nep-reg New Economics Papers
on Regulation
Issue of 2014‒05‒04
ten papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Postal-Sector Policy: From Monopoly to Regulated Competition and Beyond By Christian Jaag
  2. Integrating Thermal and Hydro Electricity Markets: Economic and Environmental Costs of not Harmonizing Pricing Rules By Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
  3. How to correct long-term system externality of large scale windpower development by a capacity mechanism? By Finon, Dominique; Cepeda, Mauricio
  4. Regulation and the burden of the net cost resulting from the Universal Service Obligation By Christian Jaag; Urs Trinkner; Topias Uotila
  5. Employment Effects of Renewable Energy Supply - A Meta Analysis By Ina Meyer; Mark Wolfgang Sommer
  6. Decentralized Regulation, Environmental Efficiency and Productivity By Ghosal, Vivek; Stephan, Andreas; Weiss, Jan
  7. Freight transport, policy instruments and climate By Mandell, Svante; Nilsson, Jan-Eric; Vierth, Inge
  8. Can we reconcile different capacity adequacy policies with an integrated electricity market? By Finon, Dominique
  9. Better information on residential energy use may deter investment in efficiency: case study of a smart metering trial By McCoy, Daire; Lyons, Sean
  10. Comparing Mobile Communication Service Prices Among Providers: A Hedonic Approach By Schöni, Olivier; Seger, Lukas

  1. By: Christian Jaag
    Abstract: This paper discusses the main aspects of the competitive and regulatory state of the postal sector. It presents the different models for postal competition and regulation in the EU and the US and their history, together with their implications on regulation, with a focus on universal services and network access. While postal monopolies used to be the main source of funding for universal service obligations, the need for alternative funding sources after full liberalization has increased the interest of regulators and the public in knowing the cost of these obligations. In parallel, new means of electronic communication and consumer needs call the traditional scope of universal services into question. This paper outlines the economic rationale of current policies and directions for future postal regulation to strengthen the postal services’ commercial viability in a competitive age, while safeguarding their relevant characteristics for the economy.
    Keywords: Postal Sector, Regulation, Liberalization
    JEL: L52 L87
    Date: 2014–04
  2. By: Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
    Abstract: The electricity sector is the largest source of GHG emissions in the world, and reducing these emissions would often be costly. However, because electricity markets remain often only integrated at a shallow level (with different pricing regulations), many gains from deeper integration (adoption of marginal cost pricing everywhere) are yet to capture. This paper assesses the benefits of such deep integration between a "hydro" jurisdiction and a "thermal" one. It also underscores the inefficiency of trade when pricing rules differ. Our detailed hourly model, calibrated with real data (from the provinces of Ontario and Quebec, Canada), estimates price, consumption, emissions and welfare changes associated to fully integrating electricity markets, under transmission constraints. A negative abatement cost of $37/tonne of CO2 is found (for more than 1 million tonnes), cleary illustrating the untapped potential of wealth creation in carbon reduction initiatives. Furthermore, given the inefficiency of shallow integration between markets, we find that removing interconnections between markets is a relatively affordable CO2-reduction opportunity, at $21.5/tonne.
    Keywords: Market Integration; Regulation; Electricity Trade; Environmental Impacts.
    JEL: F14 F15 L50 L94 Q52 Q56
    Date: 2013–12
  3. By: Finon, Dominique; Cepeda, Mauricio
    Abstract: This paper deals with the practical problems related to long-term security of supply in electricity markets in the presence of large-scale wind power development. The success of renewable promotion schemes adds a new dimension to ensuring long-term security of supply. It necessitates designing second-best policies to prevent large-scale wind power development from distorting long-run equilibrium prices and investments in conventional generation and in particular in peaking units. We rely upon a long-term simulation model which simulates electricity market players’ investment decisions in a market regime and incorporates large-scale wind power development either in the presence of either subsidised wind production or in market-driven development. We test the use of capacity mechanisms to compensate for the long-term effects of large-scale wind power development on the system reliability. The first finding is that capacity mechanisms can help to reduce the social cost of large scale wind power development in terms of decrease of loss of load probability. The second finding is that, in a market-based wind power deployment without subsidy, wind generators are penalized for insufficient contribution to the long term system’s reliability.
    Keywords: Electricity markets; generation adequacy; wind power; capacity mechanism;
    JEL: Q56 Q42 L94
    Date: 2013–04
  4. By: Christian Jaag; Urs Trinkner; Topias Uotila
    Abstract: The financing of the Universal Service Obligation (USO) in network industries has traditionally relied on granting the provider exclusive rights. Full liberalization has created the need for alternative funding mechanisms. This has increased the interest of regulators and the public in estimating the (net) cost of the USO as the universal service provider (USP) should be correctly compensated for its burden. While there is quite a comprehensive literature on the cost of the USO in light of a different business strategy in the hypothetical scenario without USO, there has been little discussion so far on the assumptions to be made about the regulatory environment in this hypothetical scenario. That is the focus of this chapter. In addition, the chapter argues that a careful assessment of the regulatory environment may be useful in assessing the burden resulting from the USO. In Europe, the costing and financing of the postal USO is laid out in the Third Postal Directive 2008/6/EG. Article 7 states that only the net cost of the USO that constitutes an unfair financial burden should be subject to compensation. It does not further define what is regarded as unfair, but imposes criteria on compensation such as objectivity, transparency, non-discrimination, proportionality, least distortion, or neutrality.
