Acknowledgments 33

In document UNIVERSITA’ DEGLI STUDI DI PARMA (Page 33-42)

The aim of the following discussions on transitions is to show the relevance of the dynamic perspective outlined above, with shifts in cost emphasis over time, from purchasing price to time costs to environmental costs. The data used for the analyses is mainly data on the purchasing price of different energy carriers. A full analysis would also require data on average costs for equipment, so this analysis is not a stringent one. It still provides a check of my conceptual model.

The underlying question in all the analyses is whether there is a need to include time costs for handling and external costs to explain why the transitions took place.

pressure from international negotiations. Free riding on the political wave of internalizing costs of global warming is thus a tempting option for many nations, which delays the internalizing process.

The growing worldwide environmental awareness over recent decades, demonstrated in national environmental legislation in both poor and rich countries and in growing membership figures of environmental NGOs (Non-Governmental Organizations), is likely to affect the internalization of environmental costs. It is thus too simplistic to regard the internalization of external costs as a pure income effect, as something that will come automatically with higher income. Income level, level of democracy and environmental awareness are factors, which all play a role in political struggles at various levels and decide when and to what extent environmental costs are internalized. A ‘high’ level of income is a necessary, but not sufficient, condition for the internalization of environmental costs.

The two factors used here as dynamic forces in a simple conceptual model to explain energy carrier transitions, technology and income levels, are closely interrelated. For one thing, as technology has opened up new applications for energy carriers, the amount of energy at man’s disposal has risen. This has led to increased production per capita, which has given higher income levels. Another example of interconnections is that there is a correlation between income levels and expenditure on education and research, which spur the technical development. In my analysis the income effect is regarded as crucial for the changing emphasis on the three kinds of costs, while the technical changes mainly influences the relative purchasing price of energy carriers.

Transitions

The aim of the following discussions on transitions is to show the relevance of the dynamic perspective outlined above, with shifts in cost emphasis over time, from purchasing price to time costs to environmental costs. The data used for the analyses is mainly data on the purchasing price of different energy carriers. A full analysis would also require data on average costs for equipment, so this analysis is not a stringent one. It still provides a check of my conceptual model.

The underlying question in all the analyses is whether there is a need to include time costs for handling and external costs to explain why the transitions took place.

Coal for firewood substitution

Coal gradually substituted firewood. The main advantage of coal compared to firewood for consumers is its high energy density. Because coal has less dead weight than firewood, there are comparatively low costs involved in dealing with it. Consumers differ in their evaluation of the energy density. All consumers will save time if they use an energy carrier with high energy density, but for transportation there are extra gains in choosing an energy carrier of high density, in that it saves space and fuel, which means that there is no out-crowding of other goods and/or passengers. In a low-income country like Sweden at the beginning of the 19th century, wage costs were not very high and handling costs therefore not so important compared to the purchasing price of fuels. Transportation was therefore the only consumer category that was willing to pay a quality premium for coal’s energy density. Coal had a clear quality advantage in its high energy density, but this does not mean that coal in all respects was superior to firewood. Some consumers, especially those for which the time costs mattered little, like wealthy people with servants who took care of the heating, preferred the cosy wood fires and were reluctant to use coal. For most consumers the purchasing price of coal compared to firewood would have been crucial for their choice.

The estimates of appendix A suggest that about half of the coal was used for room heating in 1850 and in 1870. Room heating is a usage where the high energy density of coal does not matter as much as in transportation. Was the purchasing price of coal compared to firewood low enough to make room heating by coal economical around the mid-1800s or did consumers pay some quality premium for the low costs for handling, or were they rather persuaded to use the less cosy coal by a lower relative price? Figure 5.8 depicts the relative price of coal compared to firewood 1800-1960.

There was a substantial decline of the coal price compared to the firewood price between 1820 and 1860. The price of firewood increased substantially compared to coal during the 19th century, because of increased demand from a growing population and a rather inelastic supply due to decreasing stocks and long production periods. There was at the same time a relative decline in the coal price. Punctiform energy resources like coal have fewer points of departure and are thereby easier to transport. The invention and diffusion of railways created excellent opportunities for connecting the mines with consumption centers, thereby lowering the transportation costs for coal. Firewood, by its area dispersion, could not benefit to the same extent from the railways. Thus, railways and coal contributed to urbanization and made coal cheaper in relation to firewood.

