• Primary Program Energy Systems and Macroeconomics
  • Research Interests Econometric modeling, consumer behavior, energy markets, sustainable and renewable energy, liberalization and regulation policy

Biography

Carlo Andrea is a visiting researcher who currently works as a professor of economics at the University of Perugia, and a professor of energy economics at the University LUISS, Rome. He has been the president of AIEE, Italy (Italian Association for Energy Economics) since 2014 and was the president of the IAEE (International Association for Energy Economics) in 2008. Formerly, he was energy advisor to the Minister of Industry of Italy, president of GRTN (Italian Electric Transmission Network), chief economist at ENI, an economist at the Bank of Italy, a research associate at Project LINK, United Nations, and a lecturer and professor of economics at the universities of Pennsylvania (USA), Campobasso, Sassari and Urbino (Italy).

Carlo Andrea’s fields of research include econometric modeling, consumer behavior, energy markets, sustainable and renewable energy, liberalization and regulation policy. He has testified to Italy Senate and Parliament briefings, and has provided various governments with technical and policy reports on electricity market liberalization and renewable energy development. Carol Andrea has also authored over 200 scientific articles and is chief editor of the Review of Economics and Institutions.

Publications

See all Carlo Andrea’s publications
  • Discussion papers
  • Instant Insight
  • KAPSARC journal articles
  • External journal articles
Balancing Energy Security Priorities: A Portfolio Optimization Approach to Oil Imports

Balancing Energy Security Priorities: A Portfolio Optimization Approach to Oil Imports

The idea of energy security emerged after the energy crises of the 1970s. It has evolved from the initial paradigm of assuring sufficient energy supplies to include a price affordability perspective and, eventually, many other energy-related issues, such as infrastructure, environmental impacts, societal effects, energy efficiency and governance. However, security of physical supply and price affordability remain the paradigm’s two key pillars. This study applies financial portfolio theory to the energy security issues of East Asia’s four major energy importers: China, Japan, South Korea and Taiwan. The authors calculate the relative risks associated with the dynamics of oil imports, and the import prices paid, and estimate the efficient frontiers for corresponding import portfolios. Lastly, the study runs several scenarios that simulate the effects of restructuring the four countries’ oil import portfolios and of external disruptions, notably US sanctions on Iranian oil sales. The paper’s key findings include: The short-run impact of a fully enforced Iranian oil export embargo would increase portfolio risk across the board, within a 3% to 15% range. However, the subsequent substitution of Iranian oil imports by other suppliers would prove beneficial for Japan and Taiwan. The risk premium associated with passing through the Malacca Straits would result in a 27.5% increase in price volatility for China’s oil imports, although the negative impact on its average import price level would be less pronounced, at 2.6% compared to between 5.2% and 5.8% for the other three importers.

May 28, 2019
Estimating the Household Consumption Function in Saudi Arabia

Estimating the Household Consumption Function in Saudi Arabia

This research is part of a joint project between the Saudi Arabian Monetary Authority (SAMA) and the King Abdullah Petroleum Studies and Research Center (KAPSARC). This paper estimates a micro-based life cycle consumption model for Saudi Arabia over the period 1970-2017 The estimate of consumption behavior in this paper is identified as centering on the income effect and the wealth effect: The income effect is defined as the direct impact on consumption of a variation in income. The wealth effect is defined as a consumer’s perception of a change in his or her wealth and a concomitant decision either to liquidate some of that wealth to enable an increase in consumption (in the case of a positive wealth change) or to decrease consumption in order to restore the consumer’s desired level of wealth (in the case of a negative wealth change). The wealth effect on consumption can be substantially different from the income effect because it is more closely related to consumers’ expectations of, and fluctuations in, the value of real and financial assets. The authors’ estimation shows that both income and wealth have significant effects on household consumption in Saudi Arabia, with a long-run marginal propensity to consume (MPC) out of income of around 0.73-0.95, and out of wealth of around 0.06. The sensitivity of consumption to income and wealth in Saudi Arabia appears to be consistent with the growth of the Saudi economy.

