nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒11‒05
six papers chosen by
Roger Fouquet
Imperial College, UK

  1. Long-term Framework for Electricity Distribution Access Charges By Tooraj Jamasb; Karsten Neuhoff; David Newbery; Michael Pollitt
  2. Competition and contracts in the Nordic Residential Electricity Markets By Stephen Littlechild
  3. Dams By Esther Duflo; Rohini Pande
  4. A Chinese Sky Trust? Distributional Impacts of Carbon charges and Revenue Recycling in China By Mark Brenner; Matthew Riddle; James K. Boyce
  5. Compensation for Environmental Services and Rural Communities: Lessons from the Americas By Herman Rosa; Deborah Barry; Susan Kandel; Leopoldo Dimas
  6. Development, Environmental Policy, and Mass Media: Theory and Evidence By Suphachol Suphachalasai

  1. By: Tooraj Jamasb; Karsten Neuhoff; David Newbery; Michael Pollitt
    Abstract: In order to achieve overall economic efficiency, incentive regulation of electricity distribution utilities must address two important and inter-related issues. First, the utilities’ allowed revenues need to be set at correct levels. Second, the access charging mechanism by which the utilities recover the allowed revenues must give the correct economic signals to generation and load connected to the network. This paper is concerned with the latter aspect of regulation. The paper discusses the main economic principles that should form the basis on which a distribution access charging model is developed. The charging model should have a number of attributes: be calibrated to each existing network; contain an asset register; be able to determine assets needed to meet new demand; find least-cost system expansion; compute network losses and handle ancillary services; estimate incremental operating and maintenance costs; be available to users; and be simple enough for external users to understand.
    Keywords: Electricity, network regulation, access charges, distributed generation
    JEL: L43 L51 L94
    Date: 2005–11
  2. By: Stephen Littlechild
    Abstract: The main Nordic residential electricity markets (Norway, Sweden and Finland) effectively opened to retail competition around 1998. They have not been subject to regulatory controls on prices or other contract terms. Between 11 and 29 per cent of residential customers have switched suppliers and between a fifth and a half of all residential customers have chosen alternative contractual terms of supply. These alternatives include fixed price contracts ranging from 3 months to five years duration, as well as spot-price related terms, instead of the standard variable tariffs. The use of these alternatives is increasing over time, and there is considerable product innovation. This paper surveys these developments and illustrates with case studies of significant suppliers in each Nordic market. The market is thus ascertaining and bringing about the outcomes that customers prefer. Without retail competition, it is not clear how regulation will replicate this aspect of the market process.
    Keywords: retail competition, electricity, regulation, Nordic countries
    JEL: L94 L L51
    Date: 2005–11
  3. By: Esther Duflo; Rohini Pande
    Abstract: The construction of large dams is one of the most costly and controversial forms of public infrastructure investment in developing countries, but little is known about their impact. This paper studies the productivity and distributional effects of large dams in India. To account for endogenous placement of dams we use GIS data and the fact that river gradient affects a district's suitability for dams to provide instrumental variable estimates of their impact. We find that, in a district where a dam is built, agricultural production does not increase but poverty does. In contrast, districts located downstream from the dam benefit from increased irrigation and see agricultural production increase and poverty fall. Overall, our estimates suggest that large dam construction in India is a marginally cost-effective investment with significant distributional implications, and has, in aggregate, increased poverty.
    JEL: O21 O12 H43 H23
    Date: 2005–10
  4. By: Mark Brenner; Matthew Riddle; James K. Boyce
    Abstract: The introduction of carbon charges on the use of fossil fuels in China would have a progressive impact on income distribution. This outcome, which contrasts to the regressive distributional impact found in most studies of carbon charges in industrialized countries, is driven primarily by differences between urban and rural expenditure patterns. If carbon revenues were recycled on an equal per capita basis via a ‘sky trust,’ the progressive impact would be further enhanced: low-income (mainly rural) households would receive more in sky-trust dividends than they pay in carbon charges, and high-income (mainly urban) households would pay more than they receive in dividends. Thus a Chinese sky trust would contribute to both lower fossil fuel consumption and greater income equality.
    Date: 2005
  5. By: Herman Rosa; Deborah Barry; Susan Kandel; Leopoldo Dimas
    Abstract: In principle, payments for environmental services – such as watershed management, biodiversity conservation, and carbon sequestration – can advance the goals of both environmental protection and poverty reduction. A review of recent initiatives in the Americas suggests, however, that this desirable combination is not automatic. If payments for environmental services (PES) schemes are to be an effective vehicle for strengthening livelihoods in poor rural communities, they must be designed with that objective firmly in mind. This paper draws key lessons from diverse experiences in Costa Rica, Mexico, Brazil, El Salvador, and New York.
    Date: 2004
  6. By: Suphachol Suphachalasai (Department of Land Economy, University of Cambridge)
    Abstract: This paper investigates the relationship between development, environmental policy determination, and mass media. It stresses the role of mass media as a channel through which the level of development influence environmental policy making. Special interests appear to wield considerable influence over environmental policies, and create policy distortion. We develop a model with two political parties competing in election and policy influence by special interests to study environmental policy determination. Mass media acts as information provider to voters in the election. It informs voters regarding environmental policy platforms announced by the political parties. The theory suggests that, as development progresses, environmental awareness rises and so does the demand for environmental news. This induces profit maximizing media form to report more environmental news, and in turn keeps voters better informed regarding the policy platforms of the parties. We find that, in equilibrium, a more stringent environmental policy is implemented when the voters are better informed through mass media. The model also demonstrates the way in which process of development brings about the stringency of environmental policy at a level closer to the social optimum when special interests present. Empirical evidence across countries supports our fndings.
    Keywords: Environmental Policy, Mass Media, Special Interests, Electoral Competition
    JEL: D72 D8 H23
    Date: 2005–02

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