAN OIL POLITICS The Plan 257 The first substantive talks on building a pipeline from Russia to China began in 1994 and then heated up in 1997 when Russia and China agreed to develop the Kovyktinskoye gas field. China agreed . in a sense. Using the method of loans-for-shares.34 Using his college contacts. rising to the position of deputy head of the Communist youth movement Komsomol and making sure that students religiously attended Party meetings. It was. and who had benefited from ‘‘fire sale’’ prices in many instances. Though his parents were not supporters of the Soviet Union policies. He also sought a possible merger with ExxonMobil or ChevronTexaco. he launched a private bank. they taught their son to conform. perestroika on steroids.
it manages 30. However. However.258 THE JOURNAL OF ENERGY AND DEVELOPMENT Map 1 to pay $150 billion for the oil. transports 93 percent of oil produced in Russia. new independent states have claimed ownership of the pipelines within their borders. Yukos was poised to begin building the world’s most expensive pipeline. there were 84. the Ukrainian pipeline system appears to be in urgent need of repair. Meanwhile. It is a giant and dominating force in the world of pipelines and oil transit: With the Soviet Union’s break-up.’’35 Gazprom served as the state-owned gas production company and Glantransneft had the state’s monopoly on pipeline construction. Russia also pressures these new governments to turn over their pipelines to Russia so as to assure proper maintenance of the lines. given these countries’ frequent inability to pay for oil and gas. This type of request backfired in Ukraine.000 miles of pipelines and 390 oil refilling stations. solidly in the hands of the Russian government. China envisioned that by 2030. The company. Prior to the breakup of the Soviet Union. Russia has exchanged oil and gas for control and ownership of the pipelines in these states. the Russian Federation still retained its monopoly and control of the pipelines. helping to diversify its energy suppliers. 30 percent of its oil imports would come from its western neighbor. In 1991 Glantransneft was formed into a joint-stock company called Transneft. making this grid ‘‘the largest single trunk pipeline network in the world. Ukraine has not been able to carry out proper maintenance and has resisted Russia’s demand for (hazard .000 kilometers of pipeline across the region.
however. The first signs of disruption occurred shortly after the very public May 2003 Yukos-CNPC documents signing. Transneft. the agreement also would address China’s main energy issues—its desire to diversify its energy sources and its desperate need for oil. Khodorkovsky did not appear concerned with these developments. in a July 2003 interview with a news show in Russia. when Yukos tried to push its way into the Russian pipeline business. his donations to teachers and media outlets skirted politics too closely. The Detour: The Yukos-CNPC deal seemed like a marriage made in heaven. to Nakhodka. Charged with fraud and tax evasion. During the summer of 2003. he was found guilty and sentenced to nine years in prison on May 31. Internal and external politics derailed the pact. relatively low profile. President Putin declared it was Russia’s ‘‘prerogative’’ to maintain pipelines constructed by the Soviet Union ‘‘in order to protect its national interests and parts of the system 36 that are beyond Russia’s borders. north of Angarsk and further away from Lake Baikal. Despite his early.SINO-RUSSIAN OIL POLITICS 259 a guess?) part-ownership of the system.37 The Yukos company was dismantled and its assets distributed to rival firms. particularly the Russian president. Khodorkovsky’s attempt to partner with Western oil companies alarmed and irritated many in the government. This new proposed route was more environmentally sound as it would be further away from Lake Baikal than Angarsk. The trouble began with Moscow. More fortunately for . moved Moscow politicians. The new plan was for a pipeline to be built from Taishet. these events followed just a few months later on October 25. whether or not he had some inkling that the government was poised to arrest him and dismantle the Yukos-CNPC agreement. The state-controlled pipeline agency. now sat in the driver’s seat of the far eastern export project but soon found itself in a political morass. 2005. he noted that there were some concerns the government expressed about Yukos and the proposed pipeline but that those were ‘‘normal’’ issues to work through with such a massive project. the Russian government began arresting Khodorkovsky’s colleagues and publicizing accounts of Yukos’ bullying tactics and how its main investors acquired their wealth through intimidation and the murder of rivals in other oil companies. he was warned to stay clearly in the business sector but out of political activities. Russian claims on the network have indeed taken some astonishing forms: in October 2003. However. Khodorkovsky ran afoul of government officials. But it was not to be. it was up against stiff odds. particularly those in President Putin’s cabinet. Furthermore. a Russian port city facing the Gulf of the Sea of Japan (map 1). Vladimir Putin. to scuttle the original agreement. which was helping to finance this massive undertaking.38 Effective lobbying from Japan. the original proposed point of origin. Russia would profit given the amount of taxes Yukos would have to pay. in return for carrying out the required maintenance work.’’ Thus.
260 THE JOURNAL OF ENERGY AND DEVELOPMENT geopolitical reasons. also a state-owned enterprise. with a possible spur to China. however. Then for the project to start operations. the world-wide economic recession changed everything. Transneft was convinced that the Taishet-Nakhodka route should be the one followed. businesses went bankrupt. In the final analysis. Once it became clear that Russia was wobbling on the original Yukos-CNPC agreement. the Japanese press published articles claiming that Russia had agreed to forgo the original plan and would bypass China. it may have been this economic downturn that helped settle the pipeline route argument.39 The Taishet-Nakhodka proposed route was met with outrage in China. mortgage and insurance companies stayed afloat with federal government bailouts. it needed help from a company that could secure the oil. the Chinese accused Japan of intruding into the China-Russian oil agreement and of pressuring the Russians to abandon the proposal. and the largest U. the new route bypassed China and had the oil deposited off the coast of Japan with a port where it could easily be shipped to Japan. where he was received and welcomed warmly with the hope a promise could be secured that the pipeline would be built to the Pacific. creating economic woes in Russia. who wanted to go forward with the Taishet-Nakhodka route. accusing the United States and Russia of scheming to limit China’s growth in both its energy and military sectors.40 There appeared to be economic and political pressure placed on Russia by the Japanese. Rosneft argued that the original plan of building a pipeline from Russia to China should rule the day. Oil prices fell. The first part of the project will stretch to Skovorodino [terminal]. Rosneft. Meanwhile. Concomitantly. At some point during this five-year span. The debate raged from 2004 through 2009. and members of Putin’s cabinet. Transneft and Rosneft. Then in 2008.S. had settled on a plan to build the Taishet-Nakhodka route. But while Transneft built the pipeline. Transneft’s spokesman Sergei Grigoriev insisted that his company would not be swayed by outside ‘‘bribes’’: ‘‘We are not building a pipeline to China or Japan. was Transneft’s partner in supplying the oil that would be transferred via the Eastern Siberia Pacific Ocean Pipeline (ESPOP). The two companies bitterly argued the familiar debate regarding the destination of the pipeline. within Russia there was a rift developing between Transneft officials. South Korea.’’41 By 2006 Transneft. In 2005 Russia’s Industry Minister. we will send oil from Skovorodino by railroad.’’ But Grigoriev also bluntly told the press that Russia’s internal politics would be the primary factor in deciding where to terminate the pipeline: ‘‘It is political lobbying that will decide where it [the pipeline] will go—to China or Japan. with the blessing of Putin and other cabinet ministers. who wanted to honor the original agreement. some complaints emanated from the Chinese. needed money. Victor Khristenko. traveled to Tokyo. where 50 percent of its export revenue was generated by the energy sector. Media outlets in Japan and China closely followed the political intrigue in Moscow. Banks closed. The Russian government and its companies. and the United States. Japan remained .
on the other hand. China’s economic growth for the third quarter of 2008 was 9 percent. The Chinese financing turns out to be 45 more than double Japan’s last offer.6 billion for U. which was around one-third of the open market price at the time. to invest in domestic projects that helped China weather that crisis. during 2008 China cut interest rates and directed special government investment in its economic sector. not least of all because of the color of China’s money has proved more alluring because of the urgent short-term financing problem in which both Transneft and Rosneft currently find themselves. John Helmer put it best in November 2008: This is what has turned the Skovorodinio-Daqing pipeline into the longest-running soap opera in the history of oil transportation. clean energy projects. The result was that China loaned Transneft $15 billion and Rosneft $10 billion.44 Reviewing these events. China’s unique political system allows its leaders to implement economic policies much quicker than in other political structures.6 billion for clean energy development compared with the $8. China would not sign agreements with any Russian company until it received assurances that everyone was on the same page. The quid pro quo agreement was that Russia agreed to build the pipeline to China’s doorstep before stretching it to the Pacific. have Putin and Wen really tied the knot this time? It seems so. Some of the pieces are centuries old. which was lower than any one quarter since 2003. The result of Russia’s economic difficulties and China’s fiscal largesse meant that China was now in a stronger position in terms of determining the financing and route of the ESPOP. Chinese leaders recalled the 1997 Asian financial crisis and immediately set in place measures. In addition.S. . politicians were able to pass a stimulus package through Congress for their country’s stalled economy. Second. Five years and countless episodes later.’’ a more appropriate descriptor of Russia’s ESPOP is as a puzzle. The construction commenced. China’s government had pumped $586 billion into its own economy. China also agreed to drop the interest on the loans from 7 percent to 6 percent. Finally. it had to rethink its position. For its part. Before U. First. similar to those they used at the time.40 a barrel.SINO-RUSSIAN OIL POLITICS 261 interested in financing an $11-billion pipeline to Nakhodka. China invested $34. Conclusion Despite the picturesque language of a ‘‘soap opera. given its system of greater state control and the ability of the government to act unilaterally. but when the costs ballooned to $18 billion at a time when the world was slipping into a deep recession. while Russia agreed to sell the crude oil at $11. China. was much more economically proactive in the face of a global downturn.42 Furthermore. China was thus in a position to present attractive options for Russia in the midst of a global economic downturn. in the following year.43 China’s proactive economic stimulus measures in 2008-2009 are rooted in three realities.S.
there are no close ports or other countries where the oil might be sent from the terminating point.’’46 Russian officials were frank in stating that political lobbying would determine the final outcome of the pipeline route. Long-held suspicions were conveniently swept under the rug in the name of pragmatism and economic need. then apart from the generous terms of their loans with Transneft and Rosneft.’’ Russia also is dependent on China’s continuing purchases of its oil. Shoichi Nakagawa. and favorable pricing.’’ One observer noted. And if there is a winner. Japanese frustration reached a boiling point in 2005 when a Transneft spokesman. ‘‘The China-Japan bidding war over the route of the oil pipeline helped Russia. the dismantling of Yukos and the imprisonment of Khodorkovsky is widely viewed as a black eye on Russia’s announced opening to private-sector investment and to a more open market system. it initially presented something of a stark contrast to the collapse of U. A specialist following the talks stated. The world recession exposed Russia’s growing dependence on global commodity prices and left it with little recourse but to reach out to China and capitulate on its once-intransigent insistence that ‘‘this is a pipeline on Russian soil and only Russia will decide where it will terminate. and they were not pleased with the back-and-forth negotiations. it is not a transiting line but with site-specific delivery constraints. Within the context of the ESPOP. tying construction loans for the pipeline to repayment with guaranteed 47 volumes of oil. This would lessen the possibility of Russia turning off the spigot whenever it chooses.S. Finally. Japan might look back on the inordinate political capital expended as excessive in its attempt to influence Russia and its oil companies to swing the pipeline away from China and toward Japan. China and Japan were caught in the middle of the pipeline route debates. With the outcome of the ESPOP project. But some could assert the largest loser in this story is Russia. Japan will not provide financial cooperation. but angered China. Given the Chinese government’s ability to move quickly and on a large scale to address economic recovery. Perhaps even more importantly. So while the ESPOP might just be a side-story within a global context. That [Japan’s] threat played directly into Transneft’s hands. Trade. banks and automobile and insurance companies. and Industry. it is quite another thing altogether to do the same against China. one can ponder to what extent this story could be . It is one thing for Russia to use energy supplies as a weapon against the Ukraine. Sergei Grigoriev. intimated that the first priority would be to get oil flowing near the Chinese border. this was accomplished in the run-up to and in the midst of a massive global economic downturn. there are what might be considered losers and a winner in this story.262 THE JOURNAL OF ENERGY AND DEVELOPMENT while others are new. Japan’s Minister of Economy. Since the ESPOP terminates on the border of China. as it had more than once warned the Kremlin against allowing the Nakhodka oil port plan to be held hostage by Japan’s financing formula. China won the battle of having a pipeline built from East Siberia to its doorstep. In truth. declared: ‘‘In such a situation.