Coal for firewood substitution

Coal gradually substituted firewood. The main advantage of coal compared to firewood for consumers is its high energy density. Because coal has less dead weight than firewood, there are comparatively low costs involved in dealing with it. Consumers differ in their evaluation of the energy density. All consumers will save time if they use an energy carrier with high energy density, but for transportation there are extra gains in choosing an energy carrier of high density, in that it saves space and fuel, which means that there is no out-crowding of other goods and/or passengers. In a low-income country like Sweden at the beginning of the 19th century, wage costs were not very high and handling costs therefore not so important compared to the purchasing price of fuels. Transportation was therefore the only consumer category that was willing to pay a quality premium for coal’s energy density. Coal had a clear quality advantage in its high energy density, but this does not mean that coal in all respects was superior to firewood. Some consumers, especially those for which the time costs mattered little, like wealthy people with servants who took care of the heating, preferred the cosy wood fires and were reluctant to use coal. For most consumers the purchasing price of coal compared to firewood would have been crucial for their choice.

The estimates of appendix A suggest that about half of the coal was used for room heating in 1850 and in 1870. Room heating is a usage where the high energy density of coal does not matter as much as in transportation. Was the purchasing price of coal compared to firewood low enough to make room heating by coal economical around the mid-1800s or did consumers pay some quality premium for the low costs for handling, or were they rather persuaded to use the less cosy coal by a lower relative price? Figure 5.8 depicts the relative price of coal compared to firewood 1800-1960.

There was a substantial decline of the coal price compared to the firewood price between 1820 and 1860. The price of firewood increased substantially compared to coal during the 19th century, because of increased demand from a growing population and a rather inelastic supply due to decreasing stocks and long production periods. There was at the same time a relative decline in the coal price. Punctiform energy resources like coal have fewer points of departure and are thereby easier to transport. The invention and diffusion of railways created excellent opportunities for connecting the mines with consumption centers, thereby lowering the transportation costs for coal. Firewood, by its area dispersion, could not benefit to the same extent from the railways. Thus, railways and coal contributed to urbanization and made coal cheaper in relation to firewood.

Figure 5.8 Coal price in relation to firewood price 1800-1960.

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

1800 1820 1840 1860 1880 1900 1920 1940 1960

coal-price/fw-price coal-price/altfw-price

Methods and sources: The method has been to link together different price-series, with level adjustments, to create long coherent price series for firewood and for coal. A first aim has been to get as close to consumer prices as possible, i. e. retail prices have been used when available and they set the price level, i. e. other price series, like import prices, have been level adjusted. A second aim has been to mix prices to reflect consumption patterns. For firewood a mix of 50% birch and 50% pine has been used, because information of relative shares of various fuelwood is not available. For coal annual relative shares of coal and coke have been estimated from the import statistics and from the industrial statistics from 1890 onwards. From 1950 “stybb”, or fragmented coal, is included as a third category, with somewhat lower quality and price. The prices for firewood and coal are expressed in relation to energy units. This is easier for coal than it is for firewood, because variation in energy content is larger for firewood. I have used two different figures of average energy content of mixed fuelwood. In my fw-price series I use the figure 6.9 GJ/m3(s), which is taken from Skogsstatistisk årsbok (according to which one solid cubic meter gives 1.92 MWh, or 6.9 GJ). In my second alternative (altfw-price) I use the figure 8.97 GJ/m3 (solid) for mixed wood taken from “Föreningen för kraft och bränsleekonomi:

Koks, kol eller ved för centralvärmeanläggningar, Helsingfors, 1924. The figures for coal and coke have in both cases been taken from the second source, stating that one ton of coal contains 29 GJ and one ton of coke contains 32 GJ.31 The firewood price series are from Jörberg, L. (1972): “A history of prices in Sweden 1732-1914”, Lund, as far as they extend and they are then linked to Ljungberg’s (1990) series. Jörberg’s series set the level since they are retail prices.32 The coal price series are from Ljungberg and linked backwards in time to Schön’s elaboration of Hansen’s price index for coal.33

31 The figures for coal are also subject to some uncertainty, for instance recent energy statistics by SCB state the energy of one ton of coal to be 27 GJ and one ton of coke to 28 GJ.

32 Birch: 1800-1869 table on p 691-692 in Jörberg’s price history. The national values are non weighted averages between regions. For 1870-1875 I have calculated average prices for 10 regions from the table on p 496. From 1876 only the prices for two expensive regions exist. I have therefore corrected the price level according to the relation in 1869 for the average of those two expensive regions and the average for the whole country, (1.4) Jörberg’s birch prices are used as far as they go, i.

e. until 1892 and then they are linked to Ljungberg’s series. Ljungberg in his birch series uses purchasing prices for the State Railways (SJ)1904-1919, for 1890-1903 Ljungberg extrapolates the series with the help of market scales for Stockholm (1904=100), for 1920-1963 Ljungberg uses the primary material for the wholesale price index from SCB’s archive, 1964-1980: extrapolating of the wholesale price(1964=100) with help from quantity and value figures for fuel-wood (Kastved, långved

Figure 5.8 Coal price in relation to firewood price 1800-1960.

