nep-reg New Economics Papers
on Regulation
Issue of 2014‒12‒13
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Deregulation, Competition, and Market Integration in China's Electricity Sector By Yanrui WU
  2. Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market By Mathias Reynaert
  3. Political stability, regulation and investment in the African mobile markets By Moshi, Goodiel; Mitomo, Hitoshi
  4. Dynamic Natural Monopoly Regulation: Time Inconsistency, Asymmetric Information, and Political Environments By Ali Yurukoglu; Claire Lim
  5. The Impact of Location and Proximity on Consumers’ Willingness to Pay for Renewable and Alternative Electricity: The Case of West Virginia By Nkansah, Kofi; Collins, Alan
  6. Renewable Energy Policies and Cross-border Investment: Evidence from Mergers and Acquisitions in Solar and Wind Energy By Chiara Criscuolo; Nick Johnstone; Carlo Menon; Victoria Shestalova
  7. The Value of Regulatory Discretion: Estimates from Environmental Inspections in India By Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
  8. Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies By Charnovitz, Steve; Fischer, Carolyn
  9. Challenges faced by communication providers in meeting regulatory requirements: Analysis of equivalence of input and functional separation By Perumal, Sinnakkrishnan; Walker, Robert
  10. The Internet Economy - Regulatory Challenges and Practices By Isabell Koske; Rosamaria Bitetti; Isabelle Wanner; Ewan Sutherland
  11. Policy on the media platform industry: The analysis of pricing policies of internet media with two-sided market theory By Kim, Sung-min
  12. Impact of users' communities on broadband economics By Domingo, Albert; Oliver, Miquel
  13. The European Climate Policy is Ambitious: Myth or Reality? By Catherine Benjamin; Isabelle Cadoret; Marie-Hélène Hubert
  14. Private Access Fees and Congestion Is There a Role for Government After All? By Salant, Stephen; Seegert, Nathan

  1. By: Yanrui WU (University of Western Australia)
    Abstract: This report presents an updated and expanded review of reforms in China’s electricity sector. It aims to examine the impact of reforms on competition, deregulation, and electricity market integration in China. The findings are used to draw policy implications for electricity market development, particularly the promotion of energy market integration (EMI).
    Keywords: electricity sector, reforms, unbundling, energy market integration and China
    Date: 2014
  2. By: Mathias Reynaert
    Abstract: Emission standards are one of the major policy tools to reduce greenhouse gas emissions from transportation. The welfare e¤ects from this type of regulation depend on how …firms choose to abate emissions: by changing relative prices, by downsizing their flÂeet or by adopting technology. This paper studies the response of fi…rms to a new emission standard in the European car market using panel data covering 1998-2011. The data show that …firms choose to comply with the regulation by adopting new technology. To evaluate the welfare effects of the regulation I estimate a structural model using data from before the policy announcement and explicitly test the ability of the model to explain the observed responses. I …find that, because the abatement is done by technology adoption, consumer welfare increases and overall welfare effects depend on market failures in the technology market. The design of the regulation matters to induce technology adoption.
    JEL: Q48 R48 L62 H23
    Date: 2014–11–11
  3. By: Moshi, Goodiel; Mitomo, Hitoshi
    Abstract: This study attempted to analyze the effect of regulation and political stability in allocation of mobile telecommunication investments in the African continent between year 2001 and 2011. In order to better understand the dynamics of investment in telecommunications, a framework was developed to understand the factors that determine investments in telecom industry at country and industry level, particularly: institutions, market size/demand level, market structure and investing cost. The results show that investments in the telecommunications industry are positively dependent on liberalization that opened the market to private sector; however, no statistical evidence was found on the effect of political stability measured by the democratic process. Further, the study has shown that market structure especially competition, and market size and cost of investing in a country are important factors for investments allocation in mobile telecommunications industry among African countries.
    Keywords: mobile telecommunication,investment, political stability,liberalization,African countries
    JEL: L51 L1 C23 C26 D43
    Date: 2014
  4. By: Ali Yurukoglu (Stanford University); Claire Lim (Cornell University)
    Abstract: This paper studies time inconsistency, asymmetric information, and political ideology in natural monopoly regulation of electricity distribution companies. Empirically, more conservative political environments have higher regulated rates of return and worse operational efficiency as measured by electricity lost in distribution. Capital investment improves reliability in a cost effective manner. We estimate a dynamic game theoretic model of utility regulation featuring investment and asymmetric information. Under-investment due to time inconsistency is severe. Conservative regulators improve welfare losses due to time inconsistency, but worsen losses due to asymmetric information.
    Date: 2014
  5. By: Nkansah, Kofi; Collins, Alan
    Abstract: In 2015, West Virginia will implement a Renewable and Alternative Energy Portfolio Standards Act. Meeting these standards with either natural gas or wind power will generate different welfare impacts across society. In particular, this study examined how energy source and generation proximity influence consumers’ willingness-to-pay (WTP) for electricity. Using choice modelling, residents within two counties with distinct location characteristics (existing coal power plant or wind farm) were asked to choose between a renewable source (wind farm) and an alternative energy source (natural gas power plant). We also seek to determine how residents’ proximity to a hypothetical electricity generation facility (wind farm or natural gas generation source) influences their WTP for renewable and alternative electricity. Results showed that the sampled population in both counties were willing to pay a much higher positive premium to site a natural gas-fired power plant at a distances far from their residence compared to siting wind turbines at a similar distance. Compensation was required to site a natural gas-fired power plant at a moderate distance from an individuals’ residence.