’’ Critical Asian Studies. its mix of economic liberalization with slower political change may offer a trade-off in flexibility and pragmatism. Harvard University.’’ Asia Times. Sebes. pp. 2004). 2005. 1984). 5. 4 5 3 2 R.S. 2009). 1985). Huaichuan Rui.I. The author wishes to thank Michelle Yu for her assistance in translating materials. Qipin He. China has many challenges ahead as it transforms into a global superpower. NOTES 1 John Helmer. available at http://www. Odd Arne Westad.net/guojimaoyi/090320/15245133. ‘‘Siberian Oil Pipeline and Its Implication for Northeast Asia. ‘‘An Analysis of Sino-Russian Energy Cooperation.R. 2009. State University of New York at Binghamton. p. 8 7 Martin Jacques. Political Science. no. 2 (2007). Sino-Russian Relations: A Short History (Sydney: G.html. Etzold. April 29. available at http://www. Kensuke Kanekiyo. the third largest in the world after the United States and Russia.S. available at http://news.5 billion short tons of recoverable coal reserves. ‘‘The Treaty of Nerchinsk (Nipchu) 1689: A Case Study of the Initial Period of Sino-Russian Diplomatic Relations Based on the Unpublished Diary of Father Thomas Pereyra of the Society of Jesus’’ (Ph. March 20. May 19. Transition and Development in China: The Case of the Coal Industry (London: Routledge. but. Allen & Unwin.’’ Xinhua. Quested.’’ paper presented at the 26th annual international area conference of the International Research Center for Energy and Economic Development on ‘‘Burgeoning Asian Demand: Could Supply Alliances Change?’’ Boulder. 1976).com/english/2009-05/19/content_11402237.html (translated by Michelle Yu). ‘‘China Beats Japan in Russian Pipeline Race. Department of Energy.’’ China Thesis Download Center. 1958).SINO-RUSSIAN OIL POLITICS 263 used as a lesson for or premonition of the future. 2005. China in the 1920s: Nationalism and Revolution (New York: New Viewpoints.D. ‘‘The Deterioration of an Alliance: The Effects of Various International Crises on PRC-U. 2003).atimes.K. Neville Maxwell.html. April 19-20. 39. When China Rules the World: The End of the Western World and the Birth of a New Global Order (New York: Penguin Press.com/atimes/Central_Asia/GD29Ag01. 9 Suzanne Veronica Uttaro. Gilbert F. 13 12 11 10 .144.xinhuanet.studa. available at http:// www/eoa/dpe/gpv/cabs/China/Coal. Relations from 1950-1980’’ (Thesis. 2009. dissertation. vol.S. Support for writing this article also was provided by Boise State University. Decisive Encounters: The Chinese Civil War. China holds an estimated 1. Globalisation. Chan and Thomas H. ‘‘How the Sino-Russian Boundary Conflict Was Finally Settled. ‘‘Timeline of China-Russia Oil Pipeline Negotiation. 1946-1950 (Stanford: Stanford University Press. 6 Joseph S. according to the Energy Information Administration of the U. Colorado. 229-53.html.
21. cit. 28.S. p. 2004). 29 30 Rafael Kandiyoti. China and Southeast Asia: Into the Twenty-First Century (Honolulu: Pacific Forum/Center for Strategic and International Studies. p. 15. 2002). Kanekiyo. 7.264 14 THE JOURNAL OF ENERGY AND DEVELOPMENT Xia Yishan. John McBeth. 114. Tauris. India). May 2000). 26 27 28 25 24 23 22 X. 2003. Pipelines: Flowing Oil and Crude Politics (London: I. spring 2005. op. New Jersey: Financial Times Press. 1. K. 2027. Peter Navarro. Charles Wolf. Shin’ya Sugiyama. 31 32 Ibid. 11.’’ Wall Street Journal. 1995.: The Library of Congress..: The Library of Congress. Congress/Foreign Affairs. April 27. Margaret MacMillan. p. Defense and Trade (Washington D. p. Policy. p. 2. op. 2007).. 1988). 1993).C. Congressional Research Service Report for the U..S.G. July 14. Rising Energy Competition and Energy Security in Northeast Asia: Issues for U. Jim Nichol and Steven Woehrel.. Paris 1919: Six Months That Changed the World (New York: Random House. The Coming China Wars: Where They Will Be Fought and How They Will Be Won (Saddle River. China-Russia Energy Cooperation: Impetuses. ‘‘Russia: Oil and Politics. 1859-1899: Export Trade and Overseas Competition (London: Athlone Press. Kanekiyo. 2008). Defense.. Congress/Foreign Affairs. p. 2006). B. 2. Gidadhubli. 20 21 19 18 Ibid. Richard L Grant. Russia’s Cutoff of Natural Gas to Ukraine: Context and Implications.C. p. 306. p. cit.’’ Middle East Quarterly. 16 17 15 K. p.’’ Far Eastern Economic Review. Congressional Research Service Report for the U. 107. ‘‘Oil-Rich Diet: Beijing is Asked to Explain Its Maritime Appetite. California: RAND. p. February 15. Baker III Institute for Public Policy of Rice University. 2005.. Prospects and Impacts (Houston: The James A. 7. op. ‘‘China Flexes Economic Muscle throughout Burgeoning Africa. p. ‘‘Providing Arms: China and the Middle East. Yishan. p. R. Emma Chanlett-Avery.S. . Karby Leggett. 2003). p.’’ Economic and Political Weekly (Mumbai. p. Japan’s Industrialization in the World Economy. March 29. 6. 11. and Trade (Washington D. 6. p. May 24. Dan Blumenthal. p. cit. Ibid. Fault Lines in China’s Economic Terrain (Santa Monica.
Russia: A Pipeline Connection.’’ Asia Times. Metallinou Spyridoula-Amalia.Com.ru/archive/index. and Ronald Smith. 2008. November 23. May 25. Brandon MacGillis and Nicolle Grayson.’’ About. a spur or offshoot from the line under construction to Nakhodka on the Pacific. available at http://www. 2009).about.’’ The Pew Charitable Trusts. p. Richard Sakwa.org/events/?fa=eventDetail&id=891. The Quality of Freedom: Khodorkovsky. available at http://engforum. 2006. Helmer.. Richard Giragosian. 288-95. ‘‘Cell Block Four. Institute of International Relations. John Helmer.’’ Carnegie Endowment. ‘‘China Ties up Russia’s Crude.html.’’ Asia Times. Helmer. available at http:// www.’’ Lisa Chiu.com/atimes/China_Business/GJ18Cb02. ‘‘China Leads G-20 Members in Clean Energy Finance and Investment. 134. 2009. 2010.’’ paper presented at the International Summer Seminar. p. February 18.org/news_room_detail. p.htm. 2010. 41 42 40 39 J. available at http://www. ‘‘Russia Opens China Oil Pipeline.’’ The Financial Times.. available at http:// chineseculture.php?t-231210. 47 46 45 44 43 J. Putin and the Yukos Affair (New York: Oxford University Press. and Andrew Kuchins. 2004).com/memberships/132391/analysis/20090217_ china_russia_pipeline_connection_act_desperation. March 24.pewtrusts. 3-7. 35 36 37 38 34 Rafael Kandiyoti. ‘‘China Beats Japan. Transneft: Pipeline Myths (Nicosia.atimes. 3. Greece. Elena Savchik. ‘‘China Ties up Russia’s Crude–Again. 116. ‘‘China’s Response to the Global Financial Crisis. ‘‘Energy Security: The Russian Trans-Siberian Pipeline and the Sino-Japanese Courtship. op. carnegieendowment. Sagers and Jennifer Nicoud. Editor’s note: The 67-kilometer pipeline from Skovorodino in east Siberia to China’s northeast frontier. October 18. ‘‘Development of East Siberian Gas Field and Pipeline to China: A Research Communication. ‘‘Can Anyone Save This Marriage: Russo-Chinese Energy Relations. An Act of Desperation?’’ Statfor Global Intelligence. pp. Adam Landes.com/od/thechinesegovernment/a/Chinaeconomy.aspx?id=57972.html.pravda.’’ . ‘‘China. ‘‘The Sino-Japanese Pipeline Struggle. May 1997. 2010. actually was opened on August 29. Stephen Blank. Keith Gessen. cit.’’ Post-Soviet Geography and Economics. Edward Chow. August 30. Cyprus: Renaissance Capital Limited. Hydra. Ibid. September 2006. available at http://www. 2010.stratfor. pp.’’ London Review of Books.SINO-RUSSIAN OIL POLITICS 33 265 Matthew J. February 25. 2005.
D. Lavrentios Vasiliadis has a B. in regional planning from the London School of Economics and Political Science. His research interests include regional economics. Argyrios D. regional planning. The Journal of Energy and Development. is teaching at the Technological Institute of Western Macedonia.A. and Lavrentios Vasiliadis* Introduction he region of Western Macedonia is located in the northwestern part of Greece and is one of the largest lignite centers world-wide. More than one-eighth of the region’s surface is used for the lignite mining. he teaches at Democritus University of Thrace in the Department of International Economic Relations and Development. foreign direct investment. The electrification of Greece during the post-World War II period was based on this large quantity of lignite in Western Macedonia. economic theory. and international trade. Assistant Professor in Rural and Regional Development at The Technological Educational Institution of Western Macedonia (Greece).LIGNITE MINING AND LIGNITE-FIRED POWER GENERATION IN WESTERN MACEDONIA OF GREECE: ECONOMY AND ENVIRONMENT Fotios Chatzitheodoridis.D. who has a M. and industrial organization. and policy analysis. Argyrios D. in environmental studies (University of Aegean) and has worked for the Greek Ministry of Rural Development and Foods and Aristotle University of Thessaloniki (Greece). 267 . in political science and public administration from the University of Athens and both a M. in regional and urban planning and a Ph. investments evaluation. is the major source for the production T *Fotios Chatzitheodoridis.Sc. His research interests cover sustainable development. the author holds a Ph.A. This area. even today.D. All rights reserved. also teaches at The University of Central Greece. in agricultural economics from Aristotle University of Thessaloniki and currently is a Ph. Kolokontes. 33. Currently. candidate in the Department of Agricultural Economics. His research interests include regional and urban development. An economist. No. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). Kolokontes. Vol. environmental economics.
3 Despite the dominant role played by lignite-power generation in meeting Greece’s energy needs. including the developmental duality between its eastern and western portions and the related intraregional inequalities. the detachment from other traditional economic activities of the region. and employment. the developmental dependence of Kozani and Florina prefectures on lignite mining. these externalities include environmental impacts. Western Macedonia consists of four prefectures: Kozani.1 The power generated by lignite-fired plants in the region amounts to 4.268 THE JOURNAL OF ENERGY AND DEVELOPMENT of electricity in Greece. as well as the gradual increase of unemployment rates due to the slow development of staggered economic activities. which is almost 84 percent of the total lignitefired generation industry of Greece (5. and the costs to the quality of the living standard. suggest that the crucial role of the region in meeting the country’s energy needs is not likely to change in the near to medium term. and Grevena. the increasing preference being placed on renewable resources and natural gas.145 MW.17 percent.16 MW) of the country’s power generation system. during the period 2000-2010 the prefecture of Florina increasingly has contributed more to the mining of lignite for power generation.4 Given the historic importance of Western Macedonian lignite mining and its use in power generation.990. Kozani has been the site of the largest energy production units of the country. the depletion of the major exploitable lignite pits in Western Macedonia. Kastoria. the overall established national power generating capacity is expected to reach 15. coupled with the increasing focus on the use of natural gas and renewable resources and the planning of the Public Power Corporation S. Other consequences arise because of these mining and energy production activities. Although these economic activities create employment in the region. where the lignite is found. and aging energy plants in Western Macedonia could cause considerable problems for the region in terms of its productive infrastructure.288 MW).11 percent and 86.2 Changes coming from market liberalization in Greece.295 MW will be generated by lignite-fired stations in Western Macedonia. Between 2012-2016. the lignite power generation of Western Macedonia contributes a third (33. the planned development and exploitation of lignite reserves in other regions of Greece. respectively. Florina. At the same time.A.438 megawatts (MW). longer-term challenges exist for this industry in Western Macedonia.292. in combination with some of the negative developmental and environmental externatilities this has produced. of which 5. health issues for the inhabitants. income.18 MW with the lignite-powered capacity anticipated to provide 6. our paper presents an inputoutput analysis that shows there is a more balanced development plan for utilizing lignite for power generation in the western part of the region. that is. The first two prefectures form the eastern part of the region. at the same time they cause some of the most significant problems for Western Macedonia. output. From a long-term perspective.39 percent) of the total capacity (13. 33. The results from our . Since the end of World War II.