February 5, 2019
A Comparison of Alternative Programs for Climate Policies

A Comparison of Alternative Programs for Climate Policies

This research paper compares the relative welfare impact of different options for allocating the financing burden of climate change mitigation policies. Focusing on efficient ways to finance policies aimed at climate change mitigation, not only at direct carbon reduction, could delink the issue of carbon taxation from carbon emissions. A Pigouvian tax is the traditional way of correcting for negative externalities, or the undesirable consequences for society arising from the actions of a company or industry sector, by levying additional taxes on that activity. Pigouvian taxation corrects society’s welfare loss, however, from the viewpoint of the private sector, such taxation imposes a deadweight economic loss with respect to the original private equilibrium. As an alternative, we evaluate a methodology that could fund investments to reduce carbon dioxide (CO2) emissions, and we show that the policy we consider to be optimal from a tax standpoint – Ramsey pricing can both improve world welfare and be politically more acceptable than other pricing options. Rather than focus directly on emissions reduction by taxing energy, a Ramsey pricing solution can be designed to minimize distortions while raising funds for investment in climate change mitigation.

December 30, 2018
Potential Effects of Trade Liberalization on China’s Imports of Plastics From the GCC

Potential Effects of Trade Liberalization on China’s Imports of Plastics From the GCC

Petrochemical products, particularly plastics, contribute to a significant share of expanding and increasingly diverse trade flows between the Gulf Cooperation Council (GCC) countries and China. The petrochemical sector could benefit from a preferential bilateral trade regime between China and the GCC, but has been a bone of contention in the GCC-China Free Trade Agreement (FTA) negotiation process. This study applies a dual-stage model of import demand functions to estimate the impact of trade liberalization scenarios, within an FTA framework, on China’s imports of major plastics from the GCC and the rest of the world. It assesses the implications of these scenarios for all parties.

June 4, 2018
Estimating the Learning Curve of Solar PV Balance-of-Systems for Over 20 Countries

Estimating the Learning Curve of Solar PV Balance-of-Systems for Over 20 Countries

The capital cost of a solar photovoltaic (PV) system comprises the module and balance-of-systems (BOS). The latter refers to everything else that is needed to make the solar system functional including cables, mounts, labor, etc. While modules are priced internationally, the BOS is countryspecific. Price developments of modules, which have been thoroughly studied in literature, followed an 80 percent learning curve (LC). On the other hand, research on the LC for BOS has not been as extensive.

June 15, 2017
The Effect of Preferential Trade Agreements on Energy Trade from Chinese and Exporters’ Perspectives

The Effect of Preferential Trade Agreements on Energy Trade from Chinese and Exporters’ Perspectives

During periods of supply abundance that lead to lower prices, commodity exporters strive to secure their market share with major importing economies. This paper seeks to cast light on what drives an exporter’s share of Chinese imports of oil, gas and coal – and we find that the strategy behind achieving this goal need not rely on pricing policies alone. China has been promoting a trade agenda that seeks to strengthen economic ties in the Asia-Pacific region and has been extending negotiations aimed at developing relationships worldwide. The country is a major energy import powerhouse; its trade deals have significant impact on the international energy trade and global energy markets. We explore the role of energy in China’s preferential trade agreements (PTAs) and extend the trade gravity model to disaggregated trade flows, estimating the impact these agreements have on Chinese energy imports.

April 16, 2017
The Renewable Energy Policy Paradox

The Renewable Energy Policy Paradox

One major avenue for policymakers to meet climate targets is by decarbonizing the power sector, one component of which is raising the share of renewable energy sources (renewables) in electricity generation. However, promoting renewables in liberalized power markets creates a paradox.

