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This paper constitutes a first analysis on stock returns and stock return volatility of energy corporations from the Eurozone. According to our results, the gas market does not play a role for the pricing of Eurozone energy stocks. However, changes in the Euro to U.S. Dollar exchange rate as well as developments at the money and especially at the oil market strongly affect returns of the energy stock portfolios analyzed. While oil price hikes negatively impact on stock returns of European utilities, they lead to an appreciation of oil and gas stocks. Most importantly, we show that oil market volatility negatively affects European oil and gas stocks. In contrast, energy stock volatility is not driven by volatility of the resource market, but only by its own dynamics.

This paper constitutes a first analysis on stock returns and stock return volatility of energy corporations from the Eurozone. According to our results, the gas market does not play a role for the pricing of Eurozone energy stocks. However, changes in the Euro to U.S. Dollar exchange rate as well as developments at the money and especially at the oil market strongly affect returns of the energy stock portfolios analyzed. While oil price hikes negatively impact on stock returns of European utilities, they lead to an appreciation of oil and gas stocks. Most importantly, we show that oil market volatility negatively affects European oil and gas stocks. In contrast, energy stock volatility is not driven by volatility of the resource market, but only by its own dynamics.

Sectoral heterogeneity is crucial to address several economic questions. This paper provides a detailed mapping of sectoral production possibility frontiers, using different nesting structures and levels of aggregation (primary, secondary, tertiary activities and energy-intensive firms). Elasticities of substitution between capital, labour and energy are identified by employing an international multi-sector dataset, accounting for biased technological change and normalising the production function to clusters of observations. Complementarity dominates, with the noteworthy exception of the capital-labour composite, close to Cobb-Douglas. I also present some stylized facts relating substitution elasticities to sectoral characteristics.

Sectoral heterogeneity is crucial to address several economic questions. This paper provides a detailed mapping of sectoral production possibility frontiers, using different nesting structures and levels of aggregation (primary, secondary, tertiary activities and energy-intensive firms). Elasticities of substitution between capital, labour and energy are identified by employing an international multi-sector dataset, accounting for biased technological change and normalising the production function to clusters of observations. Complementarity dominates, with the noteworthy exception of the capital-labour composite, close to Cobb-Douglas. I also present some stylized facts relating substitution elasticities to sectoral characteristics.

The economic evaluation of ultra-long-lived investment projects is not only challenging due to the choice of the planning horizon but also due to the discounting of future uncertain cash flows. Thus, for real world investment decisions a better understanding of the project’s risks and their effect on the project’s value is crucial. If long-term investments are modeled, stochastic processes may be used to reflect the uncertain development of future prices and cash flows. The choice of the stochastic process is consequently an essential assumption in the modeling process. This paper critically discusses the risk of ultra-long-lived investment projects implied if future pay-off’s are assumed to follow geometric Brownian motion processes. In our analysis, we distinguish between projects driven by costs and such driven by revenues. For both kind of projects we compare the value at risk with the returns of a risk-free asset. Therein, the value at risk describes the threshold value of the confidence levels of the uncertain cash flow’s probability density function. The comparison for long time horizons shows that the lower confidence interval exceeds the returns of a risk-free asset used as a benchmark for any choice of the confidence level, which implies that the returns of a “worst-case” scenario (within the assumed confidence interval) will still exceed the returns of a risk-free asset in the long-term perspective. For the case of uncertain future cost, the risk measure is defined as the difference between the expected value and the boundary of the confidence interval. This value is also found to become negative in the long-term perspective.

The economic evaluation of ultra-long-lived investment projects is not only challenging due to the choice of the planning horizon but also due to the discounting of future uncertain cash flows. Thus, for real world investment decisions a better understanding of the project’s risks and their effect on the project’s value is crucial. If long-term investments are modeled, stochastic processes may be used to reflect the uncertain development of future prices and cash flows. The choice of the stochastic process is consequently an essential assumption in the modeling process. This paper critically discusses the risk of ultra-long-lived investment projects implied if future pay-off’s are assumed to follow geometric Brownian motion processes. In our analysis, we distinguish between projects driven by costs and such driven by revenues. For both kind of projects we compare the value at risk with the returns of a risk-free asset. Therein, the value at risk describes the threshold value of the confidence levels of the uncertain cash flow’s probability density function. The comparison for long time horizons shows that the lower confidence interval exceeds the returns of a risk-free asset used as a benchmark for any choice of the confidence level, which implies that the returns of a “worst-case” scenario (within the assumed confidence interval) will still exceed the returns of a risk-free asset in the long-term perspective. For the case of uncertain future cost, the risk measure is defined as the difference between the expected value and the boundary of the confidence interval. This value is also found to become negative in the long-term perspective.

We decompose the economic implications of the Kyoto Protocol at the cross-country level, splitting the total economic impact for each region into contributions from its own emission abatement policy and those from other regions. Our analysis which is based on a large-scale computable general equilibrium model for the world economy indicates that spillover effects are an important consequence of multilateral carbon abatement policies.. We calculate a crosscountry matrix for monetary transfer payments which would have to be assigned on a bilateral basis in order to provide compensation for the international spillovers associated with the implementation of the Kyoto Protocol.