Two Elphinstone PhD Scholarships available in Economics

A number of Elphinstone PhD Scholarships are available across the arts, humanities and social sciences, linked to specific, individual research projects. These Scholarships cover the entirety of tuition fees for a PhD student of any nationality commencing full-time study in October 2015, for the three-year duration of their studies.

 

Valuing Flexibility in Energy-related Investments Using Real Options

Supervisor 1: Dr Marc Gronwald 

Supervisor 2: Professor Joseph Swierzbinski

The need to make large, long-term, and risky investments is a major feature of the energy sector. Over the past twenty years, the field of real options has developed analytical tools to assess how the design of an investment strategy and, in particular, the nature of the flexibility incorporated into such a strategy can affect the value of an investment. One example is an analysis of how the value of an offshore oil lease is affected by the option to delay development or to abandon the lease.

Although this is an active field of research that straddles the fields of Economics and Finance, there are still many interesting research problems to be studied. Three examples are mentioned briefly below.

Within the area of petroleum economics, the techniques of real options analysis can be applied to study the effectiveness of proposed regimes for taxing oil revenues.

In addition, more can be done to study how better models of oil price uncertainty can be incorporated into the design of long-term investment strategies - in particular effects of decreasing oil prices are insufficiently understood.

Real options analysis is also relevant in other areas of energy economics. For example, understanding the economic forces that affect the early adoption of novel technologies is a key issue for renewable resource policy, and methods from real options analysis can be adapted to study this question.

Selection will be made on the basis of academic merit. A strong background in either quantitative economics/finance or applied mathematics is essential.

 

Induced Innovation in Environmental Technology, with a Focus on Automobile Fuel Economy

Supervisor 1:  Dr Takahiko Kiso

Supervisor 2: Dr Rames Abul Naga  

With high oil price in the past decade or so (though the trend is currently downward in the short run) and the need to reduce carbon dioxide emissions, developing fuel efficient vehicles has become an important issue worldwide. A common tool used in many countries to tackle this challenge is fuel economy standards that require automakers to achieve a certain level of average fuel efficiency in their fleet. Many countries, including the EU and the USA, have been tightening fuel economy regulations lately.

In environmental economics, government regulations, along with resource prices, are considered a possible source of technological progress (the induced innovation hypothesis). According to the hypothesis, firms that are required to comply with environmental standards will allocate more R&D (research and development) activities into those technologies that are useful for meeting the standards. This leads to technological progress in environmental technologies. In other words, environmental regulations induce technological progress. The hypothesis indicates that the tightening of fuel economy regulations in recent and coming years may induce innovations in automakers’ technology for providing fuel efficiency, which will in turn lower the cost of achieving the regulatory targets.

There are studies that find empirical evidence of induced innovation from environmental regulations (e.g. Newell et al., 1999; Popp, 2002, 2006). For the automobile industry, Berry et al. (1996) is the only empirical study on induced innovation, and focus on the development of pollutant control technologies in the period of 1972-1982.

This PhD project will empirically investigate the possibility and degree of induced innovation in automobile fuel efficiency technology in more recent years (1990 onwards) when fuel economy has become an important policy issue. For example, using historical data on vehicle characteristics (e.g. fuel economy, size, horsepower) of different vehicle models in the market, we observe how fuel economy has improved over time after controlling for the effect of changes in other vehicle characteristics such as size and horsepower. Alternatively, we focus on time series data on patent applications in areas relating to automobile fuel economy, and analyse whether R&D activities (as reflected in the number of patent applications) respond to regulatory stringency as predicted by the theory of induced innovation.

References

Berry, S., S. Kortum, and A. Pakes (1996). Environmental change and hedonic cost functions for automobiles. Proceedings of the National Academy of Sciences 93, 12731–12738.

Newell, R. G., A. B. Jaffe, and R. N. Stavins (1999). The induced innovation hypothesis and energy saving technological change. Quarterly Journal of Economics 114, 941–975.

Popp, D. (2002). Induced innovation and energy prices. American Economic Review 92, 160–180.

Popp, D. (2006). International innovation and diffusion of air pollution control technologies: The effects of NOX and SO2 regulation in the US, Japan, and Germany. Journal of Environmental Economics and Management 51, 46–71.

Applicants are expected to have an MSc in Economics or related disciplines.


How Do I Apply?

To apply for an Elphinstone PhD Scholarship, you should apply for a PhD via our online system stating:

  • ‘Elphinstone PhD Scholarship’ in the Intended Source of Funding section
  • The name of the lead supervisor in the Name of Proposed Supervisor section
  • The title of the specific research project in the Outline Summary section
  • Candidates should simultaneously register their desire to be considered by emailing the Graduate School Administrator, Ann Marie Johnston, at a.m.johnston@abdn.ac.uk

Deadline for submission of applications: Thursday 30th April 2015.

Eligibility for an Elphinstone Scholarship is based on academic excellence. Applicants must have the equivalent to a UK 1st class or an Upper Second (2.1) Honours undergraduate degree and/or a Masters with Commendation/Merit or Distinction.

Information for your country, including entry requirements, is available here.

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