Moreover. employment. the United States.LIGNITE MINING AND ELECTRICITY: GREECE 269 modeling indicate that a different development policy should be adopted for the eastern portion of Western Macedonia. employment. Using these data. the economical and environmental effects from the energy minerals mining and energy production sectors in Western Macedonia are presented.8 During the post-World War II period lignite mines and plants operating in Aliveri Evia and Ptolemaida Kozani supported the . (PPC). there must be a long-term plan based on fostering economic activities capable of improving the economic conditions for the citizens of this region in the coming post-lignite era. and fourth worldwide. and income and with fewer environmental externalities. the sectors of energy minerals mining and energy production in the region of Western Macedonia are analyzed as far as their economic contribution and environmental repercussions are concerned. Methodology and Data For this paper. secondary data are used from the Greek Regulatory Authority for Energy (RAE).7 Lignite Mining and Energy Production Greece is ranked second in the production of lignite within the European Union. The last section includes the conclusions. and income multipliers. the Public Power Corporation S. Then. following Germany. We begin this study with a discussion of the methodology and data sources utilized. but with more multiplicative effects on output.5 The national intersectoral transactions matrix of 1999 was adjusted to a pattern of 29 sectors for the construction of the regional matrix. and the National Statistical Service of Greece (NSSG). third in Europe overall. A description of the exploitation of lignite deposits at the regional and national level follows. together with the relevant elasticities.A. The type I output. were calculated for the definition of the alternative economic activities that could be developed in the region by the same funds applied to subsidies.6 The secondary simulation of direct and total requirements matrices of Western Macedonia has been based on the techniques of simple (SLQ) and cross-industry (CILQ) location quotients. and Russia. An input-output (I-O) regional model has been applied for the calculation of type I multipliers and elasticities. as well as from the European Environment Agency (EEA). The prospects for the development of other economic activities in the region and the long-term rebuilding of its productive structure are underlined by the multipliers and elasticities of input-output analysis.
261 to 1.2 billion tons. the national production of lignite has stabilized at around 62 million tons with mild fluctuations from year to year. This means that 78.257 kcal/gr in the Florina area. unexploited lignite reserves of between 150 to170 million tons also are located in the Ellasona area of the Larisa prefecture.9 million tons) there was an increase of 119.3 million tons).615 kilocalories per gram (kcal/gr) in the Ptolemaida area and 1.7 percent. Nevertheless.10 The PPC—with the majority of shares held by the Greek government— dominates the Greek market of energy minerals mining and energy production as it holds extraction rights for approximately 60 percent of the country’s lignite deposits.82 percent.11 In 2006 in the bridged mainland Greek power generation system and using the criterion of installed power. compared with the rest of Greek reserves.4 percent of Greece’s lignite production for 2006 came from Western Macedonia.69 percent over the 1980 level. the PPC possessed 95.82 billion tons of lignite.12 PPC is the only company in Greece that owns lignite-fired plants for energy production. From 1980 (22. Today. the equivalent of 57 percent of the country’s exploitable reserves.14 The lignite deposit of the Ptolemaida-Florina area.7 million tons) until 1990 (49. Comparing lignite-based power generation as a percentage of the country’s overall power generation shows a marked declining trend: in 2004 the lignite-based generation represented 66.13 The proven and exploitable lignite reserves of Greece are estimated to be between 3.9 Moreover. there are no other lignite deposits in use in Greece at this time (2009). it covered 90 percent of the mainland demand. the lignite center of Ptolemaida in Kozani has become one of the largest in the world. and by early 2010 it had fallen but still had a significant market share with 39. In 2006 the production reached the 62. while in 2002 the highest production of lignite in the history of Greece was recorded (70.78 percent of the total.15 Lignite mining during the past 25 years has experienced significant growth following the country’s increasing demand for electricity. representing an increase of 209.43 percent. The Alivery Evia’s basin was exhausted in the early 1980s with considerable repercussions on the employment situation and subsequent migration from the area. the most important proven and unexploited deposit of 900 million to 1 billion tons is located in the wider area of Drama prefecture. In Western Macedonia. With the exception of Megalopolis in the Arkadia prefecture.5-million-ton level of which 49 million tons were mined from Western Macedonia.3 percent of the total generation capacity of the national market.5 percent of the overall power generation. Since 2003. while a large peat deposit (4 billion cubic meters) has been found in Philoppi in the Kavala prefecture. in 2006 it represented 58. contains the largest calorific value.270 THE JOURNAL OF ENERGY AND DEVELOPMENT electrification of the country. ranging from between 1.16 . in 2005 this percentage was 64.927 to 2.1 to 3. the areas of FlorinaAmintaio-Ptolemaida-Kozani (in the Florina and Kozani prefectures) account for approximately 1.
41 7.32 0.94 11.09 17.76 21.73 9. Western Macedonia employs 78.22 0. Focusing on the activity of lignite mining.75 39.18 The regional employment in the sector of energy and non-energy minerals mining represents 28.68 8.02 8.31 0. During the period from 1995-2003.38 The energy sector refers to lignite-fired power generation.60 8. Source: Authors’ calculations. AND THE GROSS DOMESTIC PRODUCT (GDP) OF GREECE.95 11.67 39.07 37.77 13.91 19.49 13.26 0.23 0.30 19. the energy and non-energy minerals sector employs 5. the share of the regional gross output of the sector to the gross domestic product (GDP) of Greece on average reached 0.22 19.31 0.09 36. It is obvious that.51 17.20 0.24 0. in particular. this figure has reached 40 percent.51 34.70 37.38 0.47 0.44 percent of the economically active population of the Western Macedonia region and.54 0.18 19.76 11.99 percent of the national sectoral total.35 7. on average the energy and non-energy minerals mining sector has contributed 8.09 percent.40 38.23 percent.35 13.15 13. According to the National Statistical Service of Greece (NSSG).24 0.21 0.93 8. THE GROSS OUTPUT OF WESTERN MACEDONIA.40 0.24 0.69 38. .73 percent of the corresponding sectoral national employment.51 8.39 0.81 0.48 7. In the same period.17 Between 2000 and 2003 this figure has consistently remained above the average.35 11.23 22.20 0.62 7.LIGNITE MINING AND ELECTRICITY: GREECE Effects from the Extraction of Lignite 271 Financial Effects: Table 1 shows that since 1997 the sector of energy and nonenergy minerals mining in Western Macedonia has steadily accounted for more than the one-third of the gross sectoral output at the national level.21 percent of regional gross output. Over the last few years.54 17.66 18.47 31. Table 1 DIACHRONIC CONTRIBUTION OF THE MINING AND ENERGY SECTORS TO THE GROSS NATIONAL SECTORAL OUTPUT. the extraction of lignite employs 5. 1995-2003 (in percent) Contribution of Energy and Non-Energy Minerals Mining Sector of Western Contribution of Western Macedonia’s Macedonia to Energy Sector to Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average a a Gross National Regional GDP of Gross National Regional GDP of Sectoral Output Gross Output Greece Sectoral Output Gross Output Greece 31.10 19.33 0.21 0.25 18.
a decreasing percentage trend is observed due to a variety of factors.19 The contribution of the energy sector of Western Macedonia to the national sectoral output during the period of 1995 to 2003 averaged 19. stabilizing around 11 percent since 2000.51 percent.20 In both cases.2 percent to 9. this capital-intensive activity contributes only 5. which is significantly lower in relation to what other labor-intensive sectors contribute to the regional employment.21 However.41 percent. during the period from 1998 to 2005 the national unemployment rate decreased from 11. Table 3 shows that on average during the period from 1995 to 2003. and the textile sector 8. and a possible interpretation of this (besides inflation) could be that it is the result of attempts to restructure the regional productive bases in the other two prefectures of the region.09 percent to the regional employment.27 percent of the regional employment.435 million in 2003. which constitutes 19. including the first private-sector initiatives that have been developed as a result of Greece’s market liberalization. This unequal development explains why there is an over-concentration of the population in the Kozani prefecture.22 The sectors of energy and non-energy minerals mining and energy production contribute more to the formation of regional gross output than to job creation. the sectoral regional gross output consistently increased in value from e2.039 million in 1995 to e3. a very low rate compared to other laborintensive activities such as the agriculture-livestock-hunting-forestry sector.272 THE JOURNAL OF ENERGY AND DEVELOPMENT in terms of employment. the dwindling of the lignite production base of the prefecture finally resulted in an economic dead-end for the community. while the sectoral contribution to the regional gross output was 13. whereas a contrary trend has emerged in Western Macedonia were the region’s unemployment rate has increased to 18 percent — recording the highest levels of any other area in Greece. and this highlights the economic dependence of this prefecture on the finite resource of available lignite deposits.81 percent.30 percent (table 1).46 percent.6 percent.43 percent of the sector’s national total. the commerce sector providing 11. As far as employment is concerned. It is worth noting that although Western Macedonia is the dominant producing region of lignite mining in Greece. the capital-intensive power-generation sector in Western Macedonia employs 14. the construction sector some 9. Despite the fact that initially the economic activities surrounding lignite mining and energy generation did create new jobs in Kozani.25 percent of Kozani prefecture’s GDP came from energy and non-energy minerals mining activities and energy production.38 percent. . 34. while at a regional level this percentage is 5.23 Table 2 highlights the unequal development between the eastern part (the prefectures of Kozani and Florina) and western part (the prefectures of Grevena and Kastoria) of the Western Macedonia region in terms of the energy and nonenergy minerals mining sector and the energy production sector. According to the NSSG. the extraction of lignite provides the bulk of the region’s employment in the energy and non-energy minerals mining sector.
LIGNITE MINING AND ELECTRICITY: GREECE Table 2 DIACHRONIC CONTRIBUTION OF WESTERN MACEDONIA PREFECTURES TO THE GROSS REGIONAL SECTORAL OUTPUT OF THE ENERGY AND NON-ENERGY MINERALS MINING SECTOR AND THE ENERGY PRODUCTION SECTOR.55 1.91 0.01 20.59 0.23 1. .74 12.93 0.32 35.39 96.10 6.16 12.43 24.17 12.87 12.57 96.84 1.01 1.78 41.84 0.50 9.04 3.46 30.60 8.23 0.10 11.73 33.41 0.62 13.34 86.99 11.34 86.16 32.72 2.71 0.91 Florina 5.54 27.92 0.49 97.96 73.66 25.81 2.05 Kastoria 0. Table 3 CONTRIBUTION OF THE ENERGY AND NON-ENERGY MINERALS MINING SECTOR AND ELECTRICITY PRODUCTION SECTOR TO THE GROSS DOMESTIC PRODUCT OF THE KOZANI AND FLORINA PREFECTURES.34 19.46 1.04 0.75 11.60 13.45 31.75 1.09 31.14 95.35 93.45 6.53 38.60 4.03 1.80 Kastoria 0.13 0.28 1.42 96.65 Grevena 0.82 4. 1995-2003 Kozani Prefecture Florina Prefecture Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average a Energy/ NonEnergy/ NonEnergy Energy Total Total Mineral Energy Contribution Mineral Energy Contribution Mining Production Mining Production by Both by Both a a Sector Sector Sector Sector Sectors Sectors 10.89 2.07 2. Source: Authors’ calculations.33 14.84 0.14 95.43 Energy production sector refers to lignite-fired power production.16 0.01 The energy sector refers to lignite-fired power generation.67 23.88 11.65 22.60 5.25 3.02 32.01 1.98 74.27 14.06 0.00 74. Source: Authors’ calculations.13 0.52 1.17 96.78 1.71 23.59 1.97 0.97 8.75 1.31 1.94 75.26 11.73 0.09 10.39 a Energy Production Sector Kozani 97.93 0.96 a 77.96 1.43 11.49 1.16 22.57 11.23 0.43 0.81 0.26 0.27 Florina 1.29 19.92 22.65 13.65 11.70 7.21 20.97 Grevena 0.57 0.57 1.42 21.85 12.24 1.93 0.54 34.16 22.42 14.66 1.14 0.04 1.03 1. 1995-2003 (in percent) Prefecture 1995 1996 1997 1998 1999 2000 2001 2002 273 2003 Energy and Non-Energy Minerals Mining Sector Kozani 93.98 0.47 32.10 95.89 9.
