ONLINE 60ème Séance du Séminaire PSL de Recherches en Économie de l’Energie

Kai A. Konrad (Max Planck Institute for Tax Law and Public Finance), "Elusive effects of export embargoes for fossil energy resources"

Unlike produced commodities, the extraction and sale of fossil energy resources such as oil or natural gas is an ”asset swap”: assets stored in the ground are converted into financial assets. The value of assets in the ground is reduced by the amount taken out and sold. This is important for assessing the coercive power of the threat of implementing an export embargo. Even if the country affected by the embargo is ruled by an autocratic kleptocrat, who appropriates all the revenues from resource sales, the sanctioning effect is close to zero in a functioning financial market environment. However, if the autocrat considers his future government power to be at risk and, at the same time, can bunker the extraction proceeds in a financial safe-haven, then the embargo leads to expected wealth losses for the autocrat. The expected wealth losses increase in the difference between the likelihood of retaining power and the wealth security of the financial assets in a safe-haven. We also analyze variants of the model such as an oligopolistic resource market, where the non-sanctioned resource exporters benefit at the expense of the sanctioned country.

K.A. Konrad and M. Thum, Elusive effects of export embargoes for fossil energy resources. Energy Economics (2022), doi: https://doi.org/10.1016/j.eneco.2022.10644

Maxime Schenckery (IFP Energies Nouvelles-IFP School), "European Economic impacts of cutting energy imports from Russia: A computable general equilibrium analysis".

The recent economic sanctions against Russia can jeopardise the sustainability of the European Union’s (EU) energy supply. Despite the EU’s strong commitment to stringent abatement targets, fossil fuels still play a significant role in the EU energy policy. Furthermore, high dependency on Russian energy supplies underlines the vulnerability of the EU energy security. Using a global computable general equilibrium model, we prove that the current EU embargo on coal and oil imported from Russia will have adverse supply effects, substantially increasing energy prices and welfare costs for the EU resident. Although it reduces emissions, extending the embargo to include natural gas doubles this welfare cost. The use of coal is likely to increase, especially with respect to EU electricity generation, given the current constraints of additional import capacities from non-Russian producers. The impact on Russia once the EU extends the sanctions to natural gas is less substantial than on the EU. Russian welfare cost will increase less than 50%, indicating that extending the current restriction to boycott Russian gas is a costly policy option.

Sigit Perdana, Marc Vielle, Maxime Schenckery, European Economic impacts of cutting energy imports from Russia: A computable general equilibrium analysis, Energy Strategy Reviews, Volume 44, 2022. https://www.sciencedirect.com/science/article/pii/S2211467X22002000