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on Regulation |
| By: | Tooraj Jamasb (Durham University Business School); Rabindra Nepal (School of Economics, The University of Queensland) |
| Abstract: | The incentive regulation of costs related to physical and cyber security in electricity networks is an important but relatively unexplored and ambiguous issue. These costs can be part of a cost efficiency benchmarking or alternatively dealt separately. This paper assesses the issues and options of incorporating network security costs within incentive regulation in a benchmarking framework. The relevant concerns and limitations associated with network security costs accounting and classification, choice of cost drivers, data adequacy and quality and the relevant benchmarking methodologies are discussed. The discussion suggests that the present regulatory treatment of network security costs using benchmarking is rather limited to being an informative regulatory tool than being deterministic. We discuss how alternative approaches outside of the benchmarking framework such as the use of stochastic cost-benefit analysis and cost-effectiveness analysis of network security investments can complement the results obtained from benchmarking. |
| Date: | 2014–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:522&r=reg |
| By: | Paulo Moisés Costa (ESTG, Instituto Politécnico de Viseu and INESC TEC, Portugal); Nuno Bento (ISCTE, Instituto Universitário de Lisboia and Dinâmia'CET-IUL, Portugal); Vítor Marques (Entidade Reguladora dos Serviços Energéticos, Portugal) |
| Abstract: | This paper aims to analyze the implementation of innovations, featuring technological risk, in network industries through the development of a suitable regulatory scheme. In particular, Smart grid (SG) technologies which have the potential to save operational costs and reduce the need for further investments in the grid, but are still surrounded by many uncertainties which discourage the investment. Therefore, a suitable regulatory scheme should be developed in order to incentivize network operators to invest in SG technologies, besides of conventional investments that yield the regulatory and warranted revenue. Through a decision model, it is shown that incentive regulation encourages the adoption of innovations that enhance efficiency. Yet the consideration of technological risk into the analysis reduces the set of investment opportunities. In addition, the model assesses the impact on firm’s decision of different types of projects that can displace more or less conventional capital and reduce more or less operational costs. Therefore, this paper provides a new tool that can be used to evaluate the effect of different regulatory designs in a wide range of investments with the characteristics of SG. |
| Keywords: | Economics of regulation; Price-cap; Cost-plus, Technological change; Smart grids. |
| JEL: | O33 L51 L94 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2014-11.&r=reg |
| By: | Gibson, Matthew |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2014–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt6tn7t0wv&r=reg |
| By: | Ian W.R. Martin; Robert S. Pindyck |
| Abstract: | How should we evaluate public policies or projects to avert, or reduce the likelihood of, a catastrophic event? Examples might include inspection and surveillance programs to avert nuclear terrorism, investments in vaccine technologies to help respond to a "mega-virus," or the construction of levees to avert major flooding. A policy to avert a particular catastrophe considered in isolation might be evaluated in a cost-benefit framework. But because society faces multiple potential catastrophes, simple cost-benefit analysis breaks down: Even if the benefit of averting each one exceeds the cost, we should not necessarily avert all of them. We explore the policy interdependence of catastrophic events, and show that considering these events in isolation can lead to policies that are far from optimal. We develop a rule for determining which events should be averted and which should not. |
| JEL: | D81 H56 Q54 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20215&r=reg |
| By: | Schindler, Dirk (Dept. of Accounting, Auditing and Law, Norwegian School of Economics); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | There is a growing concern that governments lose substantial corporate tax revenue due to transfer pricing and debt shifting strategies. Existing literature studies debt shifting and transfer pricing separately. In practice, however, the choice of debt-to-asset ratios in affiliates and the transfer price of internal debt are interrelated management decisions that are also mutually affected by government regulation. This paper models these strategies as intertwined. We find that the tax sensitivity of the corporate tax base depends on whether debt shifting and transfer pricing are cost complements or substitutes. A second result is that stricter regulation of debt shifting and transfer pricing may have the effect of fostering such activities. |
| Keywords: | Multinational corporations; profit shifting; debt shifting; concealment costs |
| JEL: | D21 F23 H25 |
| Date: | 2014–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_022&r=reg |
| By: | Hryckiewicz, Aneta |
