nep-reg New Economics Papers
on Regulation
Issue of 2011‒10‒01
twenty-one papers chosen by
Oleg Eismont
Russian Academy of Sciences

  1. Incentive Regulation and Network Innovations By Dierk Bauknecht
  2. Standards and Incentives in Safety Regulation By Reinshagen, Felix
  3. Political Endowments and Electricity Market Regulation in Turkey: An Institutional Analysis By S. Mustafa Durakoglu
  4. Law & Economics Perspectives on Electricity Regulation By Adrien de Hauteclocque; Yannick Perez
  5. What is the digital internal market and where the European Union should intervene? By Philippe Defraigne; Alexandre de Streel
  6. Access Regulation, Entry, and Investment in Telecommunications By Fabio Manenti; Antonio Scialà
  7. Quality and Environmental Regulation: Verifying Compliance along the Supply Chain By Dionisia Tzavara; Adrienne Héritier
  8. New Foundations of Transnational Private Regulation By Fabrizio Cafaggi
  9. Information provision by regulated public transport companies By De Borger B.; Fosgerau M.
  10. A Brief History of Regulations Regarding Financial Markets in the United States: 1789 to 2009 By Alejandro Komai; Gary Richardson
  11. The interaction between emissions trading and energy and competition policies By Francesco Gullì
  12. Merchant interconnector projects by generators in the EU: Effects on profitability and allocation of capacity By Silvester van Koten
  13. Get rid of banks and build up a modern financial world By Lenz, Rainer
  14. Has Deregulation Increased Investment in Infrastructure?: Firm-Level Evidence from OECD Countries By Sónia Araújo
  15. The Role of Abatement Technologies for Allocating Free Allowances By Christin, Clémence; Nicolaï, Jean-Philippe; Pouyet, Jerome
  16. An American Model for the EU Gas Market? By Sergio Ascari
  17. Energy Liberalization in Antitrust Straitjacket: A Plant Too Far? By Malgorzata Sadowska
  18. Emissions Trading and Social Justice By Farber, Daniel A
  19. Capacity to Compete: Recent Trends in Access Regimes in Electricity and Natural Gas Networks By Adrien de Hauteclocque; Kim Talus
  20. Facilitating Low-Carbon Investments: Lessons from Natural Gas By Anne Neumann; Karsten Neuhoff
  21. A New Institutional Perspective on Environmental Issues By Claude Ménard

  1. By: Dierk Bauknecht
    Abstract: Smart Grids require innovations in the electricity networks, mainly on the level of the distributed system operator (DSO). A main objective is to increase the share of distributed generation (DG) connected to that network level, but also to enable load management on the demand side. This paper analyses network innovations in the context of the regulatory framework, namely incentive regulation. It is structured as follows: The first section examines how cost-based and price-based regulatory schemes influence RD&D by regulated companies. This is followed by a discussion of various regulatory instruments to stimulate innovation. The third section provides a more general discussion of the pros and cons of promoting network innovations via network regulation.
    Keywords: incentive regulation; price-based regulation; cost-based regulation; Rd&D; network innovations
    Date: 2011–02–22
  2. By: Reinshagen, Felix
    Date: 2011–06–01
  3. By: S. Mustafa Durakoglu
    Abstract: Turkey has been going through a liberalization process in its electricity market over the last decade. So far, the regulatory content of the market reforms has been in the center of attention in the literature, to the negligence of regulatory governance. However, recent studies, which applied the theoretical insights of new institutional economics to utilities regulation, have demonstrated that political endowments of the country draw the boundaries to which extent such regulatory content can be effectively implemented. In line with these studies, this paper adopts an institutional approach and attempts to identify the political endowments of Turkey in order to further analyze whether the market reforms succeeded in bringing about sufficient checks to cure the institutional problems. In other words, the paper takes a picture of the overall regulatory arena. The results show that the current regulatory structure, especially government-regulator relations, fails to meet good regulatory governance criteria. The paper also provides some policy suggestions.
    Keywords: electricity regulation; regulatory governance; institutions
    Date: 2011–02–25
  4. By: Adrien de Hauteclocque; Yannick Perez
    Abstract: This paper first reviews some of the main contributions of the new institutional economics to the analysis of the process of competitive transformation of network industries. It shows that neoinstitutional analysis is complementary to the microeconomics of rational pricing, since it accounts for the decisive role of an institutional framework adapted to new transactions. It emphasizes the importance of the political reform process, which draws on the conditions of attractiveness and feasibility to define an initial reorganization of property rights in these industries. The paper then analyzes in this light some of the main challenges ahead for electricity regulation: the question of investment in generation capacities and the link to long term contracts, the regulation of wholesale market power, the support to Renewable Energy Sources for Electricity (RES-E) and the design of new regulatory authorities.