its sectoral gross output contributed 21.47 percent during the 1995 to 2003 time frame. In 2003.33 percent in 2003. education. in particular. The contribution of this sector to the GDP of Grevena reached 28. while other important activities are those of commerce. and restaurants. Commerce. In the prefecture of Kastoria.92 percent of Kastoria’s GDP in 2003.25 The directives also call for the development of technologies for carbon capture and storage (CCS) into underground reservoirs and the encouragement of other more environmentally friendly technologies of renewable energy resources. up by 58.22 percent during this period. The financial sector also has increased significantly.g. the most important sector in the Florina prefecture remains the agriculture-livestock-hunting-forestry sector.09 percent. the sector of hotels and restaurants is very important for the Kastoria prefecture.24 These directives are targeted mainly toward the adoption of innovative low-carbon technologies for lignite-fired power plants. the activities of lignite mining and power generation are connected with issues of environmental protection and health. commerce is the single most important sector to the prefecture’s GDP.82 percent to 14. changes the operating environment for lignite power generation. Specifically. The thought behind the quantification of environmental externalities and their pricing through the newly created market for trading greenhouse gas emissions. none of the lignite-fired power plants in Greece have implemented CCS procedure. hotels. Additionally. the energy policy of the European Union (EU) in the framework of its commitment to meeting the Kyoto Protocol has issued a number of directives for reducing greenhouse gas emissions and. e. Currently. The inauguration in 2005 of the European Emissions Trading Scheme (ETS) directs the lignite-fired power plants either to install and implement the low-carbon technologies or to .36 percent during the years 1995 to 2003. by lowering carbon before or after combustion. contributing 12. as well as hotels and restaurants. representing an increasing proportion of 43.26 To date. The agriculture-livestock-hunting-forestry sector remains the most important economic driver for Grevena. during the period from 1995 to 2003 the contribution of these sectors to the GDP of Florina prefecture has increased from 4.21 percent to the prefecture’s GDP with an increasing ratio change of 58. also are identified as significant economic activities in Grevena.27 The EU environmental legislation is gradually becoming stricter. curbing carbon dioxide (CO2) emissions. the other two prefectures of the region— Kastoria and Grevena—have virtually no activity in the two sectors in question. Compared to Kozani and Florina.274 THE JOURNAL OF ENERGY AND DEVELOPMENT The contribution of the Kozani prefecture to the regional sectoral gross output of mining and energy generation has been decreasing while that of the Florina prefecture has been increasing (tables 2 and 3). Based on the structure of its GDP and employment patterns.. Environmental Effects: Apart from the intraregional inequalities.
in a sample of 3.28 Within this framework an energy plan is required that will take into account the directives set by the EU.LIGNITE MINING AND ELECTRICITY: GREECE 275 gradually withdraw themselves from the newly liberalized and more competitive market. The sectors of commerce.. According to their ranking based on elasticities. table 4 presents the emissions of carbon monoxide (CO). according to its Strategic Plan. . these sectors are appropriate for the dispersion of their multiplier effects on the regional output.33 Apart from the CO2 emissions (37. For example.559 children it was found that chronic rhinitis and infectious and acute bronchitis appeared at least two times more frequently in Kozani and Florina compared to the other two prefectures. the PPC applied in 2007 to the RAE for the establishment in the region of two new lignite-fired power plants of 900 MW additional power (one in Florina and one in Kozani prefecture). and that is expected to increase in 2010 to account for 65 percent. construction. and energy had comparatively middle or low type I multipliers in our analysis but high elasticity indices due to their significant size (11.32 The largest lignite-fired power unit in Western Macedonia and in Greece (Saint Dimitrios station). Measurements of the environmental impacts from the mining and transport activities associated with lignite are not included in this assessment (e.09 percent.46 percent. Table 4 presents the lignite-fired power stations of Western Macedonia. including generation and emissions. and 5. the lignite-fired power capacity of Western Macedonia will reach 5.30 Public Power Corporation also plans to shut down the LCWM-LIPTOL Station by 2015. and the exploitation of renewable resources for energy production in order to develop a secure and consistent energy supply as well as the protection of the environment.38 percent.298. respectively). nitrogen oxides (NOx).34 Input-Output Analysis Results Table 5 shows the key sectors for the improvement of living standards for the inhabitants of the Western Macedonia region. More precisely. emissions trading.295 MW. the prospects for the creation of new employment opportunities in the fields of technological innovation. in research conducted in 2005 in Western Macedonia that analyzed the effects of air pollution on the health of children aged 9 to 12 years.438 MW with an increasingly trend into the foreseeable future. The energy sector is responsible for 62 percent of the greenhouse gas emissions in Greece.29 Their generation capacity is 4. and sulfur oxides (SOx) that are released in the air by the lignite-fired power plants over the 2002 and 2004 time period.51 percent of the regional employment. has been defined as the dirtiest in Europe in a survey by the World Wildlife Fund in 2005. mining.31 Thus. which is located in Kozani prefecture.000 tons in 2004) that burdens the environment of Western Macedonia.g. 5. 9. the dust). the demands of the integrated and liberalized energy market.
276 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 4 LIGNITE-FIRED POWER GENERATION PLANTS OF WESTERN MACEDONIA: POWER a CAPACITY (in megawatts — MW) AND EMISSIONS (in thousand tons). and Public Power Corporation S. (PPC). Denmark: EEA.438 >12.gr.090 (C) >48. state either the size that has been measured.2 (M) 620 1.int.2 (E) >15.3(M+E) 5. 2002 AND 2004 Lignite-Fired Station/Emissions Saint Dimitrios Carbon monoxide (CO) Carbon dioxide (CO2) Nitrogen oxides (NOx) Sulfur oxides (SOx) Kardia CO CO2 NOx SOx Ptolemaida CO CO2 NOx SOx b Amyntaio CO CO2 NOx SOx b Melitis CO CO2 NOx SOx LCWM/LIPTOL CO CO2 NOx SOx c Total CO CO2 NOx SOx a Power (MW) 1. or not available. The European Pollution Emission Register (Copenhagen.500 (C) 21.A. 4.2 (M) 330 N. N. also available at www.2 (M) 9. C.3 (M) 5. 2.7 (M+E) M.200 (C) 15. N. b Amyntaio and Melitis Stations are in Florina prefecture.8 (M) >74.C.1 (M) 4.3 (M) >35.9 (M) 11.A.0 (M) 2.2 (M) 10. estimated.0 (M) 3.0 (M) 24.298 (C) 59.250 2.8 (M) 17.3 (M) 600 3.A. First Public Report for the P.7 (M) 37.630 (C) 2.900 (C) 19.sec. E.6 (M) 14. 358 (C) 0.A.A.595 2002 2004 5. Sources: European Environment Agency (EEA).A.480 (C) 6. N.510 (C) 7.A. c > indicates that the real size is larger than that given. N.A.670 C) 7.A. Activities (Athens: PPC.eper.8 (E) 1. respectively.A.5 (M) 35. calculated. others are in Kozani prefecture.6 (M) 1.P.0 (M) N.3 (M) 11.140 (C) 7.dei.6 (M) 7.eu. also available at www. N.7 (M) 5.’s S.8 (M) N. 2007).8 (M) 5.8 (M) 23.A. 2007). N.4(M+E) 72.A.7(M) 2. 43 N.1 (M) 13. .0 (M) 5. and N.A.000 (C) 19.5 (M) 13.
mining. other sectors can cause larger multiplier impacts in a long-term period. the further development of this sector would be desirable. based on their high rankings as a type I multiplier. not only at the present but also in the future. Although not the top priority for regional planners. respectively) that they cannot create noticeable multiplier impacts in the existing economic structure of the region. an activity concentrated in the Kastoria prefecture). In particular.LIGNITE MINING AND ELECTRICITY: GREECE 277 employment. The sectors of financial services and basic metal and fabricated metal products represent such small portions of the total employment (1. for the moment. its further growth is desirable due to its high multiplier potential that could spread throughout the regional economy. the elasticities show that this sector’s multiplier ability. as can be seen by its highly ranked elasticities and type I multipliers in table 5. is restrained due to its relatively limited size (1. employment. and energy would not contribute to this goal.and long-term time frames due to its relatively solid number of jobs (providing 4. and income in the short and medium term. Nevertheless.86 percent of the regional employment. the employment and income multipliers reveal that the food-beverages-tobacco sector is the most suitable for the creation of new jobs and the growth of regional income over time. Regarding the textile sector. but they deserve further attention as their multipliers show they can have a more dynamic role in future growth. The significant size of the agriculture-livestock-hunting-forestry sector in the region similarly would have beneficial effects. and income. employment. This sector has the advantage of very few negative environmental externalities relative to some other sectors. and income both in the short. Conclusions The economic activities of lignite mining and power generation are responsible for the developmental duality between the eastern and western parts of the . An expansion of the sectors of commerce. although its size is already important (8. construction. the leading economic sectors for the region (table 5) could be in the food-beverages-tobacco sector and the textile materials production (including fur tanning.73 percent of the regional employment). Hotels and restaurants constitute another sector that is capable of spreading important economic growth effects to the wider regional output.73 percent of regional employment) and its multiplier capacity. From a longer-term perspective. given changes in and/or diversification in the regional productive infrastructure. However.24 percent and 0. The future expansion of the food-beverages-tobacco sector can have the most significant direct and indirect multiplier effects to regional output. relative to all of the other economic activities of the region.41 percent of the regional employment).
46280 2.00275 (04) (01) (04) (03) (03) (02) (16) (19) (16) (20) (16) (20) Basic Metals/ Fabricated Materials 1.31201 (13) 1.93126 (01) 3.60827 (04) 2.42350 (05) 1. the distortion in productive economic structures mainly in the eastern portion of the region.42307 (12) 0.10235 (03) 0.06179 (07) 0.03816 (10) 0.35699 (05) 1.05669 (08) 0. EE. and IE refer to output.11630 (03) 0.14360 (01) 0.13101 (12) (15) (13) (16) (19) (21) (02) (02) (01) (01) (01) (01) Energy/ Minerals Mining 1.13554 0.08571 (14) (21) (15) (20) (16) (18) (04) (04) (04) (04) (04) (04) Energy Production 1. and IM indicate the type I multipliers of output.10343 (03) 0.14581 (01) 0.74222 (07) 0.27857 0.06748 (06) Financial Services 1.32933 1.30097 1.30635 (09) 1.28778 1.25840 1.00492 (20) 0. and income elasticities. calculated by the simple location quotient (SLQ) and cross-industry location quotient (CILQ).26220 1.00543 (20) 0.67035 (01) 5.04026 (10) 0.05636 (08) 0.13064 0.00308 (21) 0.15028 (03) 0.12720 (02) 0. respectively.28186 1.34125 (14) 1. employment.71004 (02) 1.44442 2. EM.00276 0.00235 (21) a Indices b Textiles 1.05901 (07) OM by SLQ OM by CILQ EM by SLQ EM by CILQ IM by SLQ IM by CILQ OE by SLQ OE by CILQ EE by SLQ EE by CILQ IE by SLQ IE by CILQ a The numbers in parenthesis represent the sectoral rankings by each index and secondary simulation method.47872 (08) 1.00236 (21) 0.06396 (07) 0.06000 (07) 0.45624 (03) 1.21185 1.08030 0. b The indices of OM.78987 (05) 1.11531 (03) 0.12275 0.03984 (10) 0.05921 (07) 0.31953 (01) 0.08471 0.12002 (02) 0.13032 (01) 2.25781 1.08600 0.25022 0.35468 (15) 0.36863 (12) 1.68447 (03) 1.34308 (06) 1.08586 0.22096 (17) 1.07467 (05) 0.01183 0.71414 (01) 1. Western Macedonia region.13331 (26) 1.10962 (03) 0.75288 (03) 1.56097 (11) 1.00516 0.03803 (10) Hotels and Restaurants 1. and income.06418 (06) 0.39516 (06) 1. respectively. The reduction in staffing levels at many mines throughout the .00987 0.39333 (11) 1.06064 (07) 0.41132 1. and the degradation to the quality of living standards due to the negative environmental impacts associated with the lignite industry.11877 (02) 0.77700 (06) 1.00997 0.62186 2.23948 1.08115 0.12405 0.32446 (10) 1.13147 0.24027 (15) 1. The indices OE. employment.27049 1.42234 (10) 1.06888 (06) 0.00487 (20) 0.06351 (06) 0.21300 (23) 1.20669 (24) 0.06772 (06) 0.90534 (02) 4.88459 0.19822 (21) 1.12677 (02) OM by SLQ OM by CILQ EM by SLQ EM by CILQ IM by SLQ IM by CILQ OE by SLQ OE by CILQ EE by SLQ EE by CILQ IE by SLQ IE by CILQ Indices b Construction 1.44133 1.278 THE JOURNAL OF ENERGY AND DEVELOPMENT Table 5 THE KEY SECTORS OF WESTERN MACEDONIA REGION Sectors Food/ Beverages/ Tobacco 1.10924 (03) Commerce 1.