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

1800 1820 1840 1860 1880 1900 1920 1940 1960

coal-price/fw-price coal-price/altfw-price

Methods and sources: The method has been to link together different price-series, with level adjustments, to create long coherent price series for firewood and for coal. A first aim has been to get as close to consumer prices as possible, i. e. retail prices have been used when available and they set the price level, i. e. other price series, like import prices, have been level adjusted. A second aim has been to mix prices to reflect consumption patterns. For firewood a mix of 50% birch and 50% pine has been used, because information of relative shares of various fuelwood is not available. For coal annual relative shares of coal and coke have been estimated from the import statistics and from the industrial statistics from 1890 onwards. From 1950 “stybb”, or fragmented coal, is included as a third category, with somewhat lower quality and price. The prices for firewood and coal are expressed in relation to energy units. This is easier for coal than it is for firewood, because variation in energy content is larger for firewood. I have used two different figures of average energy content of mixed fuelwood. In my fw-price series I use the figure 6.9 GJ/m3(s), which is taken from Skogsstatistisk årsbok (according to which one solid cubic meter gives 1.92 MWh, or 6.9 GJ). In my second alternative (altfw-price) I use the figure 8.97 GJ/m3 (solid) for mixed wood taken from “Föreningen för kraft och bränsleekonomi:

Koks, kol eller ved för centralvärmeanläggningar, Helsingfors, 1924. The figures for coal and coke have in both cases been taken from the second source, stating that one ton of coal contains 29 GJ and one ton of coke contains 32 GJ.31 The firewood price series are from Jörberg, L. (1972): “A history of prices in Sweden 1732-1914”, Lund, as far as they extend and they are then linked to Ljungberg’s (1990) series. Jörberg’s series set the level since they are retail prices.32 The coal price series are from Ljungberg and linked backwards in time to Schön’s elaboration of Hansen’s price index for coal.33

31 The figures for coal are also subject to some uncertainty, for instance recent energy statistics by SCB state the energy of one ton of coal to be 27 GJ and one ton of coke to 28 GJ.

32 Birch: 1800-1869 table on p 691-692 in Jörberg’s price history. The national values are non weighted averages between regions. For 1870-1875 I have calculated average prices for 10 regions from the table on p 496. From 1876 only the prices for two expensive regions exist. I have therefore corrected the price level according to the relation in 1869 for the average of those two expensive regions and the average for the whole country, (1.4) Jörberg’s birch prices are used as far as they go, i.

e. until 1892 and then they are linked to Ljungberg’s series. Ljungberg in his birch series uses purchasing prices for the State Railways (SJ)1904-1919, for 1890-1903 Ljungberg extrapolates the series with the help of market scales for Stockholm (1904=100), for 1920-1963 Ljungberg uses the primary material for the wholesale price index from SCB’s archive, 1964-1980: extrapolating of the wholesale price(1964=100) with help from quantity and value figures for fuel-wood (Kastved, långved

In 1820 heating by coal was on average 150-300% more expensive than using firewood, which means that coal heating should have been negligible at the time. People would only be willing to pay such a quality premium for transportation. But the price improved rapidly for coal. In 1850 firewood prices and coal prices were fairly equal on average and in some regions coal was cheaper. In wood scarce regions like Stockholm, Uppsala, Malmöhus and Göteborg & Bohuslän, with access to import ports for coal and consequently low domestic transportation costs, coal had a clear price advantage in 1850. This relative price comparison supports my results in Appendix A that a substantial part of the coal was used for room heating in 1850 and 1870.

When coal consumption increased rapidly after the 1850s it seems like people no longer had to pay a quality premium for coal. Prices of coal were generally lower than prices of firewood from then onwards, according to figure 5.8.

Some of the environmental costs of coal consumption were experienced in Swedish cities, where the dust was annoying, but not to the same degree as it was for example in England, where household coal combustion was much larger and caused severe breathing problems.34 The fact that carbon-dioxide emissions influence the climate was not yet known, although it was to be argued as early as in 1896, but it was then considered a social advantage for a cold country like Sweden instead of a cost.35 If we allow ourselves an anachronistic exercise and impose the knowledge and values of today on the past by a fictive tax on CO2

emissions what would relative prices then have been? Several recent Swedish estimates use a social cost for CO2 emissions of 0.1 SEK/kg.36 Deflated with the general GDP deflator this cost corresponds to a cost of 1.6 SEK/ton in 1850.