    Keywords: Electricity Markets; New Institutional Economics; Law & Economics
    Date: 2011–03–31
  5. By: Philippe Defraigne; Alexandre de Streel
    Abstract: This paper analyses the digital internal market and when EU intervention is needed to achieve this internal market. It sets legal and economic criteria to determine the appropriate scope of the EU intervention. It applies these criteria to several case studies and concludes that sometimes the EU intervention is not justified (choice of regulatory remedies in many national markets, regulation of mobile termination rate, price control of Next Generation Access networks), whereas in other cases EU intervention is justified (entry regulation, international roaming, spectrum). The paper calls for a more open debate of the concept and the means to achieve the digital internal market. It also submits that EU intervention should focus on the areas where its benefits are the highest (in particular given the possibilities of economies of scale provided by the technology or the cross-country externalities), and where its costs are the lowest (in particular given the heterogeneity of national preferences or the need for regulatory experimentation and competition). Therefore, EU intervention is more relevant for the content part of digital regulation (such as copyright, privacy, electronic commerce, dispute resolution) than for the infrastructure part (i.e. the electronic communications networks and services). In particular, this paper calls the Commission to use with extreme caution its new power on regulatory remedies, especially in the context of the deployment of NGA, given the uncertainty on the best form of regulation.
    Keywords: digital internal market; level of intervention; regulatory remedies
    Date: 2011–06–20
  6. By: Fabio Manenti; Antonio Scialà
    Abstract: This paper presents a model of competition between an incumbent and an entrant firm in telecommunications. The entrant has the option to enter the market with or without having preliminary invested in its own infrastructure; in case of facility based entry, the entrant has also the option to invest in the provision of enhanced services. In case of resale based entry the entrant needs access to the incumbent network. Unlike the rival, the incumbent has always the option to upgrade the existing network to provide advanced services. We study the impact of access regulation on the type of entry and on firms' investments. Without regulation, we find that the incumbent sets the access charge to prevent resale based entry and this overstimulates rival's investment that may turn out to be socially inefficient. Access regulation may discourage welfare enhancing investments, thus also inducing a socially inefficient outcome. We extend the model to account for negotiated interconnection in case of facilities based entry.
    Keywords: telecommunications; ladder of investment; access regulation; interconnection
    Date: 2011–06–24
  7. By: Dionisia Tzavara; Adrienne Héritier
    Abstract: Among the factors providing incentives to monitor the behaviour of input suppliers are the regulatory requirements to which downstream firms are subject. We develop a formal economic model to examine the relationship between the strictness of the regulatory environment and downstream firms’ incentives to act as inspectors of their sub-contractors. We consider the interaction between a downstream producer and an upstream input supplier. The downstream chooses the probability with which to monitor the upstream’s compliance and the upstream chooses a compliance level which determines compliance of the end product with quality or environmental regulation. We find that the strictness of regulation affects the downstream’s monitoring strategy in combination with the level of quality or environmental standards. If the standards are sufficiently low then the strictness of regulation increases incentives to monitor the upstream. Contrary, if the standards are sufficiently high then the pressure on the downstream to monitor the upstream is relaxed and the strictness of regulation decreases incentives to monitor. We argue that the strictness of regulation should not be treated in isolation as a factor determining the choice of downstream firms to monitor their input suppliers.