September 8, 2016
Iran Sanctions: Implications for the Oil Market

Iran Sanctions: Implications for the Oil Market

United States (U.S.) Iran energy sanction waivers expired May 2, 2019. The waivers permitted eight economies (China, Greece, India, Italy, Japan, South Korea, Taiwan, and Turkey) to temporarily continue buying oil from Iran. Based on KAPSARC modeling of the political decision-making process, this Instant Insight – the first such KAPSARC publication – finds that the international community, and indeed some of the waiver economies, will at best partially comply with reinstated sanctions. China, India and Turkey are particularly unlikely to comply with U.S. sanctions and will maintain much of their current oil trade with Iran, the modeling shows. The paper also simulates the likely impact on the global oil price of ending the waivers in four scenarios which show: i) no oil price rise if the sanctions don’t work at all, ii) an oil price rise of up to 12% by Q2 2020 if Iranian oil exports drop by an average 42%, iii) a 30%-plus price increase if the sanctions are 100% effective, and iv) no significant price change if Saudi Arabia offsets reduced Iranian crude oil exports by increasing its output and exports. The analysis in the paper is based on two in-house models: the KAPSARC Toolkit for Behavioral Analysis (KTAB) and the KAPSARC Global Energy Macroeconometric Model (KGEMM).

May 9, 2019
Analyzing renewable energy and climate conditions effects on societal welfare worldwide

Analyzing renewable energy and climate conditions effects on societal welfare worldwide

The Energy Journal

2017
Residential Energy demand elasticities and weather worldwide

Residential Energy demand elasticities and weather worldwide

The Energy Journal

2017
The Economics of Solar PV Energy

The Economics of Solar PV Energy

HAEE Energy Conference

2017
Revealed and stated preferences for CO2 emissions reduction: the missing link

Revealed and stated preferences for CO2 emissions reduction: the missing link

Renewable and Sustainable Energy Reviews

2017
Renewable energy scenarios for costs reductions in the European Union

Renewable energy scenarios for costs reductions in the European Union

Renewable Energy

2016
Revealed and stated preferences for CO2 emissions reduction: the missing link

Revealed and stated preferences for CO2 emissions reduction: the missing link

Renewable and Sustainable Energy Reviews

2016
Market Power and Transmission Congestion in the Italian Electricity Market

Market Power and Transmission Congestion in the Italian Electricity Market

The Energy Journal

2016
Renewables diffusion and contagion effect in the Italian regional electricity markets: assessments and policy implications

Renewables diffusion and contagion effect in the Italian regional electricity markets: assessments and policy implications

Renewable and Sustainable Energy Reviews

2016
Socio-economic acceptability for smart grid development – A comprehensive review

Socio-economic acceptability for smart grid development – A comprehensive review

Journal of Cleaner Production

2016
Italian youngsters’ perceptions of alternative fuel vehicles: a fuzzy-set approach

Italian youngsters’ perceptions of alternative fuel vehicles: a fuzzy-set approach

Special Issue GIKA 2016, Journal of Business Research

2016
Demand Market Power and Renewables in the Italian Electricity Market

Demand Market Power and Renewables in the Italian Electricity Market

Renewable and Sustainable Energy Reviews

2016
A System of Hourly Demand In The Italian Electricity Market

A System of Hourly Demand In The Italian Electricity Market

The Energy Journal

2015
Ramsey Prices in the Italian Electricity Market, Special Issue “Energy markets and policy implications”

Ramsey Prices in the Italian Electricity Market, Special Issue “Energy markets and policy implications”

Energy Policy

2015
Marginal cost and congestion in the Italian electricity market: an indirect estimation approach

Marginal cost and congestion in the Italian electricity market: an indirect estimation approach

Energy Policy

2015
Costs assessments of European Environmental Policies, Special Issue: “OR in Energy Modeling and Management”

Costs assessments of European Environmental Policies, Special Issue: “OR in Energy Modeling and Management”

Computers & Operations Research

2015
Regional coordination of European environmental policies

Regional coordination of European environmental policies

Journal of Policy Modeling

2015
Electricity Demand in Wholesale Italian Market

Electricity Demand in Wholesale Italian Market

The Energy Journal

2014
Future Business Models for Power Markets: What can We Learn from the ‘Sharing Economy’?

Future Business Models for Power Markets: What can We Learn from the ‘Sharing Economy’?

Oxford Energy Forum

2014

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