A discussion on electricity prices, or the two sides of the coin

We examine how different pricing frameworks deal with non-convex features typical of day-ahead energy prices when the power system is hydro-dominated, like in Brazil. For the system operator, requirements of minimum generation translate into feasibility issues that are fundamental to carry the generated power through the network. When utilities are remunerated at a price depending on Lagrange multipliers computed for a system with fixed commitment, the corresponding values sometimes fail to capture a signal that recovers costs. Keeping in mind recent discussions for the Brazilian power system, we analyse mechanisms that provide a compromise between the needs of the generators and those of the system operator. After characterizing when a price supports a generation plan, we explain in simple terms dual prices and related concepts, such as minimal uplifts and bi-dual problems. We present a new pricing mechanism that guarantees cost recovery to all agents, without over-compensations. Instead of using Lagrange multipliers, the price is defined as the solution to an optimization problem. The behaviour of the new rule is compared to two other proposals in the literature on illustrative examples, including a small, yet representative, hydro-thermal system. This article is part of the theme issue ‘The mathematics of energy systems’.

Japanese Beef Tariffs: Beef Quality, Farm Programs, and Producer Compensation

Beef is a highly protected commodity in Japan and the number of studies on the impact of beef import tariff reduction has increased in light of the controversy over the Trans-Pacific Partnership Agreement (TPPA), in which the gains from freer trade in beef was a major point of discussion. We estimate that an 11% tariff reduction for Japanese imports of both Australian and U.S. beef can generate a net welfare gain to Japan of between US$92 million and US$915 million. These results are not overly sensitive to whether beef is treated as homogeneous or heterogeneous. A more significant determinant of welfare gains is the extent to which farm policy would be decoupled along with tariff reductions. Under a decoupled farm program, producer welfare can remain unchanged while the net gain from freer trade is identical to that of complete removal of price supports with no compensation to producers. Therefore, negotiators for U.S. and Australian beef interests should lobby for both lowered tariffs and a decoupling of domestic farm policy within the importing country. This seems to have been the case as Japan was willing to move toward a more decoupled farm program under the TPPA.

China's food demand will undergo structural change

Subject The outlook for China's agricultural sector in 2017. Significance Last year saw the removal of a price floor for corn and the launch of the 13th Five-Year Plan, which will guide agricultural policy to 2020. With China’s fertility rate among the lowest in the world, population growth is no longer a significant determinant of food demand. However, demographics still have a role to play through the impact of the accelerated ageing of the population on diet. Impacts Between now and the mid-2030s, meat consumption (including fish) is likely to rise more than 60%. Dairy products will be the fastest-growing sector, with per capita milk consumption rising something like 150% by 2030. There is significant scope to raise corn yields through technology and market mechanisms. Price supports for rice and wheat are likely to be abandoned.

The Last Farm Bill?

“Farm bill” is a colloquial term for omnibus legislation that authorizes various government programs related to agriculture, food, and rural areas. Some of these programs have their roots in New Deal legislation. Others were initially authorized after the New Deal and subsequently included in farm bills. Some debate exists about exactly which omnibus legislation was the precursor of modern-day farm bills. However, since at least 1973, farm bills have included titles related to farm programs, trade, rural development, farm credit, conservation, agricultural research, food and nutrition programs, and marketing. Beginning in 2008, crop insurance-authorizing language was also included in the farm bill.Farm bills generally have a life of approximately five years. In the case of farm support programs (typically authorized in Title 1), the farm billtemporarily amends permanent legislation. When the farm bill expires, theseprograms revert to permanent legislation (from the 1930s and 1940s) unless a new farm bill is adopted that again temporarily amends permanent legislation. The permanent legislation would put in place price supports, at extremely high levels, for many agricultural commodities, distorting markets and greatly increasing federal costs. The specter of reverting to permanent legislation has, through the years, been used by Congress to ensure that future Congresses will replace expiring farm bills with new legislation.

ECONOMICS OF LAND USE DYNAMICS IN TWO MEXICAN COFFEE AGROFORESTS: IMPLICATIONS FOR THE ENVIRONMENT AND INEQUALITY

<span lang="EN-US">L</span><span lang="EN-US">and use and land cover change have wide ranging implications for the environment and human welfare. This study analyzes both landscape and parcel level data to assess the causes and extent of deforestation in two Mexican coffee agroforests, as well as the likely environmental and welfare effects of policies designed to reduce tree cover loss. We find that shade coffee growers in Atzalan exhibit a relatively high elasticity of substitution between agricultural outputs: in response to low coffee prices, they have predominantly cleared their agroforestry parcels for production of tree crops. Shade coffee growers in Zozocolco exhibit a relatively low elasticity of substitution: agroforests were mostly either augmented with allspice trees or abandoned. Our policy simulations show that price supports for shade coffee would have larger effects on canopy preservation and welfare in Atzalan, even though Zozocolco is more marginalized.</span>

Tourism Market Segmentation Based on Price Sensitivity

This article builds on the double role of the effect of prices on the choice of tourism activities: not only is it the sole component of the destination marketing mix that represents revenue but also a determinant factor in tourist choice. On this account, identifying patterns of tourists with different degrees of sensitivities to prices would help destinations design an appropriate bundle of activities and have a clear definition of the segment they should try to attract. Accordingly, the objective of this article is to identify tourist segments from individual price sensitivities to activities. The results show—although price has a dissuasive influence on the choice of activities—a differentiated effect (as this dissuasiveness is not general for all individuals); this heterogeneous responsiveness to price supports its use as a segmentation criterion. In the empirical application, four segments are found with significantly different price sensitivities.