Journal of Forest Economics > Vol 28 > Issue 1

Do nonrenewable-energy prices affect renewable-energy volatility? The case of wood pellets

Hui Xian, Wells Fargo, USA, hui.xian@wellsfargo.com , Gregory Colson, Department of Agricultural and Applied Economics, University of Georgia, USA, gcolson@uga.edu , Berna Karali, Department of Agricultural and Applied Economics, University of Georgia, USA, bkarali@uga.edu , Michael Wetzstein, Department of Agricultural Economics, Purdue University, USA, mwetzste@purdue.edu
 
Suggested Citation
Hui Xian, Gregory Colson, Berna Karali and Michael Wetzstein (2017), "Do nonrenewable-energy prices affect renewable-energy volatility? The case of wood pellets", Journal of Forest Economics: Vol. 28: No. 1, pp 42-48. http://dx.doi.org/10.1016/j.jfe.2017.05.004

Publication Date: 0/8/2017
© 0 2017 Hui Xian, Gregory Colson, Berna Karali, Michael Wetzstein
 
Subjects
 
Keywords
JEL Codes:Q21Q23Q31Q40
GARCHNonrenewable energyRenewable energyWood pellets
 

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In this article:
Introduction 
Literature 
The U.S. wood pellet export market 
Methodology 
Data and preliminary analysis 
Results and discussion 
Conclusions 

Abstract

Over the past decade, the U.S. Southeast has experienced a rapid expansion of wood-pellet biomass production for European export. This renewable wood-pellet supply requires nonrenewable-energy inputs in its manufacturing and logistics, which suggests possible price-volatility spillovers between renewable and nonrenewable markets. A BEKK-MGARCH model is employed for investigating these possible price-volatility spillovers. Overall, results suggest a limited negative effect of past volatile nonrenewable-energy prices influencing current wood-pellet price volatility. Specifically, high volatilities in nonrenewable-energy prices do not affect the volatility of wood-pellet prices. Thus, any stability concerns in terms of nonrenewable-input prices affecting the wood-pellet market are not warranted.

DOI:10.1016/j.jfe.2017.05.004