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Aatola P.,Government Institute for Economic Research | Ollikainen M.,University of Helsinki | Toppinen A.,University of Helsinki
Energy Economics

We investigate the price determination of the European Union emission allowance (EUA) of the European Union emissions trading scheme (EU ETS). We postulate an uncertain permit price and risk-averse firms which have the possibility to hedge in the forward market. The firms produce final goods, abate their emissions and trade permits in the permit market. The dependence of the equilibrium permit price on exogenous variables is studied in a permit market model. We test our theoretical findings with empirical data from 2005 to 2010 in the EU ETS market. We use daily forward prices of EUA as our dependent variable. We use several econometric models with multiple stationary time series to discover that there is a strong relationship between the fundamentals, such as German electricity prices and gas and coal prices, with the price of EUA. We find that the EUA forward price depends on fundamentals, especially on the price of electricity as well as on the gas-coal difference, in a statistically significant way. © 2012 Elsevier B.V. Source

Aatola P.,Government Institute for Economic Research | Ollikainen M.,University of Helsinki | Toppinen A.,University of Helsinki
Energy Policy

We study the impact of the carbon price on the integrating electricity market in the EU. Our theoretical framework suggests that the price of carbon has a positive but uneven impact on electricity prices depending on the marginal production plant. The carbon price may increase price differences in the short run. We apply time series analysis on daily forward data from 2003 to 2011 and investigate whether we can find empirical evidence for our analytical findings. Our results support the hypotheses that integration in electricity prices has increased over time and that the carbon price has a positive but uneven impact on the integration of prices. © 2013 Elsevier Ltd. Source

Iho A.,Mtt Agrifood Research Finland | Laukkanen M.,Government Institute for Economic Research
Agricultural and Food Science

This study analyzes the economic feasibility of gypsum amendment as a means to reduce particulate and dissolved phosphorus loads from arable areas. To this end, an optimization model is developed that includes gypsum amendment as well as matching phosphorus fertilization to crop need and the level of soil phosphorus reserves as phosphorus load mitigation measures, with soil phosphorus reserves measured by soil test phosphorus (STP). The optimal extent of gypsum amendment is then determined simultaneously with optimal fertilization use as a function of field STP level. The results indicate that whether or not gypsum amendment is economically feasible depends on field erosion susceptibility and STP level. When accounting for the costs and benefits to the society on the whole, gypsum treatment suits best to mitigation of phosphorus losses from soils with excessively high phosphorus reserves; once a threshold STP level is reached, gypsum amendment is optimally given up. This threshold level depends on field slope and on society's willingness to pay for water quality. Source

Iho A.,Mtt Agrifood Research Finland | Laukkanen M.,Government Institute for Economic Research
Ecological Economics

This article puts forward a model of the role of phosphorus in crop production, soil phosphorus dynamics and phosphorus loading that integrates the salient economic and ecological features of phosphorus management, with grain production in southern Finland as an application. The model accounts for the links between phosphorus fertilization, crop yield, accumulation of soil phosphorus reserves, and phosphorus loading into waterways. It can be used to guide precision phosphorus management as a means to mitigate agricultural phosphorus loading. Erosion control is considered as an additional measure to reduce phosphorus loading through soil loss. A dynamic programming approach and numerical solution method are used to analyze the intertemporally optimal combination of fertilization and erosion control and the associated soil phosphorus development. The optimal fertilizer application rate changes markedly over time in response to changes in the soil phosphorus level. Erosion control was found to increase welfare only on land that is highly susceptible to erosion. © 2012 Elsevier B.V.. Source

Tiihonen J.,Karolinska Institutet | Tiihonen J.,Finnish National Institute for Health and Welfare | Tiihonen J.,Kuopio University Hospital | Ronkainen K.,University of Eastern Finland | And 2 more authors.
BMJ Open

Objective: To study the net economic effect of smoking on society. Design: Prospective cohort study. Setting: Eastern Finland. Patients: We studied mortality, paid income and tobacco taxes, and the cumulative costs due to pensions and medical care among tobacco smoking and non-smoking individuals in a 27-year prospective cohort study of 1976 men from Eastern Finland. These individuals were 54-60 years old at the beginning of the follow-up. Main outcome measures: The net contribution of smoking versus non-smoking individuals to public finance balance (euros). Results: Smoking was associated with a greater mean annual healthcare cost of €1600 per living individual during follow-up. However, due to a shorter lifespan of 8.6 years, smokers' mean total healthcare costs during the entire study period were actually €4700 lower than for non-smokers. For the same reason, each smoker missed 7.3 years (€126 850) of pension. Overall, smokers' average net contribution to the public finance balance was €133 800 greater per individual compared with non-smokers. However, if each lost quality adjusted life year is considered to be worth €22 200, the net effect is reversed to be €70 200 (€71.600 when adjusted with propensity score) per individual in favour of non-smoking. Conclusions: Smoking was associated with a moderate decrease in healthcare costs, and a marked decrease in pension costs due to increased mortality. However, when a monetary value for life years lost was taken into account, the beneficial net effect of nonsmoking to society was about €70 000 per individual. Source

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