    Keywords: compliance; monitoring; supply chain; quality and environmental regulation
    Date: 2011–03–01
  8. By: Fabrizio Cafaggi
    Abstract: Transnational Private Regulation (TPR) constitutes a new body of rules, practices and processes, created primarily by private actors, firms, NGOs, independent experts like technical standard-setters and epistemic communities, either exercising autonomous regulatory power or implementing delegated power, conferred by international law or by national legislation. Its recent growth reflects (A) a reallocation of regulatory power from the domestic to the global sphere and (B) a redistribution between public and private regulators. When in place, TPR produces strong distributive effects both among private actors and between them and nation states. It differs both from global public regulation and from conventional forms of private rule-making identifiable with the law merchant. The main differences concern both actors and effects. TPR is generally voluntary, mirroring domestic private regulation. Parties who wish to join the regulatory bodies participating to the regime are free to do so, however once they are in, they are legally bound and violation of the rules is subject to legal sanctions.* This freedom can be partially limited when the participation in a private regime and compliance with its standards is the condition to access to other regimes which provide market opportunities for the regulated entities. Often, subscription to a regime or compliance with a set of standards condition the access to the market or the ability to compete thereby reducing the freedom to choose. Voluntariness can be undermined by public intervention changing the regime from voluntary to compulsory. Less frequent than those observed at the domestic level are the examples of delegated private regulation to be found at the transnational level, where an explicit act of delegation by an IO or an IGO empowers a private body with regulatory power and makes the regime mandatory for the regulated entities. More diffused are the examples of ex post judicially recognised private regulation, when domestic courts recognise privately produced standards as part of customary public or private (international) law making it binding. The paper will address the factors driving towards the emergence of new TPR are identified in comparison with, on the one hand, lex mercatoria and, on the other hand, international public regimes. The focus will be then on the private sphere, looking at both the different conflicts of interests arising in the regulatory relationships and the need for governance responses; and then institutional complementarity between public and private regimes will be examined. In light of this approach, the claim that differences between public and private at the global level exist is substantiated. The publicprivate divide is analysed, comparing the domestic and the transnational level. Four different models of interaction are identified: hybridisation, collaborative law-making, coordination and competition.
    Keywords: soft law
    Date: 2011–01–15
  9. By: De Borger B.; Fosgerau M.
    Abstract: We study the interaction between pricing, frequency of service and information provision by public transport firms offering scheduled services, and we do so under various regulatory regimes. The model assumes that users can come to the bus stop or rail station at random or they can plan their trips; the fraction of users who plan their trips is endogenous and depends on the frequency of service and on the quality of information provided. Four institutional regimes are considered, reflecting various degrees of government regulation. A numerical example illustrates the theoretical results. Findings include the following. First, fare regulation induces the firm to provide less frequency and less information than is socially optimal. Second, if information and frequency did not affect the number of planning users a higher fare always induces the firm to raise both frequency and the quality of information. With endogenous planning, however, this need not be the case, as the effect of higher fares strongly depends on how frequency and information quality affect the number of planners. Third, a profit-maximizing firm offers more information than a fare-regulated firm. Fourth, if the agency regulates both the fare and the quality of information then more stringent information requirements induce the firm to reduce frequency; this strongly limits the welfare improvement of information regulation. Finally, of all institutional structures considered, socially optimal fares, frequency and quality of information stimulate passengers least to plan their trips, because the high frequency offered reduces the benefits of trip planning.
    Date: 2011–09
  10. By: Alejandro Komai; Gary Richardson
    Abstract: In the United States today, the system of financial regulation is complex and fragmented. Responsibility to regulate the financial services industry is split between about a dozen federal agencies, hundreds of state agencies, and numerous industry-sponsored self-governing associations. Regulatory jurisdictions often overlap, so that most financial firms report to multiple regulators; but gaps exist in the supervisory structure, so that some firms report to few, and at times, no regulator. The overlapping jumble of standards; laws; and federal, state, and private jurisdictions can confuse even the most sophisticated student of the system. This article explains how that confusion arose. The story begins with the Constitutional Convention and the foundation of our nation. Our founding fathers fragmented authority over financial markets between federal and state governments. That legacy survives today, complicating efforts to create a financial system that can function effectively during the twenty-first century.
    JEL: G2 G21 G22 G28 N2 N21 N22
    Date: 2011–09
  11. By: Francesco Gullì
    Abstract: Emissions trading is a “cap and trade” regulation aimed at reducing the cost of meeting environmental targets. This paper studies how this regulation interacts with energy and competition policies. Two vertically related and imperfectly competitive markets are investigated: 1) the electricity market (output market); 2) the market for natural gas (input market). The effect of energy policy is simulated by assuming that the supporting scheme is able to improve the competitiveness of the low carbon technologies which are able, at the same time, to increase security of supply. The effect of the competition policy is accounted for by assuming that firms try to meet a profit target rather than to maximize profits, because of the regulatory pressure exerted by the competition and sector-specific authorities. By using the dominant firm model (in both markets) and the auction approach (in the output market), the paper highlights a trade-off between these policies. Without regulatory pressure, the result is ambiguous. Together, environmental and energy policies can lead to an increase in market power and its effects, but this in turn not necessarily amplifies their performances. However the worst case, the absolute increase in pollution in the short-run, is excluded. With regulatory pressure, the environmental and energy policies may imply a decrease in market power and this in turn can lessen their performance. In addition, this time the absolute increase in pollution in the short-run is not only possible but even likely. However this unfavourable effect would happen only if the pollution price is sufficiently low, that is if the environmental policy is rather modest. From the policy implications point of view, the analysis suggests what follows. If the models used to estimate performances and costs of environmental and energy policies ignore the full role of imperfect competition (the impact on prices combined with the strategic use of power capacity), this may induce incorrect estimations of the cost of the public action or may lead to incorrect policy calibrations, depending on how the policy targets are set. Finally, although the results are based on a series of simple assumptions about the operation and the structure of energy markets, they seem to be enough robust. Nevertheless the paper suggests caution in extending to other market structures the outcome of the dominant firm model.