    Keywords: Universal service obligation, burden of the net cost, regulatory delta approach
    JEL: L51
    Date: 2013–11
  5. By: Ina Meyer; Mark Wolfgang Sommer
    Abstract: The paper investigates a central hypothesis of the green economy concept, which states that transitioning to a low-carbon economy is justified on a sound economic basis. We analyze this hypothesis by focussing on employment effects from renewable energy deployment, based on an evaluation of 23 selected impact studies from peer-reviewed journals. The studies are categorized into two clusters, one consisting of studies that represent employment factors of specific renewable technologies, and another that compiles model-based scenario assessments on employment effects from specific renewable policies. Both clusters distinguish the applied methodologies and the type of employment effects considered – direct, indirect, induced, gross or net. Given the heterogeneity of assumptions, the results of the different studies are hardly comparable, although we find that a majority of the investigated scenarios show positive net employment effects. These results crucially depend on the financing of an RES support scheme and the global competitiveness (technological lead) for a specific technology. The positive link between renewable energy deployment and job creation is thus not straightforward, since different assumptions, system boundaries and modelled interactions such as the crowding out of alternative energy production or effects from prices, income and foreign trade influence the results. Further research is needed.
    Keywords: Renewable energy, employment effects, green economy, climate mitigation
    JEL: J20 Q01 Q20 Q52
    Date: 2014–04
  6. By: Ghosal, Vivek (Georgia Institute of Technology (Atlanta), European Business School Wiesbaden, and CESifo, Munich.); Stephan, Andreas (The Ratio Institute); Weiss, Jan (Jönköping International Business School)
    Abstract: Using a unique plant-level dataset we examine green productivity growth in Sweden’s heavily regulated pulp and paper industry, which has historically been a significant contributor to air and water pollution. Our exercise is interesting as Sweden has a unique regulatory structure where plants have to comply with national environmental regulatory standards and enforcement, along with decentralised plant-specific regulations. In our analysis, we use the sequential Malmquist-Luenberger productivity index which accounts for air and water pollutants as undesirable outputs. Some of our key findings are: (1) regulation has stimulated technical change related to pollution control, and has induced plants to catch up with the best-practice technology frontier with regard to effluent abatement; (2) large plants are more heavily regulated than small plants; (3) plants in environmentally less sensitive areas or those with local importance as employer face relatively lenient regulatory constraints; (4) environmental regulations trigger localized knowledge spillovers between nearby plants, boosting their green TFP growth.
    Keywords: TFP; DEA; Sequential Malmquist-Luenberger productivity index; pulp and paper industry; pollution; environmental regulations; enforcement; plant-specific regulation; productivity; Porter hypothesis.
    JEL: D24 L51 L60 Q52 Q53 Q58
    Date: 2014–04–24
  7. By: Mandell, Svante (Department of Real Estate and Construction Management, Royal Institute of Technology); Nilsson, Jan-Eric (The Swedish National Road and Transport Research Institute (VTI)); Vierth, Inge (The Swedish National Road and Transport Research Institute (VTI))
    Abstract: The impact of policy instruments supposed to reduce greenhouse gas emissions from road freight transports may seem smaller than expected. Using insights from economics and contract theory, the paper sorts out the (possible) instances of market failure in the freight transport market; operator market power, asymmetric information split incentives, and public goods. The primary limitations of standard policy instruments are demonstrated to be linked to unobservable information. Some of these may be reduced but not eliminated as information technologies develop, making it possible to observe, verify and provide contract-relevant information to the uninformed parties. There is little reason to believe that possible market failures present major limitations to the efficiency of economic instruments geared toward protecting the climate, other than possibly in the short run.
    Keywords: Freight transport; climate; greenhouse gas; policy instruments; asymmetric information; split incentives
    JEL: Q53 R40 R48
    Date: 2014–04–10
  8. By: Finon, Dominique
    Abstract: In the present European Union debate, many consider capacity remuneration mechanisms (CRM) as useless and, if they are eventually considered as useful, there is a necessity of total alignment of capacity adequacy policies in time. We develop an opposite position. The adoption of CRM is a necessity because the market and regulatory failures to invest in peaking units, which are amplified by the large, scale development of intermittent sources by out-of-market policies. Then, provided that some minimal harmonization is sought by regulators and TSOs, each member state should have some freedom in the adoption of his capacity adequacy policies.
    Keywords: energy market; capacity remuneration mechanisms (CRM); European Union;
    JEL: Q55 Q58 Q43
    Date: 2013–09
  9. By: McCoy, Daire; Lyons, Sean
    Abstract: Smart metering allows electricity utilities to provide consumers with better information on their energy usage and to apply time of use tariffs. These measures have been shown to reduce electricity consumption and induce time-shifting of demand. Less is known about how they affect residential energy efficiency investment behaviour. Using data from a randomised-controlled trial on a sample of 2500 Irish consumers we show that exposure to time of use pricing and better information over a 12 month period can have the unintended effect of reducing investment in energy efficiency measures within the home.
    Keywords: Randomised-controlled trial; Smart-metering; Energy efficiency adoption
    JEL: D12 O33 Q4 Q55
    Date: 2014–04–18
  10. By: Schöni, Olivier; Seger, Lukas
    Abstract: The present article proposes a new approach to compare mobile communication service prices among different communications service providers. To this end, a hedonic model based on monthly phone bills is employed that relates billed amounts and the quantities of consumed mobile communication services. A linear hedonic regression model is separately estimated for each provider and then used to estimate prices. Laspeyres, Paasche, and Fisher double-imputed price indices are then used to compare prices across communications service providers on an aggregate level. The sensitivity of these indices in relation to the estimated hedonic functions is investigated using a generalized additive model.
    Keywords: mobile communication; price indices; prediction; hedonic regression
    JEL: C43 C52 C53 P42
    Date: 2014–04–30

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