Rögnvaldur Hannesson

A competitive electricity market model is used to analyze the effects of replacing conventional base load power with an intermittent power supply. The model is a conceptual one and uses linear demand curves with a triangular probability distribution. In a base reference case, there are two types of providers of electricity, base load providers and peak load providers, each with a constant marginal cost. Prices are determined by the highest marginal cost of the active providers or by what the market can bear. The production capacity of each type of provider is determined by rents being equal to fixed costs. This reference case is compared to a case where base load providers have been replaced by intermittent solar and wind energy, with peak load providers still active. Despite lower costs, intermittent power is likely to result in higher and more volatile prices of electricity. Lower electricity prices could result if conventional baseload power is sufficiently expensive. The implications of changes in the availability of intermittent power are also analyzed.

Production of a renewable substitute to fossil fuels is modeled as causing the cost of this backstop technology to fall over time in proportion to the scale of the substitute production and how long it has been in use. The unit cost of resource extraction is assumed to rise as the stock is depleted, so learning by doing will increase the reserves permanently left in the ground. The green paradox can nevertheless be present, in the sense that the resource extraction path can initially lie above what it would be in the absence of a parallel production of renewable energy. In a monopolistic market, the resource monopolist's optimal price path is twophased, even with inelastic demand. In the limit-pricing phase, the price is falling, due to the progressive learning by doing effect, and the extraction path is rising.

This paper examines the correlation between end-user electricity prices and the share of solar and wind energy in total electricity production in OECD countries. It is shown (i) that end-user prices in recent years (2020–2022) are positively correlated with the share of solar and wind and (ii) that the price of electricity in the majority of countries has risen with the solar and wind share since these types of energy came on the scene.

The history of the environmental Kuznets curve is traced. We estimate how the CO₂-intensity of economies is related to GDP per capita and examine the implications for the Kuznets curve. We find mixed evidence for the existence of this curve. In many poor and medium rich countries the CO₂-intensity has increased since 1990, while in rich countries it has fallen. In some of those it has fallen at an increasing rate, but in others at a declining rate. If the CO₂-intensity converges to a lower limit as countries grow richer the Kuznets curve would not exist.

Production of commodities and industrial products typically declines in relative terms as countries get richer. Does this mean that economic growth will become dematerialized and take place without being accompanied by a rise in the use of materials? Do we see signs of this already happening? We look at the production of cement and thirteen minerals 1960–2019 and find no evidence of dematerialization. Production of cement and eight minerals has grown more rapidly than world GDP and that of three minerals more rapidly than world population. Extraction of most minerals has accelerated rather than stagnated since the turn of the century.

The Norwegian government gets a substantial income from oil and gas extraction, both through taxes and partnerships with oil companies. In recent years (2009–2011), this has amounted to about 25% of government revenues. The Norwegian parliament has endorsed a savings guideline aimed at preserving petroleum wealth. Actual savings of petroleum revenues are compared with what this guideline stipulates, and the guideline itself is compared to the Hicksian permanent income rule for wealth preservation. While the Norwegian savings policy has been successful from a macroeconomic perspective it has been less so from a microeconomic perspective. Over the last 15 years expenditure on disability and sick leave has increased rapidly while expenditure on transportation infrastructure has stagnated. These trends are compared with the trends in similar expenditures in Sweden and Denmark. On the basis of the Norwegian experience, I discuss to what extent institutional design can guard against misinformation or misaligned incentives and to what extent the Norwegian petroleum fund design could be useful for underdeveloped but resource rich countries.

The sharing of the Northeast Atlantic mackerel (Scomber scombrus) stock is analysed as a game between four parties: the European Union, Norway, the Faroe Islands, and Iceland. Consideration is given to how the outcome depends on the nature of the stock's migrations. Two types of migrations are considered: (i) density-dependent, where the mackerel migrates into the Icelandic economic zone only if it exceeds 3.5 million t, and (ii) stochastic migrations, where the said migrations are stochastic. It is determined that the Faroe Islands would never accept a cooperative solution wherein they can only fish with the globally optimal fishing mortality within their own zone. This is also true for Iceland when the migrations into her zone are stochastic, but not if they are density-dependent. In the latter case, the other players have incentives to retaliate to Icelandic overfishing by fishing harder, which greatly reduces the number of years when mackerel are available in the Icelandic zone. It is assumed that the objective is maximization of the catch volume over a time-horizon of 50 years.

An error correction model is estimated for the spot versus 12 months futures price of Brent Blend. Whether or not speculation in the futures market has been driving the spot price is examined by testing for Granger causality; if the futures price Ganger causes the spot price and not the other way around, it is an indication that speculation in the futures market is influencing the spot price. We find this to be the case for the recent changes in the oil price, both for the run‐up to the price peak of July 2008, the subsequent abrupt fall, and the rise from early 2009 to May 2011.