| Abstract: | The most recent crisis prompted regulatory authorities to implement directives prescribing actions to resolve systemic banking crises. Recent findings show that government intervention results in only a small proportion of bank recoveries. This study examines the reasons for this failure and evaluates the effectiveness of regulatory instruments, demonstrating that weaker banks are more likely to receive government support, that the support extended addresses banks’ specific issues, and that supported banks are more likely to face bankruptcy than non-supported banks. Therefore, government interventions must be sufficiently large, and an optimal banking recovery program must include a deep restructuring process. |
| Keywords: | Bank risk, business models, bank regulation, financial crisis, banking stability |
| JEL: | E58 G15 G21 G32 |
| Date: | 2014–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56730&r=reg |
| By: | Elena Claire Ricci (Fondazione Eni Enrico Mattei (FEEM), Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC) and Università degli Studi di Milano, Italy); Valentina Bosetti (Fondazione Eni Enrico Mattei (FEEM) and IEFE, Bocconi University, Italy); Erin Baker (University of Massachusetts at Amherst, USA) |
| Abstract: | This paper analyzes the future prospects of carbon capture technologies. The first part of the analysis presents and discusses the results of an expert elicitation survey on a broad range of carbon capture options. The survey collected probabilistic estimates on the future values of energy penalty under three different scenarios of R&D investments and climate policies from twelve leading European experts from both academia and industry. In the second part of the analysis, the elicitation results are used as input to an integrated assessment model. This allows us to evaluate the potentials of success of this technology within a broad mitigation portfolio of options and under different policy assumptions, in an intertemporal optimizing setting. Both parts of the work provide results that are of interest to policy-makers, integrated-assessment and energy modelers. |
| Keywords: | Carbon Capture, Expert Elicitation, Integrated Assessment Modeling |
| JEL: | Q5 Q55 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.44&r=reg |
| By: | Andersson , Tommy (Department of Economics, Lund University); Yang , Zaifu (Department of Economics and Related Studies, University of York); Zhang , Dongmo (Intelligent Systems Laboratory, University of Western Sydney) |
| Abstract: | Price controls are used in many regulated markets and well recognized as the cause of market inefficiency. This paper examines a practical housing market in the presence of price controls and provides a solution to the problem of how houses should be efficiently allocated among agents through a system of prices. We demonstrate that the dynamic auction by Talman and Yang (2008) always finds a core allocation in finitely many iterations, thus resulting in a Pareto efficient outcome. |
| Keywords: | Ascending auction; assignment market; price control; Pareto efficiency; core |
| JEL: | C71 D44 |
| Date: | 2014–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2014_024&r=reg |
| By: | Ribaudo, Marc; Savage, Jeffrey; Aillery, Marcel |
| Abstract: | In 2010, a Total Maximum Daily Load (TMDL) was established for the Chesapeake Bay, defining the limits on emissions of nitrogen, phosphorus, and sediment necessary to reverse declines in the Bay’s quality and associated biological resources. Agriculture is the largest single source of nutrients and sediment in the watershed. We use data on crop and animal agriculture in the watershed to assess the relative effectiveness of alternative policy approaches for achieving the nutrient and sediment reduction goals of the TMDL, ranging from voluntary financial incentives to regulations. The cost of achieving water quality goals depends heavily on which policy choices are selected and how they are implemented. We found that policies that provide incentives for water quality improvements are the most efficient, assuming necessary information on pollutant delivery is available for each field. Policies that directly encourage adoption of management systems that protect water quality (referred to as design-based) are the most practical, given the limited information that is generally available to farmers and resource agencies. Information on field characteristics can be used to target design-based policies to improve efficiency. |
| Keywords: | Chesapeake Bay, sediment, manure, water quality, economic incentives, conservation policy, regulation, phosphorus, nitrogen, TMDL, Crop Production/Industries, Environmental Economics and Policy, Land Economics/Use, Livestock Production/Industries, Resource /Energy Economics and Policy, |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uersrr:171880&r=reg |
| By: | Simachev, Yuri; Kuzyk, Mikhail; Feygina, Vera |
| Abstract: | Focused on the efficiency of the Russian innovation-fostering policy, the research is based on an empirical analysis of how policy instruments impact firms’ behavior. The data is obtained from two surveys of more than 600 Russian industrial companies in 2011-2012. The analysis shows that tax incentives are more conducive to innovations with a longer payback period, whereas public funding is more likely to facilitate launching new innovative projects. At the same time, both kinds of innovation support tools are affected by crowding out private funds by public ones. Besides, innovation policy design and administration are not friendly to young companies. |
| Keywords: | innovation; firm behavior; tax incentives; public subsidies and grants; evaluation of government innovation policy |
| JEL: | L20 O31 O32 O38 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56750&r=reg |