Power Generation Capacity. to support the enlargement of other economic activities that have larger economic multipliers and the potential to provide more growth. as has been highlighted in this study. regional development planning. This policy moves within a trend in the EU toward greater use of renewable fuels and natural gas. which is already suffering from a dwindling employment base. and of the future depletion of the major exploitable mines of Western Macedonia.’s S.LIGNITE MINING AND ELECTRICITY: GREECE 279 region because of improved labor productivity and the use of more capital investment has intensified the unemployment problem facing the area. jobs. 2007 (in Greek). the productive infrastructure of the western part of the region (Grevena and Kastoria prefectures) is based on the sectors with the higher type I multipliers. Athens. and local levels should adopt a different development policy.and medium-term benefits in the eastern part of the region (Kozani and Florina prefectures). along with strict greenhouse gas emissions goals. they have not been without accompanying costs to the community at large. Greece. of the planned development of lignite reserves in other regions of Greece. April 18. 1 . ‘‘Investments for Modernization and Expansion of the P.’’ paper delivered to the conference of the Athens Chamber of Commerce and Industry: Energy-Photovoltaic Parks. This is critical considering that this region has Greece’s highest unemployment rate.C. undermines the economic security and livelihoods of the people in the areas dependent on the production of lignite.P. can look at diversifying the economic base away from lignite mining.35 However. such a planning approach could make economic dependence on lignite mining and its use as a source of power generation highly problematic. particularly for the Kozani and Florina prefectures. This part of the region is planning its economic development in a long-term framework and in a more sustainable manner by transferring benefits from the present to the future. This. NOTES A. regional. Mizan. However. This will require a farsighted approach to fostering the economic development of different sectors and industries. output. and employment. The public policy and decision makers at the national. The environmental impacts and the distortions in its productivity patterns will only add to Western Macedonia’s economic problems with further increases in unemployment rates and reductions in income highly possible. and income. there are viable options to begin to diversity the bases of these economies while improving the overall environmental and health standards. textiles. which must take into consideration a more sustainable and long-term view on how best to diversify the areas’ economic activities while improving the standard of living for their inhabitants in the coming post-lignite era. such as food-beverages-tobacco. and hotels and restaurants. particularly for the Kozani and Florina prefectures. While the mining and energy sectors have created short. Conversely. income. the region will face even more problems with its productive infrastructure.A. In view of the turn toward renewable resources and natural gas. in turn.
.gr. Kymn. also available at www. D. op. pp. 117-23. 464. National Statistical Service of Greece (NSSG).. cit Public Power Corporation S.A. ‘‘The Impacts of Structural Change within an Economy on Resource Use: An Input–Output Analysis. Energy Supply and Environment. April 2008. Mizan. Bruce Hannon. Gould.’’ Structural Change and Economic Dynamics. 7 R. cit.’’ The Review of Economics and Statistics. Report for R. K.A. and Manfred Lenzen.rae. August 1977.A. Th. Karunaratne. Public Power Corporation S. Blair. pp. ‘‘Input–Output Economics and Ecology.statistics. New Jersey: Prentice-Hall. op. Athens. Konstadinos Mattas.’’ paper delivered to the conference of the Greek Technical Chamber: Lignite and Natural Gas in the Electricity Production of the Country.’s Activities: April 2004 – December 2006.’’ Structural Change and Economic Dynamics.gr.. K. Gioulekas.E. cit. 603–14. no.A.A. Konstantinos Kavouridis. pp. C. (PPC).dei.statistics. Activities. 251. also available at www.’’ Energy Policy. also available at www.’s Activities: April 2004 – December 2006.P. and Regulation Authority for Energy. First Public Report for the P. Mizan. and A. Deposits and Quality/Statistical Data (Athens: PPC. Deposits and Quality/Statistical Data. and N. and Public Power Corporation S. also available at www.dei.rae. op. D. pp. 11 10 9 Konstantinos Kavouridis. and National Accounts of Greece 1999 (Athens: NSSG. Th. ‘‘Some Thoughts for the Present Situation and the Existing Prospects as Concerns the Country’s Lignite. and A. Report for R. A. Regional Economic Planning: Generation of Regional Input–Output Analysis (London: Croom Helm Ltd.A. June 9-10. Chloros.E.’s Activities: April 2004 – December 2006 (Athens: RAE. D.E. 2006). Papavasiliou.A. p. Kottakis. op.gr..eng. (PPC).gr.’’ Applied Economics. p. March 2003.15. 13 12 . Jensen. also available at www. 457–78. and A.. August 1995. May 1986. 6 5 4 Ibid. cit. Greece. L. Ibid. 1257–272. Brian W. Report for R. vol. also available at www.gr. Mandeville. 1979).’’ Regional Studies. pp. pp. cit.A.C. T. Gavriilidis. ‘‘Interindustry Energy Demand and Aggregation of Input–Output Tables. January 2004. Tsiotsios. Miller and Peter D.asp. Inc.P. (PPC). op. 2 (2005). and Regulation Authority for Energy (RAE). 3 Ibid. Activities (Athens: PPC. ‘‘The Effects of Environmental Pollution on the Respiratory System of Children in Western Macedonia. I. also available at www. 1–34. For elasticities. and A.’s S. Sichletidis. refer to Claudia Ciobanu. Kern O. Pataka. I. Statistical Classification of Economic Activities-2003 (Athens: NSSG.dei. cit. Papavasiliou.280 THE JOURNAL OF ENERGY AND DEVELOPMENT 2 Public Power Corporation S. 2005 (in Greek). ‘‘Structural Changes in Less Development Areas: An Input–Output Framework.. 2007). and Dimitris Psaltopoulos.C.rae.gr.gr.’s S.A. and Ronald E. Mizan. 2007). 8 Konstantinos Kavouridis.’’ Journal of Investigational Allergology and Clinical Immunology. 371–74. 1985). 2003). First Public Report for the P. and Regulation Authority for Energy. ‘‘Environmentally Important Paths. Linkages and Key Sectors in the Australian Economy. Greece.gr/main.. D. ‘‘Lignite Industry in Greece within a Worldwide Context: Mining. 331–33. also available at www. 2008). Input–Output Analysis: Foundations and Extensions (Englewood Cliffs. op. pp.
20 National Statistical Service of Greece. All are available also at www. p. Belgium: COM. and Statistical Yearbook of Greece 2006 (Athens: NSSG. Deposits and Quality/Statistical Data. cit. 2007). Gross Value Added per Region. Gross Value Added per Region. A European Strategic Energy Technology Plan (SET-Plan): Towards a Low Carbon Future: COM(2007)723 Final (Brussels. Amending Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community. Belgium: COM. ‘‘Directive 2003/87/EC: Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community and Amending Council Directive 96/91/EC. 27. Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005.statistics. 2007). 23 National Statistical Service of Greece.’’ Official Journal of the European Union.statistics. National Statistical Service of Greece. 18-23. Commission of the European Communities (COM).A.asp.gr/main_eng.. 2006). 2006).000 to 8.900 to 19. 22 Commission of the European Communities (COM). 15 Public Power Corporation S. 103.asp. and Public Power Corporation S. also available at www. Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005 and Employment per Region and Sectoral Economic Activity: 1998-2003. National Statistical Service of Greece (NSSG). Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005 (Athens: NSSG. Both also are available at www. p.dei. also available at www.asp. 2006). and Statistical Yearbook of Greece 2006. Lignite is a coal in which the fossilization of organic material has advanced beyond peat but not to the extent of sub-bituminous coal.gr/ main_eng. 25 24 . Deposits and Quality/Statistical Data. 32-46.gr/main_eng. and European Parliament and Council. its heat value is around 13. October 2004 (L338). All are available also at www.’’ Official Journal of the European Union. ‘‘Directive 2004/101/EC.290 kilojoules per kilogram (6. European Parliament and Council.statistics.statistics..gr. Prefecture and Sector of Economic Activity: 1995-2003 (Athens: NSSG. 2007). 2007). Employment per Region and Sectoral Economic Activity: 1998-2003 (Athens: NSSG. op. 14. Greenhouse Gas Emission Trends and Projections in Europe 2007-EU within Reach of Kyoto Targets (Copenhagen.gr/main_eng. Employment per Region and Sectoral Economic Activity: 1998-2003.statistics. dei. p.A. October 2003 (L275). pp. An Energy Policy for Europe: COM (2007)1 Final (Brussels. (PPC). It contains about 30 percent to 40 percent water. 21 European Environment Agency (EEA). 19 18 Ibid. Denmark: Office for Official Publications of the European Communities. 16 Ibid.LIGNITE MINING AND ELECTRICITY: GREECE 281 14 Konstantinos Kavouridis. 17 National Statistical Service of Greece (NSSG).asp.300 British thermal units per pound). also available at www. also available at www.gr/ main_eng. 2006). in Respect of the Kyoto Protocol’s Project Mechanism. pp.gr.asp. Prefecture and Sector of Economic Activity: 1995-2003 (Athens: NSSG.
30.gr (in Greek). 693–703.sec. cit. Kavouridis and N. Denmark: Office for Official Publications of the European Communities. 2008).’’ European Environment Agency (EEA). First Public Report for the P. Denmark: Office for Official Publications of the European Communities. The European Pollutant Emission Register (Copenhagen. European Environment Agency (EEA). and European Parliament and Council. cit. also available at www. European Environment Agency. op. ‘‘Directive 2001/283/EC on the Promotion of Electricity Produced from Renewable Energy in the Internal Electricity Market. and European Parliament and Council. Greenhouse Gas Emission Trends and Projections in Europe 2007-EU Within Reach of Kyoto Targets. Pataka. Gioulekas.’s S. pp. in Respect of the Kyoto Protocol’s Project Mechanism. Activities.. 27 K. 2007).gr. 35 34 33 32 Konstantinos Kavouridis. ‘‘Directive 2003/87/EC: Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/91/EC’’ and ‘‘Directive 2004/101/EC. 2007).282 THE JOURNAL OF ENERGY AND DEVELOPMENT 26 K. Gavriilidis. and Public Power Corporation S.dei. Chloros. also available at www..int.eper.eu. op. Greenhouse Gas Emission Trends and Projections in Europe 2007-Country Profile: Greece: Report No5/2007 (Copenhagen. L. I. Public Power Corporation. p. 51.dei. . A. op. cit. Koukouzas.P. I. Commission of the European Communities (COM). Belgium: COM.A.C. Koukouzas. cit. Kavouridis and N.A. and Konstantinos Kavouridis. also available at www. op. D. Konstantinos Kavouridis. 2005).gr. World Wildlife Fund (WWF). cit.’’ Energy Policy. Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community: COM (2008)16 Final (Brussels. Tsiotsios. and A. ‘‘Coal and Sustainable Energy Supply Challenges and Barriers. 31 30 29 28 A.wwf. p. D. Sichletidis. op. Kottakis. Deposits and Quality/Statistical Data. February 2008.’’ Official Journal of the European Union. Report: ‘‘Dirty Thirty’’ (Athens: WWF Hellas. Mizan. 103.. op. Amending Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community. also available at www. p. cit.
