Essays in Energy Economics

This thesis presents four essays in energy economics. The first essay investigates one of the workhorse models of resource economics, the Hotelling model of an inter-temporally optimizing resource extracting firm. The Hotelling model provides a convincing theory of fundamental concepts like resource scarcity, but very few empirical validations of the model have been conducted. This essay attempts to empirically validate the Hotelling model by first expanding it to include exploration activity and market power and then using a newly constructed data set for the uranium mining industry to test whether a major resource extracting mining firm in the industry is following the theory’s predictions. The results show that the theory is rejected in all considered settings. The second and third essays investigate the difference in market outcomes under spot-market based trade as compared to long-term contract based trade in oligopolistic markets with investments. The second essay investigates analytically the difference in market outcomes in an electricity market setting, showing that investments and consumer welfare may be higher under spot-market based trade than under long-term contracts. The third essay proposes techniques to solve large-scale models of this kind, empirically, by exploring the practicability of this approach in an application to the international metallurgical coal market. The final essay investigates the influence of policy uncertainty on investment decisions. With France debating the role of nuclear technology, this essay analyses how policy uncertainty regarding nuclear power in France may feature in the French and European power sector. Applying a stochastic model for the European power system, the analysis shows that the costs of uncertainty in this particular application are rather low compared to the overall costs of a nuclear phase-out.

The European Union and its Northern Frontier : EUropean Geopolitics and its Arctic Context

The present study explores EUropean geopolitical agency in a distinct spatio-temporal context: the Arctic region of the early 21st century. Thus, it provides an in-depth analysis of the European Union’s process to construct EUropean legitimacy and credibility in its ‘Northern Neighbourhood’ between 2008 and 2014. Embedded in a conceptual and methodological framework using critical geopolitics, this study assesses the strategic policy reasoning of the EU and the implicit geopolitical discourses that guide and determine a particular line of argumentation so as to claim a ‘legitimate’ role in the Arctic and accordingly construct a distinct ‘EUropean Arctic space’. In doing so, it establishes a clearer picture on the (narrated) regional interests of the EU and the related developed policy and concrete steps taken in order to get hold of these interests. Eventually, the analysis gets to the conceptual bottom of what exactly fashioned the EU with geopolitical agency in the circumpolar North. As a complementary explanation, this study provides a thick description of the area under scrutiny – the Arctic region – in order to explicate the systemic context that conditioned the EU’s regional demeanour and action. Elucidated along the lines of Arctic history and identity, rights, interests and responsibility, it delineates the emergence of the Arctic as a region of and for geopolitics. The findings indicate that the sui generis character of the Arctic as EUropean neighbourhood essentially determined the EU’s regional performance. It explicates that the Union’s ‘traditional’ geopolitical models of civilian or normative power got entangled in a fluid state of Arctic affairs: a distinct regional system, characterised by few strong state actors with pronounced national Arctic interests and identities, and an indefinite local context of environmental changes, economic uncertainties and social challenges. This study applies critical geopolitics in a Political Science context and essentially contributes to a broader understanding of EU foreign policy construction and behaviour. Ultimately, it offers an interdisciplinary approach on how to analyse EU external action by explicitly taking into account the internal and external social processes that ultimately condition a certain EUropean foreign policy performance.