    Keywords: emissions trading; pollution; imperfect competition; energy policy
    Date: 2011–03–31
  12. By: Silvester van Koten
    Abstract: When building a cross-border transmission line (a so-called interconnector) as a for-profit (merchant) project, where the regulator has required that capacity allocation be done non-discriminatorily by explicit auction, the identity of the investor can affect the profitability of the interconnector project and, once operational, the resulting allocation of its capacity. Specifically, when the investor is a generator (hereafter the integrated generator) who also can use the interconnector to export its electricity to a distant location, then, once operational, the integrated generator will bid more aggressively in the allocation auctions to increase the auction revenue and thus its profits. As a result, the integrated generator is more likely to win the auction and the capacity is sold for a higher price. This lowers the allocative efficiency of the auction, but it increases the expected ex-ante profitability of the merchant interconnector project. Unaffiliated, independent generators, however, are less likely to win the auction and, in any case, pay a higher price, which dramatically lowers their revenues from exporting electricity over this interconnector.
    Keywords: electricity markets; regulation; cross-border electricity transmissions; vertical integration; asymmetric auctions; bidding behavior
    Date: 2011–02–25
  13. By: Lenz, Rainer
    Abstract: The financial crisis has revealed fatal institutional and structural deficits at the finance market. Politics has reacted to the financial crisis with a sea of legal bills and regulations. But all regulating efforts are merely system-imminent reparation measures and do not solve the core problems. For this, a fundamental financial reform is needed. This article analyzes the finance system’s shortcomings, documents the reform approaches from the past three years, and designs a base structure for modern finance architecture without banks.
    Keywords: Financial crisis; Banking sector reforms; Financial sector reforms; virtual markets; peer-to-peer lending; P2P lending; online lending; finanical market regulation
    JEL: G14 L20 D20 E44 A10 G24 P16 E42 E40 G10 G21
    Date: 2011–09
  14. By: Sónia Araújo
    Abstract: This paper investigates the role played by deregulation on firms’ investment decisions in infrastructure sectors. The analysis covers the period 1980-2006, which was characterised by increased liberalisation and privatisation across OECD countries. We assess the relationship of different dimensions of the regulatory framework, such as the degree of barriers to entry, public ownership, vertical unbundling and the existence of an independent regulator with firm level investment behaviour. We find that the impact of regulation on investment is both sector and firm specific. A reduction in the degree of legal barriers to entry spurs investment in the electricity sector, but only for large firms. In telecommunications, the converse is true with barriers to entry having a negative effect on smaller firms’ investment rates. The existence of an independent regulatory authority spurs investment by telecommunication companies but this effect seems to be driven by large firms alone while it is associated with a reduction in investment levels by smaller companies in the gas sector. In Europe, the degree of vertical integration is positively associated with investment rates in the electricity sector.<P>La déréglementation favorise-t-elle les investissements en infrastructure? : Analyse basée sur les entreprises des pays de l'OCDE<BR>Ce papier vise à étudier l’effet des politiques de déréglementation sur les investissements des entreprises des secteurs des infrastructures. L’analyse s’étend sur la période 1980-2006, qui a été caractérisée par la libéralisation et la privatisation des secteurs des infrastructures dans les pays de l’OCDE. Nous évaluons le rapport de plusieurs dimensions du cadre réglementaire, comme le niveau des barrières à l’entrée, détention publique, intégration verticale et l’existence d’un régulateur sectoriel indépendant avec le niveau d’investissement des entreprises. L’analyse montre que l’impact du cadre réglementaire sur l’investissement varie selon le secteur et le type d’entreprise. Une réduction des barrières à l’entrée encourage l’investissement dans le secteur de l’électricité, mais seulement pour les grandes entreprises. Dans le secteur des télécommunications, l’effet est l’inverse, avec un effet négatif des barrières à l’entrée sur l’investissement des entreprises les plus petites. L’existence d’un régulateur sectoriel indépendant favorise l’investissement dans le secteur des télécommunications, mais cet effet semble être produit uniquement par les grandes entreprises du secteur, tandis que pour les entreprises les plus petites du secteur du gaz un régulateur indépendant défavorise l’investissement. En Europe, le degré d’intégration verticale est positivement associé au taux d’investissement dans le secteur de l’électricité.