Saudi Arabia’s oil infrastructure. C. ISBN 0-918714-09-5. G. It examines Saudi Arabia’s oil policies in the past and how they were determined. McHale.’’ Occasional Paper 3.ICEED OCCASIONAL PAPER SERIES—CUMULATIVE ABSTRACTS E lectronic copies are available for downloading at www.com. ‘‘The Development of Canadian Controls on Natural Gas. Vol. 1986.’’ Occasional Paper 1. The first section summarizes pertinent trends in the Canadian natural gas industry. In addition. Abstract This article discusses the liberalization of Canada’s controls on natural gas exports. This is The Journal of Energy and Development. ‘‘Saudi Oil Policy and the Changing World Energy Balance. Saudi Arabia’s oil reserves. Abstract This paper looks at the Saudi Arabian oil policy of the 1970s and 1980s. 33. OPEC. No. which occurred in the 1980s.scribd. Thomas R. ISBN 0-918714-13-3. The author asks what are the policy options of the present and foreseeable future within and outside of OPEC? Further. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). Keywords: Saudi Arabian oil policy. All rights reserved. Colorado: The International Research Center for Energy and Economic Development. the author assesses the compatibility between the Saudi national agenda and OPEC’s objectives. Boulder. Colorado: The International Research Center for Energy and Economic Development.edu. Boulder. hard copies can be ordered by email at iceed@colorado. 1987. it discusses the relationship between Saudi policy and that of the Organization of Petroleum Exporting Countries (OPEC). 283 . Watkins. This paper outlines and discusses the development of Canadian federal-level regulations governing the export of natural gas since the issue first arose in the province of Alberta in the late 1940s. Saudi Aramco.
thereby dividing the organization into two camps: those with access to secure outlets for their crude and those lacking such outlets. energy trends in the state.284 THE JOURNAL OF ENERGY AND DEVELOPMENT followed by a presentation of Alberta’s policies. John Roberts. Kuwait. National Energy Board. the United Arab Emirates. Abstract Here the trend of OPEC country members investing in overseas downstream activities in the late 1980s is examined. Libya. Keywords: Canadian energy policy. Kuwait Petroleum Corporation. Keywords: energy prices. petroleum products. Abu Dhabi National Oil Company (ADNOC). Nigeria. downstream operations. The first section provides an introduction to the theoretical model used and presents the results obtained from its estimation. after which the Canadian federal policies are examined. Boulder. Canadian natural gas. and electricity in the context of the changing structure of the Colorado economy. and changes in relative energy prices in Colorado’s industrial sector. not all OPEC members engaged in this strategy (such as Iran. PEMEX. electricity. The second segment looks at the estimated price responsiveness of demand for coal. The author presents examples of these investments by Saudi Arabia. ISBN 0-918714-14-1. Colorado: ICEED. Integration.’’ Occasional Paper 4. and Venezuela. natural gas exports to the United States. petroleum products. Alberta energy policy. ISBN 0-918714-15-X. natural gas. and Iraq). coal. Colorado economy. natural gas. ‘‘Changing Energy Prices and Colorado Industry: Summary of a Study by the International Research Center for Energy and Economic Development. Nigeria. Boulder. . 1988. price responsiveness of demand for energy.’’ Occasional Paper 5. PDVSA (Venezuela’s national oil company). Abstract This study addresses the specific influences of changing energy prices on industry in Colorado. ‘‘The Gulf. The International Research Center for Energy and Economic Development (ICEED). Keywords: OPEC. Saudi Aramco. Colorado: The International Research Center for Energy and Economic Development. 1988. However. this was a way to gain secure guaranteed outlets for their product in the industrialized world. For many nations. and OPEC: Overseas Downstream Activities.
North Sea. the Soviet Union. Kuwait. These factors included the desire to maximize future revenues. Iran. Yet OPEC’s interest in the non-OPEC producers was limited. United Kingdom and oil. ISBN 0-918714-18-4. Colombia. Iraq. and a surplus of oil revenues. Egypt. became the dominant players in the global oil markets—Saudi Arabia. ‘‘The End of the Trend: Limited Opportunities to Slow Reintegration. Norway. ISBN 0-918714-17-6. with the ability to change their output levels and with considerable reserves. Soviet oil. China. Keywords: vertical reintegration. non-OPEC producers. The author presents several examples of the vertical reintegration in the world oil industry as producing countries partnered with international oil companies to expand their refining and marketing activities. and non-OPEC oil producers. the United States. Saudi Arabia. Boulder. United States and oil. Mexico. The case of Kuwait and the Kuwait Petroleum Corporation (KPC) is examined in depth. to engage in downstream operations. Colorado: The International Research Center for Energy and Economic Development. Abstract The author focuses on OPEC and non-OPEC relations and their relative roles as global oil suppliers. Colorado: The International Research Center for Energy and Economic Development. Canadian oil. The non-OPEC countries did not have the ability to influence price and were restricted in their ability to change production levels. John Roberts. Venezuela. non-OPEC oil. Brunei. global oil markets. Abu Dhabi. Canada). and smaller. we saw the rise of North Sea. non-OPEC nations (Angola. North Yemen. Abstract This article looks at the factors that encouraged oil-producing countries. those of the nonOPEC oil-producing nations were disparate and could not be neatly categorized as belonging to a single bloc. Iraq. ‘‘OPEC and Non-OPEC Relations. Kuwait Petroleum Corporation (KPC). This paper looks at a number of these non-OPEC countries and their relationships with OPEC: the non-OPEC individualists (the Soviet Union. 1989. particularly members of OPEC. Venezuela. Canada. OPEC.’’ Occasional Paper 7. While the interests of these countries were more aligned. Colombia. the United Kingdom. 1989. Iran. This meant that only a few countries. . China. and Oman). Keywords: OPEC. and Abu Dhabi.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 285 Tom Stewart-Gordon. OPEC’s global market share fell but still remained significant. Boulder. downstream energy sector. At the same time. During the 1980s. Malaysia.’’ Occasional Paper 6. Mexico. gaining access to a larger part of the value chain. Kuwait. refining and marketing.
Cyrus H. Colorado: The International Research Center for Energy and Economic Development. and the uncertainty surrounding non-OPEC oil supply. natural gas. Colorado: The International Research Center for Energy and Economic Development. which the authors believe was improperly referred to as a ‘‘gas bubble. Abstract Written in 1990. energy scenarios. ISBN 0-918714-20-6. the shrinking of the natural-gas bubble of the 1980s. deregulation. In addition to demand/supply balance projections. ISBN 0-918714-21-4.286 THE JOURNAL OF ENERGY AND DEVELOPMENT Ronan Huitric and John Crowley. ‘‘Interenergy Competition in Natural Gas Price Formation: The Case of the United States Since Deregulation. The factors affecting the world energy outlook include growing concern over environmental and ecological issues. the major developments analyzed are growth in energy demand. this paper provides scenarios and forecasts for the world energy outlook to the year 2000. 1990. OPEC. rising imports. OPEC’s market strategy. Colorado: The International Research Center for Energy and Economic Development. and growing support for the use of more alternative fuels to be used in the energy mix.’’ interfuel competition. government.S. geopolitics in the Middle East. geopolitics. In the U. Boulder. 1990. environmental issues and energy. Tahmassebi. Alberto Cisneros-Lavaller.S. oil supply and demand balances. Many analysts explained natural gas price formation during this period as a result of gas-to-gas completion. market. government energy policies. Abstract This article discusses the issue of natural gas price formation in the United States in the aftermath of U. deregulation. Boulder. ‘‘World Energy Outlook to the 21st Century. Abstract An overview of geopolitics of oil in the Middle East is provided in this paper. the natural gas ‘‘bubble.S. rising sentiments for an import fee and/or additional taxes on gasoline. gas-to-gas competition. Keywords: world energy outlook. natural gas forecasts. non-OPEC oil supply. Keywords: U.S. combined with a surplus of deliverability.’’ Occasional Paper 9. 1990. natural gas prices. ‘‘The Geopolitics of Oil in the Middle East: An Overview.’’ The authors explain why this explanation of price formation is inadequate and offer an alternative. the author discusses energy policy issues facing the U. ISBN 0-918714-22-2.’’ Occasional Paper 8.’’ Occasional Paper 10. The author offers a brief historical overview that sheds light on the key political . Boulder.
with transmission companies providing transportation only. Colorado: The International Research Center for Energy and Economic Development. and pricing. Boulder. Canadian natural gas reserves and production. The first section of this article summarizes Canadian reserves. in some instances— eliminated. ‘‘The U. natural gas industry (both upstream and downstream). as the concurrent monopoly and monopsony roles of pipeline companies became largely—entirely. natural gas pricing. The 1990s marked a time of increased competitiveness in the U. Under open access rules.S. Prior to the North American Free Trade Agreement (NAFTA).’’ Occasional Paper 12. Canada-United States Free Trade Agreement. production. oil scenarios. 1991. 1991.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 287 players in the region and the geopolitical implications for the oil sector.S. This is followed with an analysis of the coalitions led by these key players and future implications. Iraq. end users became free to negotiate directly with producers. the ratification of the Canada-United States Free Trade Agreement (FTA) in 1989 reinforced the liberalization of controls governing Canadian natural gas exports. Natural Gas Market in the 1990s. G. natural gas market in the 1990s and the sweeping changes that occurred in the aftermath of new regulatory changes. Abstract This article offers an assessment of changes in the Canadian government’s natural gas export policies that increasingly became more liberalized throughout the 1980s through the time this article was written in 1991. C. plus possible oils scenarios that might be foreseen in a regional context. Keywords: geopolitics of the Middle East. ISBN 0-918714-27-3. Watkins. Iran.S. Abstract The author assesses the U. Saudi Arabia.’’ Occasional Paper 11. Changes in provincial policies are dealt with in the second part. the Arab Cooperation Council (ACC). Boulder. Gerald Pollio. Colorado: The International Research Center for Energy and Economic Development. The author also discusses changes in Canadian government regulations and the impact of FTA on Canadian natural gas exports to the United States. Keywords: Canadian natural gas exports. the Gulf Cooperation Council (GCC). ‘‘Canadian Controls on Natural Gas Exports: Recent Developments. ISBN 0-918714-23-0. The rapid transformation of the natural gas market was greatly facilitated by the fact that .
It had severe economic repercussions for Saudi Arabia. OPEC. and Kuwait. Abstract The numerous options available for financing upstream petroleum developments. 1991. Federal Energy Regulatory Commission (FERC). deregulation. financial issues. 1991. Colorado: The International Research Center for Energy and Economic Development. ISBN 0-918714-28-1. natural gas regulatory and legislative issues. ‘‘A War for Oil? Energy Issues and the Gulf War of 1991. natural gas industry. Kuwait.288 THE JOURNAL OF ENERGY AND DEVELOPMENT deregulation coincided with lower gas prices. monetizing oil reserves. then what role did oil play—and what will be the consequences of the crisis for the geopolitics of oil? Keywords: Gulf War of 1991. open access rules. ´ Antonio Szabo. In particular.’’ Occasional Paper 13. Boulder.’’ Occasional Paper 15. and market factors. Other topics covered in this paper include domestic deliverability. Boulder. Iraq. Abstract This article discusses the energy issues and ramifications of the Gulf War of 1991.’’ Occasional Paper 14. ‘‘The Decade of the ‘Oil Deal’. specifically for national oil companies in developing oil-producing countries are addressed. Colorado: The International Research Center for Energy and Economic Development. Gerald Pollio. 1991. Colorado: The International Research Center for Energy and Economic Development. ISBN 0-918714-31-1. ‘‘Financial Innovation and Upstream Petroleum Development. Saudi Arabia. Iraq. natural gas deliverability. national oil companies. Keywords: U. Middle East energy security.S. Boulder. geopolitics of oil. Iran. But while the crisis certainly sparked drastic changes in the geopolitics of oil. That war radically changed the shape of oil politics and promoted the economic prospects of some key oil producers and retarded those of others. Keywords: upstream project financing. ISBN 0-918714-29-X. John Roberts. the paper focuses on some of the financial instruments used by Mexico and Venezuela. The author outlines some of these financial innovations and their relative strengths and weaknesses. regulatory and legislative issues. was it really an oil crisis? And if it was not an oil crisis. transmission. FERC Order 436. .
including analyses of oil. ISBN 0-918714-32-X. 1992. 1992. nuclear power. Alfred J. ISBN 0-918714-33-8. oil price scenarios. ‘‘Pacific Rim Energy Demand and Capital Requirements in the 1990s. Keywords: Asian energy demand. Boulos. Korea energy. private-sector equity and debt financing by banks.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 289 Abstract The author focuses on the 1990s as the decade of the ‘‘oil deal.’’ Occasional Paper 16. coal. energy capital requirements. natural gas. and concession participation. refining. domestic and international project financing. project financing. The author presents a number of cases of energy joint ventures in production. the 1990s represented a shift towards increased globalization and mega-deals in the energy industry. Abstract Here the opportunities for energy investment in the Former Soviet Union in the 1990s are examined. . Keywords: energy joint ventures.’’ Occasional Paper 17. Japan energy. and hydroelectricity. The author provides an overview of the energy supply and demand balance in the region. China energy. Six forms of financing energy projects are presented: government financing.’’ While the 1970s was a decade characterized by vertical disintegration of the world petroleum industry and the 1980s as a decade defined by the financial deal. Abstract This article addresses the energy demand and capital requirements of the Pacific Rim region in the 1990s. global petroleum industry. and marketing. Colorado: The International Research Center for Energy and Economic Development. McHale. The article evaluates the environment for foreign investors and some of the major challenges facing those wanting to do business in Russia and the Republics. ‘‘Opportunities for Energy Investment in Russia and the Republics in the 1990s. Colorado: The International Research Center for Energy and Economic Development. Boulder. nonconventional sources. financing by multinational agencies. including reasonable petroleum legislation and a fiscal framework governing oil and gas exploration and production. joint-venture arrangements with foreign crude-oil suppliers. Thomas R. Boulder. The author lays out a blueprint of how these countries can do more to increase outside investment in their energy sectors.