Imposing this fictive tax on the coal price in 1850 would have led to a price

och dylik brännved) in SOS Industry. Pine: Jörberg’s national series as far as it goes, i e. until 1914, linked to Ljungberg’s series by the average values for 1912-1914. Ljungberg’s pine series is constructed in the same manner as the birch series.

33 Retail price for coal is taken from Ljungberg, series P9157, for the period 1890-1918, linked to the wholesale prices (P9159) for the period 1918-1980. The retail price is naturally higher than the wholesale price, but variations in the difference are rather big, so the linking has been done according to the average relative price difference for 1890-1919, when retail prices were 29% higher than wholesale prices. For the period 1800-1890 I have used Schön’s unpublished price index for coal, which he has based on coal prices in Hansen, S-A. (1974): “Ökonomisk växt i Danmark, del 2, Köpenhamn, and exchange rates between Sweden and Denmark for the period 1815-1890, and in the period 1800-1815 on price development for similar goods. The retail price for coke is taken from Ljungberg (series P9166) for the period 1920-1964. For the period 1890-1919 wholesale prices (series P9166) have been used, but have been level adjusted, according to the average price differential between retail coke and wholesale coke in 1920-1964, when retail prices were 35% higher.

34 Clapp, B. W. (1994), op.cite, p 14-23.

35 Arrhenius, S.(1896), op. cite, p 127.

36 Jackson & Stymne (1996), op. cite, Lindmark, M.(1998), op.cite, p 151.

In 1820 heating by coal was on average 150-300% more expensive than using firewood, which means that coal heating should have been negligible at the time. People would only be willing to pay such a quality premium for transportation. But the price improved rapidly for coal. In 1850 firewood prices and coal prices were fairly equal on average and in some regions coal was cheaper. In wood scarce regions like Stockholm, Uppsala, Malmöhus and Göteborg & Bohuslän, with access to import ports for coal and consequently low domestic transportation costs, coal had a clear price advantage in 1850. This relative price comparison supports my results in Appendix A that a substantial part of the coal was used for room heating in 1850 and 1870.

When coal consumption increased rapidly after the 1850s it seems like people no longer had to pay a quality premium for coal. Prices of coal were generally lower than prices of firewood from then onwards, according to figure 5.8.

Some of the environmental costs of coal consumption were experienced in Swedish cities, where the dust was annoying, but not to the same degree as it was for example in England, where household coal combustion was much larger and caused severe breathing problems.34 The fact that carbon-dioxide emissions influence the climate was not yet known, although it was to be argued as early as in 1896, but it was then considered a social advantage for a cold country like Sweden instead of a cost.35 If we allow ourselves an anachronistic exercise and impose the knowledge and values of today on the past by a fictive tax on CO2

emissions what would relative prices then have been? Several recent Swedish estimates use a social cost for CO2 emissions of 0.1 SEK/kg.36 Deflated with the general GDP deflator this cost corresponds to a cost of 1.6 SEK/ton in 1850.

Imposing this fictive tax on the coal price in 1850 would have led to a price

och dylik brännved) in SOS Industry. Pine: Jörberg’s national series as far as it goes, i e. until 1914, linked to Ljungberg’s series by the average values for 1912-1914. Ljungberg’s pine series is constructed in the same manner as the birch series.

33 Retail price for coal is taken from Ljungberg, series P9157, for the period 1890-1918, linked to the wholesale prices (P9159) for the period 1918-1980. The retail price is naturally higher than the wholesale price, but variations in the difference are rather big, so the linking has been done according to the average relative price difference for 1890-1919, when retail prices were 29% higher than wholesale prices. For the period 1800-1890 I have used Schön’s unpublished price index for coal, which he has based on coal prices in Hansen, S-A. (1974): “Ökonomisk växt i Danmark, del 2, Köpenhamn, and exchange rates between Sweden and Denmark for the period 1815-1890, and in the period 1800-1815 on price development for similar goods. The retail price for coke is taken from Ljungberg (series P9166) for the period 1920-1964. For the period 1890-1919 wholesale prices (series P9166) have been used, but have been level adjusted, according to the average price differential between retail coke and wholesale coke in 1920-1964, when retail prices were 35% higher.

34 Clapp, B. W. (1994), op.cite, p 14-23.

35 Arrhenius, S.(1896), op. cite, p 127.

36 Jackson & Stymne (1996), op. cite, Lindmark, M.(1998), op.cite, p 151.

In document UNIVERSITA’ DEGLI STUDI DI PARMA (Page 33-42)

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