    Keywords: investment, regulation, infrastructure, firm level data, investissement, réglementation, infrastructure, données de firmes
    JEL: K2 L5 L92 L94 L95 L96
    Date: 2011–09–19
  15. By: Christin, Clémence; Nicolaï, Jean-Philippe; Pouyet, Jerome
    Abstract: The issue of how to allocate pollution permits is critical for the political sustainability of any cap-and-trade system. Under the objective of offsetting firms' losses resulting from the environmental regulation, we argue that the criteria for allocating free allowances must account for the type of abatement technology: industries that use process integrated technologies should receive some free allowances, whereas those using end-of-pipe abatement should not. In the long run, we analyze the interaction between the environmental policy and the evolution of the market structure. In particular, a reserve of pollution permits for new entrants may be justified when the industry uses a process integrated abatement technology.
    Keywords: Cap-and-trade system; profit-neutral allocations; abatement technologies
    JEL: L13 Q53 Q58
    Date: 2011–09
  16. By: Sergio Ascari
    Abstract: It is generally believed that the American model is not suitable for Europe, yet North America is the only large and working competitive gas market in the world. The paper shows how its model could be adapted as a target for market design within the European institutional framework. It starts from analysis of the main peculiar economic features of the gas transportation industry, which should underpin any efficient model. After the Third Package is properly implemented the EU will share several building blocks of the American model: effective unbundling of transportation and supply; regulated tariffs which, for long distance transportation, are in fact largely related to capacity and distance; investments based mostly on industry’s initiative and resources, and the related decisions are increasingly made after open and public processes. Yet Europe needs to harmonize tariff regulation criteria, which could be achieved through a monitoring process. National separation of main investment decisions should be overcome, possibly by organising a common platform where market forces and public authorities interact with private suppliers to require existing and develop new capacity, whereas industry competitively offers its solutions. Such platform would allow for long term capacity reservation, subject to caps and congestion management provisions. Auctions and possibly market coupling would play an important role in the allocation of short term capacity but a limited one in long term. Market architecture and the organisation of hubs would also be developed mostly by market forces under regulatory oversight. The continental nature of the market suggests a likely concentration of trading in a very limited number of main markets, whereas minor markets would have a limited role and would be connected to major ones, with price differences reflecting transportation costs and market conditions. Excessive interference or pursuit of political goals in less than transparent ways involves the risk of slower liquidity development and higher market fragmentation. With this view as a background, regulatory work aimed at completing the European market should be based on ensuring the viability of interconnections between current markets and on the establishment of common platforms and co-ordinated tariff systems, fostering the conditions for upstream and transportation capacity development.
    Keywords: Hubs; infrastructure; target model; network tariffs; gas market design; capacity allocation
    Date: 2011–07–07
  17. By: Malgorzata Sadowska
    Abstract: The European Commission has launched a number of antitrust investigations against the major energy incumbents in the aftermath of the energy sector inquiry. Most of them have already been settled under Article 9 of the EC Regulation 1/2003 and the undertakings offered far-reaching, sometimes structural, commitments. This article studies the 2008 investigation into price manipulation in the German electricity wholesale market. In spite of no convincing evidence and flaws in the assessment, the Commission was able to negotiate from E.ON substantial capacity divestments. The Commission is straightforward about using antitrust rules to open up energy markets. Sector inquiries, commitment procedure and structural remedies allow for a quick intervention, flexible problem-solving and bring about decisive changes in the energy market setting. However, harnessing antitrust for the purpose of energy liberalization policy has an adverse impact on competition enforcement itself. First, it leads to a number of ‘weak’ cases, based on far-fetched arguments. Second, it results in remedies which are not tailored to the abuse at issue, but are in line with a wider objective of energy market liberalization, and as an outcome of negotiations, further swayed by the firm’s own interest in the ultimate shape of the commitment package.