U. Peter C. and are production costs high enough in non-OPEC exporters that the market share of the Gulf can be expected to continue to increase if prices remain low or uncertain? Keywords: OPEC. Peter C. Keywords: U. Iran. environmental regulations. ISBN 0-918714-34-6. especially for the ‘‘Big Four. and Kuwait are discussed.’’ Occasional Paper 20. Central Asian energy.290 THE JOURNAL OF ENERGY AND DEVELOPMENT Keywords: Russia energy sector. Abstract In this paper. environmental regulations and liability issues in accelerating the export of U. refining industry. refining capacity. Abstract This article discusses the impact of U. ‘‘Indicators of Crude-Oil Production Costs: The Gulf versus Non-OPEC Sources. Boulder. Colorado: The International Research Center for Energy and Economic Development.S. Written in the early 1990s. Iraq. inefficient U. ‘‘A New Source of Project Finance Capital Through Energy Derivatives. Colorado: The International Research Center for Energy and Economic Development.S.S. Stauffer. cost of oil production.S. Boulder. The author uses the California market as an example of this trend. The author also examines the following questions: what production cost advantage do members of OPEC actually have. Colorado: The International . refining capacity and the subsequent increased dependence on imports from foreign sources of clean energy products as small. petroleum legislation.S.’’ Occasional Paper 18. ISBN 0-918714-36-2. ‘‘U. Saudi Arabia. The ‘‘big four’’ Gulf producers of Iran. foreign investment. U. Iraq. non-OPEC oil supply. Environmental Imperatives and the Accelerated Export of Refining Capacity. The Gulf oil producers dominate oil markets because of the sheer size of their known and proven reserves and because they are the lowest-cost producers. refiners were forced to close. Saudi Arabia.’’ Occasional Paper 19. is there a reason to believe that costs are escalating.S. 1993. North Sea oil supply. Boulder. Fusaro. Former Soviet Union (FSU). imports of refined products. the importance of crude-oil production costs in giving the Arabian Gulf oil producers a comparative advantage is analyzed. 1992. is there a cost-price squeeze outside of the Gulf. the author depicts the unintended consequences of the loss of U.S. Fusaro. how widely do production costs differ among members of OPEC. Thomas R. Kuwait.S.
’’ Occasional Paper 21. oil demand security. ISBN 0-918714-38-9. exchange of futures for physical (EFP). project finance. Middle Eastern oil exports. Boulder.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 291 Research Center for Energy and Economic Development. Colorado: The International Research Center for Energy and Economic Development. Asian refining capacity. For the Middle Eastern nations. OPEC. over-the-counter options. futures. energy demand.. natural gas pricing.’’ Occasional Paper 22. They offer a review of natural gas futures and their use as a risk-management tool. alternative delivery procedures (ADPs). energy derivatives. and refined products requirements. The Middle East supply side is analyzed as well. oil supply security. Topics discussed include exchange of futures for physical (EFP) and alternative delivery procedures (ADP). . Brown and J. 1993. ISBN 0-918714-37-0. Boulder. The author also presents an overview of Asian economic growth. the geopolitics of oil. Whorton. ‘‘Exchange of Futures For Physicals: New Market Opportunities for North America. ISBN 0-918714-43-5. Abstract The authors provide an overview of the emerging market for North American natural gas futures that was developing during the early 1990s. the relationship provides them with secure customers. Colorado: The International Research Center for Energy and Economic Development. and swaps are examined as risk-management tools. Jerry E. For Asian nations. NYMEX futures contracts. 1994. The use of over-thecounter options. Keywords: energy risk management. Abstract This article discusses the emergence of new financial instruments during the early 1990s that helped to manage long-term energy price risks for both producers and consumers. Jr. Keywords: natural gas contracts. swaps. oil-indexed loans. C. 1993. ‘‘Interdependence Between the Asia-Pacific and the Middle East. Keywords: Asian oil imports. Szabo. energy futures. The author assesses the use of energy derivative products as a means to not only manage energy price volatility but also to raise capital. energy price volatility. ´ Antonio M. forwards. Abstract This paper looks at the interdependence between Asia Pacific and the Middle East on the issue of security of oil supply and demand. forging relations with oil-exporting countries of the Middle East provides greater oil supply security.
Colorado: The International Research Center for Energy and Economic Development. Its impact will influence global oil-trading patterns in the physical market and will bring about greater price volatility to both cash and oil futures markets. The author offers a global oil supply-demand assessment.’’ Occasional Paper 25.S. environmental standards. Cyrus H. nonOPEC oil supplies. a new type of ‘‘environmental risk’’ has entered oil markets. U.’’ Occasional Paper 23. world oil price outlook scenarios. oil trading. Driven by the U. ‘‘Environmental Change: Oil Trading and Risk-Management Implications.’’ Occasional Paper 24.S. environmental risk management. Boulder. ISBN 0-918714-46-X. Fusaro. Colorado: The International Research Center for Energy and Economic Development. Peter C. Colorado: The International Research Center for Energy and Economic Development. Keywords: U. gasoline specifications. ‘‘Commoditization of Electric Power Markets. impetus toward tighter environmental laws and fuel quality specifications. particularly as they affect petroleum products. global oil supply and demand.292 THE JOURNAL OF ENERGY AND DEVELOPMENT Peter C. Abstract Here the author looks at the changes occurring in the U. 1995. electric utility industry with the move towards deregulation in the 1990s and the impact on the growth of power commoditization. Tahmassebi. Fusaro. 1994. NYMEX oil futures contracts. The author looks at how this new risk will increasingly be managed via financial instruments. Keywords: OPEC. ISBN 0-918714-48-6. financial derivatives. and the ramifications for OPEC. Boulder. The case of the California electric utility sector and deregulation is presented.S.S. . 1995. Abstract The objective of this paper is to provide an overview of the world oil markets and OPEC’s financial needs in order to meet its oil investment and production goals. ISBN 0-918714-44-3. a description of emerging trends in the oil industry’s market structure. ‘‘The Changing Structures of World Oil Markets and OPEC’s Financial Needs. Boulder. Abstract The study discusses the implications for oil trading and risk management in the move toward more stringent global environmental standards. surplus oil capacity.
power trading. Boulder. The netback value is zero or even negative for the longer-distance trades. Trades. electricity pricing.S. ‘‘U.S. fully taxed oil. Abstract This article looks at the movement toward deregulation of the U. . Some exporting countries profit. Peter C. deregulation. the price of LNG is capped by the technical option of modifying gas turbines to burn liquid fuels. ‘‘The Diseconomics of Long-Haul LNG Trading.) Abstract Long-haul liquefied natural gas (LNG) exports yield little or no economic rent. 2. Colorado: The International Research Center for Energy and Economic Development.’’ Occasional Paper 27. especially for foreign partners. but government takes otherwise are minimal. Stauffer. 1997. The maximum premium for LNG is less than 50 cents per thousand cubic feet (/Mcf). ISBN 0-918714-49-4. Boulder. FERC. natural gas market. California electricity deregulation. and buyers are resisting any price above oil parity. electricity industry. Thomas R. ISBN 0-918714-51-6.S. at the margin. are economical. Keywords: liquefied natural gas. The value of extracted co-products (natural gas liquids) is 50 cents to $1/Mcf. such as Borneo to Japan. no.S. Colorado: The International Research Center for Energy and Economic Development. LNG exports. electricity industry in the late 1990s and its potential impacts on natural gas and commodity markets. Returns are even less when the gas supply is nonassociated so that the project must ‘‘pay’’ the production costs as well. over-the-counter options. long-haul trading. 1996. but the Organization of the Petroleum Exporting Countries as a whole loses because low-revenue LNG energy displaces. Electricity Deregulation: Impacts on Gas and Commodity Markets. Costs of LNG are high and increase with distance. Today. because natural gas liquids are taxed at low ‘‘industrial’’ rates. These credits are the principal source of profit.’’ Occasional Paper 26. Keywords: U.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 293 Keywords: U. (This also was published as an article in The Journal of Energy and Development. commodity market. LNG pricing. 20. NYMEX natural gas futures. vol. electricity industry. Fusaro. electric utility deregulation.
Stauffer. power transmission and distribution. Michael C. with a focus on California’s approach to restructuring the electricity market. in addition to providing an in-depth mapping of Iran’s pipelines and infrastructure. this does not mean that there need be no concern about the damage . energy exports. Iranian pipelines. Keywords: Iran. Kazakhstan. Baku-Ceyhan. the paper covers the history of the movement toward electric utility deregulation in the United States. Written in 1997. the politics of the region complicate matters for the Central Asian energy exporters of Azerbaijan. Colorado: The International Research Center for Energy and Economic Development. ISBN 0-918714-53-2. Lynch. Abstract This paper looks at the geopolitics and economics of exporting Central Asian energy via Iran. 1997. However.’’ Occasional Paper 28. Abstract Although the likelihood of an oil crisis as severe as those in the 1970s seems to have subsided. utilities industry. Colorado: The International Research Center for Energy and Economic Development. U. Boulder. Turkmenistan. Colorado: The International Research Center for Energy and Economic Development. Boulder. Iran and sanction.294 THE JOURNAL OF ENERGY AND DEVELOPMENT Stephen Cohen. With existing pipelines and access to both the Caspian Sea and the Persian/Arabian Gulf. Thomas R. California and deregulation. Tapan Munroe. Kazakhstan. Caspian Pipeline Consortium (CPC).’’ Occasional Paper 30. Caspian energy. 1998. ‘‘‘The Iranian Connection’: The Geo-Economics of Exporting Central Asian Energy Via Iran.’’ Occasional Paper 29. Azerbaijan. The authors also supply an assessment of potential economic winners and losers from this restructuring. 1997. ‘‘Economic Implications of Electric Utility Restructuring in California. Central Asia. and Turkmenistan. Boulder. Keywords: electric utility deregulation. Iran would seem the most viable route for hydrocarbon exports logistically. ISBN 0-91871455-9. This article compares the various export route options for these countries and their constraints. Abstract The authors discuss the economic implications of electric utility restructuring in California.S. and Haru Connolly. ISBN 0-918714-52-4. ‘‘Facing the Elephant: Oil Market Evolution and Future Oil Crises.