    Keywords: energy policy; competition law; Germany
    Date: 2011–09–01
  18. By: Farber, Daniel A
    Abstract: Cap and trade is controversial in part because of claims that it is unjust, an issue that was highlighted by recent litigation against California’s proposed carbon market. This essay considers an array of fairness issues relating to cap and trade. In terms of fairness to industry, the conclusion is that distributing free allowances overcompensates firms for the cost of compliance, assuming any compensation is warranted. Industry should not receive, in effect, ownership of the atmosphere at the expense of the public. Environmental justice advocates argue that cap-and-trade systems promote hotspots and encourage dirtier, older plants to continue operating to the detriment of some communities. Designers of cap-and-trade systems should be alert to possible hotspots, particularly in disadvantaged communities. Little reason exists, however, to believe that any such hotspots are systematically linked with disadvantage. Finally, any regulation of emissions raises costs, with a disproportionate impact on low-income consumers. This effect can be greatly ameliorated through adroit use of revenue from auctions. The bottom line is that fairness issues are not a deal-breaker for cap and trade, but do deserve thoughtful consideration in designing a system.
    Keywords: Administrative Law, Economics, Energy and Utilities Law, Environmental Law, Social Welfare, Administrative Law, Energy Law, Environmental Law, Law and Economics, Social Welfare Law
    Date: 2011–09–20
  19. By: Adrien de Hauteclocque; Kim Talus
    Abstract: Ensuring access to a truly ‘European’ energy grid for every consumer and supplier in the European Union is a core objective of the single market project. From the first wave of liberalization directives up until the ‘draft’ framework guidelines of September 2010 on capacity allocation and congestion management being prepared by ERGEG on behalf of the new Agency for the Cooperation of Energy Regulators (ACER), the objective of the access regime in both sector is similar: to creating capacity to compete. The objective of this paper is to review and compare from a legal point of view the evolution of the EU access regime in the electricity and gas sectors. We find strong similarities for two otherwise very different sectors, as well as an influence of the electricity regime on the gas regime. The sector-specific regulatory regime, supported by the use of competition law, organises a market design in both sectors based as much as possible on short-term capacity allocation with a liquid secondary trading platforms. The imposition of UIOLI mechanisms and an increased focus on firmness of capacity is certainly the way forward but implementation still is an issue. The right portfolio of capacity durations that are to be proposed by TSOs also remains an open question. The specific features of these two commodities result however in slightly different results in practice. In electricity, the development of market coupling initiatives creates new regulatory challenges but price convergence is now in sight. In gas, the progress has been slower and efficiently functioning spot markets are yet to emerge.
    Keywords: access regime; electricity; gas; European Union; competition law; framework guidelines
    Date: 2011–02–25
  20. By: Anne Neumann; Karsten Neuhoff
    Abstract: Decarbonisation of energy and transport infrastructure requires significant private sector investments. The natural gas industry has demonstrated such large scale private sector infrastructure investment over the last decades, typically using long-term contractual arrangements. Are therefore institutional frameworks necessary that facilitate long-term contracting or provide regulation reassuring about future resource streams associated with low-carbon infrastructure - or do factors idiosyncratic to natural gas explain the prevalence of long-term contracts in natural gas infrastructure investment? We identify four reasons for the use of long-term contracting arrangements. The transformation of the natural gas industry and regulatory structure has gradually reduced the rational for three of these reasons, suggesting that remaining rational, securing of revenue streams to finance investments has become the main motivation for the use of long-term contracts. This rational is not idiosyncratic to the natural gas industry, and thus suggests that long-term contracting can also play a significant role in facilitating low-carbon infrastructure investment. We furthermore discuss the role of institutional frameworks necessary for long-term contracting, and identify the significant role governments have been playing in sharing the counterparty risk inherent in long-term contracts.
    Keywords: Investment, low-carbon economy, natural gas
    JEL: L78 O13 Q58
    Date: 2011
  21. By: Claude Ménard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper focuses on how to deal with environmental problems, through the lenses of the New Institutional Economics. The emphasis is on the intertwined role of organizational solutions and their institutional settings. This is not to say that technological solutions to environmental problems should be dismissed. However, it is argued that 'environmental innovation' is often of organizational nature, deeply embedded in institutions that adapt very slowly, making 'societal transitions' particularly challenging. The New Institutional Economics provides some key concepts to explore these dimensions and their interactions, thus shedding light on alternative solutions and the conditions of their implementation. Most examples come from the water sector.
    Keywords: Organizations, Institutions, Property Rights, Contracts, Regulation, Transaction Costs, Water
    Date: 2011

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