Boulder. ‘‘Energy/Telecommunications Convergence: The Formation and Integration of a New Value Chain. Keywords: oil crises. and bandwidth. and their possible evolution. The author presents the various strategies pursued by different companies on dealing with the issue of climate change. deregulation. Whorton and Richard E. oil security. Fessler.’’ Occasional Paper 32. OPEC. The energy industry is significantly conducive to the use of risk-management tools due to its underlying price volatility and is a logical candidate for the use of an array of electronic trading platforms. It explores the market drivers for the changing face of energy trading. greenhouse gas emissions. C. Boulder. Colorado: The International Research Center for Energy and Economic Development. This paper looks at the factors involved in determining oil crises severity. and Asia Pacific) and implications for the ancillary markets of emissions. Fusaro and Jeremy Wilcox. European energy trading. energy trading software systems. Asian energy trading. NYMEX. energy hedging. Abstract Written in 1999. Peter C. The paper provides regional analyses of market developments (North America. energy trading. oil supply disruptions. 2000. ISBN 0-918714-57-5. weather. Abstract The focus in this paper on e-commerce opportunities for energy trading is an analysis that assesses the development of electronic trading platforms.’’ Occasional . Europe. ‘‘Energy E-Commerce. U. this article assesses the oil industry’s responses to the Kyoto Protocol and the call for the reduction of greenhouse gas emissions. J. ‘‘Doing Well Be Doing Good? Oil Industry Resonses to Kyoto. emissions trading. energy industry. Colorado: The International Research Center for Energy and Economic Development. both for exchange-traded futures and over-the-counter (OTC) derivative instruments in a rapidly changing market. energy trading platforms. Keywords: Kyoto protocol. climate change issues. ISBN 0-918714-58-3.’’ Occasional Paper 31.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 295 from smaller crises.S. energy trading. their current status. Keywords: e-commerce. oil price volatility. over-the-counter derivatives. The author discusses the risks of a short-term supply disruption that could be large enough to cause a significant price increase and how this could be managed. Lynch. Michael C. 1999.
’’ Occasional Paper 35. ISBN 0-918714-60-5. 2001. there is the competition for the ‘‘last mile’’ or local customers. are inherently flawed. Second.’’ Occasional Paper 34. California’s electricity crisis of 2001. Abstract Many governments are heavily exposed to oil price risk. especially those dependent on revenue derived from oil production. Boulder. Colorado: The International Research Center for Energy and Economic Development. ISBN 0-918714-59-1. Tapan Munroe and Leslie Baroody. Keywords: telecommunications industry. Boulder. energy industry. These markets have matured greatly in the last decade. 2001. and the creation of a new value chain that is both integrated and interdependent. Abstract The convergence of the energy and telecommunications markets is the focus of this paper. James A. For these governments. Enron. Keywords: California deregulation. along with its economic impact and implications for other states contemplating deregulation. Abstract An in-depth review of California’s deregulation experience is offered. Most energy utilities and telecom companies have overlapping customer bases or service territories where they have existing rights-of-way. ‘‘Lessons from California’s Electricity Crisis. Telecommunications Act of 1996. 2002. Colorado: The International Research Center for Energy and Economic Development. deregulation and the commoditization of bandwidth capacity have forced telecom companies to revisit traditional strategies for leveraging network capacity. First. and maintaining market share in a commoditized market environment—just as energy companies have experienced most recently. Traditional approaches. such as stabilization funds. Oil risk markets could be a solution. managing declining margins. convergence of energy and telecommunications. Daniel. the commoditization of bandwidth. ISBN 0-918714-61-3. The general consensus for the energy/telecommunications convergence centers on two issues.296 THE JOURNAL OF ENERGY AND DEVELOPMENT Paper 33. PG&E. established brands. and their range and depth . Boulder. Colorado: The International Research Center for Energy and Economic Development. ‘‘Hedging Government Oil Price Risk. and service centers. dealing with large price movements is difficult and costly.
and describes the major oil fields. provides an estimate of Iraqi oil reserves. Keywords: Iraq War of 2003. renewable energy credits. ISBN 0-918714-62-1. Peter C. U.’’ Occasional Paper 36. Keywords: governments hedging oil risk. 1. 2003. Boulder. ISBN 0-918714-63-X. the impact of the war on Iraq’s neighbors. ‘‘Oil Supply Security 2004: Does the Song Remain the Same?’’ Occasional Paper 38. invasion of Iraq. Iraqi oil production. Iraqi oil reserves.) Abstract This paper summarizes the ongoing developments of the ‘‘green trading’’ markets for greenhouse gases. Abstract This article assesses the highly significant consequences for the oil sector of the Iraq War of 2003. ISBN 0-918714-64-8. Colorado: The International Research Center for Energy and Economic Development. energy hedging. Michael C. renewable energy credits. Boulder. greenhouse gas trading. 29.’’ Occasional Paper 37. what oil policies a post-Saddam regime might pursue. mainly for fear of the political cost and lack of know-how. vol. Colorado: The International Research Center for Energy and Economic Development. (This also was published as an article in The Journal of Energy and Development. ‘‘Green Trading: The Next Financial Market. 2004. Other topics include: the conduct of the Iraq War. Lynch.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 297 could allow even substantial producers—and consumers—to hedge their oil price risk. and the financial value of energy efficiency. It reviews the causes of the Iraq War. ‘‘Oil and the Iraq War of 2003. international oil companies and their interests in Iraq. John Roberts.S. the state of the Iraqi oil sector and the potential for increasing oil production. managing oil price exposure. and what is on the horizon in the convergence of capital markets and the environment. current and prospective production-sharing agreements. why green financial indexes are needed for market maturation. geopolitical consequences. . Colorado: The International Research Center for Energy and Economic Development. Iraq War and oil. 2003. no. oil price volatility. Boulder. Keywords: emissions trading. It explores what green trading actually is. Fusaro. Yet governments have held back from using these markets. international oil company investments in Iraq. and the geopolitical consequences.
2005. ISBN 0-918714-66-2. The events in 2003 prompted a number of Asian governments to develop their own strategic oil stockpiles as well as to consider other energy security policies. Written to provide some background to help guide these policies. power trading opportunities. and the future of energy trading. ‘‘Hedge Funds Change Energy Trading. supply volatility. Abstract This article addresses how hedge funds are changing energy trading and markets. power trading. Boulder. Peter C. transnational pipeline vulnerability. rebuilding the energy trading markets.’’ Occasional Paper 39. NYMEX contracts. Thailand (2004). Other topics covered include: supply volatility. Fusaro and Gary M. Keywords: hedge funds. 2006. energy trading. ISBN 0-918714-65-6.’’ Occasional Paper 40. transnational pipelines. speculative energy trading. energy versus equities. Michael C. and downstream vulnerability. Vasey. Abstract Here the author turns to the controversy that has been raging over the true level of oil production and reserves held in Saudi Arabia. Keywords: oil supply security. This paper questions and refutes many of these assumptions based upon technical information about the hydrocarbon reserves and resource base of Saudi Arabia. natural gas trading. energy commodity markets. ‘‘Crop Circles in the Desert: The Strange Controversy Over Saudi Oil Production. speculative traders. Lynch. Other topics covered include: an overview of the types of hedge funds. strategic oil stockpiles. Colorado: The International Research Center for Energy and Economic Development. energy policies. Boulder. . the decline of OPEC’s surge capacity. the author presents a history of oil supply security issues and subsequent policy responses. Many advocates of the ‘‘Peak Oil’’ theory believe that the Kingdom of Saudi Arabia has already hit its peak production level of oil and will be hampered in its oil output in the near future as it does not have adequate reserves. downstream vulnerability. Colorado: The International Research Center for Energy and Economic Development. and the structural changes that opened up the energy commodity markets.298 THE JOURNAL OF ENERGY AND DEVELOPMENT Abstract The author looks at the issue of oil supply security and is based on a presentation given to the International Energy Agency/Organization of Petroleum Exporting Countries (IEA/OPEC) Seventh Energy Experts’ Meeting in Bangkok. It assesses the scope of hedge fund investments in the energy markets.
Saudi Arabian oil reserves. Chavez. 2. Colorado: The International Research Center for Energy and Economic Development.) Abstract This paper evaluates the trend in Latin America toward resource nationalism in the energy sector as more left-leaning governments have come to power. 2008. 1. vulnerability to oil supply disruptions from Latin America. no. Keywords: Venezuela energy sector. ISBN 0-918714-68-0. however. hedge fund investments. which could ultimately be detrimental to overall energy production levels. Peter Fusaro. 32.S. 2007. Venezuela and Boliva are examined as case studies where ideological changes in governments have affected energy policies. (This also was published as an article in The Journal of Energy and Development. 32. Bolivian natural gas. Energy Patterns: Ideology. and private equity investors in clean energy technology projects. Latin American geopolitics. (This also was published as an article in The Journal of Energy and Development. Security. It analyzes how compatible or incompatible the new ideological discourse from some populist/leftist regimes is vis-a-vis their domestic energy production sustainability ` for the medium and long term and their energy trade with key international partners and consumers. Colorado: The International Research Center for Energy and Economic Development. The paper concludes that the trend toward resource nationalism raises political risk. resource nationalism. it is unlikely that there will be major changes in oil flows from Latin America to the United States. energy imports also is examined. thereby making future foreign investments in these countries less attractive. vol. Boulder.) Abstract The emerging markets for environmental financial investment and trading are examined in this paper.S. The three global market drivers for the new green investment model .’’ Occasional Paper 42. vol. The impact of Latin American geopolitics on U. ‘‘The New Green Business Model for Investment. the United States needs to evaluate mid. ISBN 0-918714-67-2. Alberto Cisneros-Lavaller. along with the evaluation of the potential U.S. It evaluates the role of venture capital funds. and U. no. Peak Oil theory. Boulder. Over the short term. Energy Production Sustainability.’’ Occasional Paper 41.ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 299 Keywords: Saudi Arabian oil production. ‘‘Latin American Geopolitics vs.to long-range energy security strategies to diversify its oil sources and expand risk management tools such as its Strategic Petroleum Reserve.
2009. biomass. Boulder. ‘‘Compliance in a New Era of Energy Market Manipulation Oversight. accelerated technology shifts. Tsegay Wolde-Georgis and Michael H. Colorado: The International Research Center for Energy and Economic Development. identify. greenhouse gases. It also examines various options for biofuels development. must navigate a myriad of regulations designed to prevent manipulation of the energy markets. ‘‘Biofuels in Africa: A Pathway to Development?’’ Occasional Paper 43. Keywords: Africa economic development. energy security. food security. sustainable development. poverty alleviation. Glantz. biofuels. Although simple in concept. ISBN 0-91871469-70-2. renewable energy financing. energy companies are implementing systematic compliance protocols to monitor. The Federal Energy Regulatory Commission. overlapping regulatory jurisdiction.’’ Occasional Paper 44. The paper provides . Abstract Energy companies. Heeg. Abstract This paper investigates biofuels pathways and the potential outcomes of biofuels development for energy security and poverty alleviation in Africa. 2010. and substantial penalty authority. Peggy A. and increased environmental concerns. faced with new laws.300 THE JOURNAL OF ENERGY AND DEVELOPMENT are discussed. the Commodity Futures Trading Commission and the Federal Trade Commission all have authority to prevent market manipulation. and its potential roles to improve or undermine the livelihoods of rural communities. which include sustained higher energy prices. Kyoto protocol. Boulder. along with the existing sulphur dioxide and nitrous oxide markets in the United States. Colorado: The International Research Center for Energy and Economic Development. and comply with the law. ISBN 0-918-714-69-9. Emissions trading of carbon dioxide and greenhouse gases also are covered. Recognizing that a finding of market manipulation carries the prospect of substantial civil and criminal penalties. environmental impacts. Keywords: Green trading. market manipulation is extremely complex in application. investment in sustainable development. The accelerating clean technology investment trajectory is assessed as is the role of climate change as a market driver.
Federal Energy Regulatory Commission (FERC). Keywords: ‘‘market manipulation. federal sentencing guidelines. Commodity Futures Trading Commission (CFTC).ICEED OCCASIONAL PAPERS—CUMULATIVE ABSTRACTS 301 an overview of the regulatory framework of energy market manipulation and outlines the regulatory expectation for compliance programs. . Federal Trade Commission (CFTC) compliance.’’ penalty.
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........................... Dahl ......................... Estimating the U....................................................... and Carol A......................... Al-Qahtani................................. Balistreri.....................INDEX TO VOLUME XXXIII No........................................ Securing Natural Gas Supplies to Europe: Lessons and Prospects Øystein Noreng ................. Al-Sahlawi ...S.......... Edward J........ 1 — Autumn 2007 A Note from the Editor ARTICLES Causality Between Energy Consumption and Economic Growth Atle G. Econometric Model of Electricity Demand in Turkey as a Measure of Economic Growth and Development Melike Bildirici and Tahsin Bakirtas ............. Dollar Depreciation Effect on Oil Prices Ayed S................................................. An Alternative Oil-Pricing Currency and OPEC’s Foreign Assets Mohammed A..................................................... Causal Relationship Between Energy Consumption and GDP: An Empirical Analysis of Five West African Countries Yaya Keho ................................ Guttormsen ...... 1 23 33 49 57 81 ............
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