    Keywords: Willingness to Pay, Choice Experiment, Renewable energy, Consumer/Household Economics, Demand and Price Analysis, Environmental Economics and Policy, Institutional and Behavioral Economics, Resource /Energy Economics and Policy,
    Date: 2014
  6. By: Chiara Criscuolo; Nick Johnstone; Carlo Menon; Victoria Shestalova
    Abstract: The study assesses the role of feed-in tariffs (FITs) and renewable energy certificates (RECs) in creating incentives for cross-border investments and for investments in particular technological portfolios via M&A. The analysis explores the dataset on M&As in alternative energy sources worldwide over 2005-2011. The results suggests that FITs encourage more diversified M&A than RECs. With respect to foreign investment, the study finds a linear relationship between FITs and cross-border M&As in the wind energy sector, but an inverted U-shaped relationship in the solar energy sector. One possible explanation for the latter may lie in reduced policy credibility due to the public finance implications of ‘generous’ FITs. Another possible explanation for this finding concerns the use of high solar FITs by countries whose natural conditions provide little comparative advantage in solar energy, suggesting that low profitability and limited potential of solar energy in those countries might have deterred the entry of foreign investors.
    Keywords: foreign direct investment, renewable energy policy, solar and wind energy, energy portfolio, M&A
    JEL: G34 Q42 Q48
    Date: 2014–10–28
  7. By: Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
    Abstract: In collaboration with a state environmental regulator in India, we conducted a field experiment to raise the frequency of environmental inspections to the prescribed minimum for a random set of industrial plants. The treatment was successful when judged by process measures, as treatment plants, relative to the control group, were more than twice as likely to be inspected and to be cited for violating pollution standards. Yet the treatment was weaker for more consequential outcomes: the regulator was no more likely to identify extreme polluters (i.e., plants with emissions five times the regulatory standard or more) or to impose costly penalties in the treatment group. In response to the added scrutiny, treatment plants only marginally increased compliance with standards and did not significantly reduce mean pollution emissions. To explain these results and recover the full costs of environmental regulation, we model the regulatory process as a dynamic discrete game where the regulator chooses whether to penalize and plants choose whether to abate to avoid future sanctions. We estimate this model using original data on 10,000 interactions between plants and the regulator. Our estimates imply that the costs of environmental regulation are largely reserved for extremely polluting plants. Applying the cost estimates to the experimental data, we find the average treatment inspection imposes about half the cost on plants that the average control inspection does, because the randomly assigned inspections in the treatment are less likely than normal discretionary inspections to target such extreme polluters.
    JEL: D22 L51 Q56
    Date: 2014–10
  8. By: Charnovitz, Steve; Fischer, Carolyn (Resources for the Future)
    Abstract: In the first dispute on renewable energy to come to World Trade Organization (WTO) dispute settlement, the domestic content requirement of Ontario’s feed-in tariff was challenged as a discriminatory investment-related measure and as a prohibited import substitution subsidy. The panel and Appellate Body agreed that Canada was violating the GATT and the TRIMS Agreement. But the SCM Article 3 claim by Japan and the European Union remains unadjudicated, because neither tribunal made a finding that the price guaranteed for electricity from renewable sources constitutes a ‘benefit’ pursuant to the SCM Agreement. Although the Appellate Body provides useful guidance to future panels on how the existence of a benefit could be calculated, the most noteworthy aspect of the new jurisprudence is the Appellate Body’s reasoning that delineating the proper market for ‘benefit’ analysis entails respect for the policy choices made by a government. Thus, in this dispute, the proper market is electricity produced only from wind and solar energy.
    Keywords: feed-in tariff, renewable energy, subsidies, international trade, WTO, green growth, local content requirement
    JEL: K33 Q48 Q56 Q58
    Date: 2014–10–30
  9. By: Perumal, Sinnakkrishnan; Walker, Robert
    Abstract: Regulatory authorities, governing markets and industries around the world, aim to develop a fair and equivalent competitive market with low entry and exit barriers that provide customers with sufficient knowledge and information to enable them to switch between products, services and suppliers at will. Equivalence of Input (EOI) and Functional Separation (FS) are mechanisms used by telecommunications regulatory authorities to achieve this objective. This paper discusses and analyses legislations mandating the use of EOI and FS, in various geographies, and the challenges that the mechanisms impose on Significant Market Power (SMP) Telco organisations. Furthermore, this paper provides a solution framework for Telco organisations to comprehensively address these challenges in their transformation programmes.
    Keywords: Equivalence of Input,Functional Separation,Telecom Regulation,Transformation
    Date: 2014
  10. By: Isabell Koske; Rosamaria Bitetti; Isabelle Wanner; Ewan Sutherland
    Abstract: The Internet has become an integral part of the everyday life of households, firms and governments. Its proper functioning over the long run is therefore crucial for economic growth and people’s wellbeing more generally. The success of the Internet depends on its openness and the confidence of users. Designing policies that protect society while allowing for Internet’s great economic potential to be fulfilled, is a difficult task. This paper investigates this challenge and takes stock of existing regulations in OECD and selected non-OECD countries in specific areas related to the digital economy. It finds that despite the regulatory difficulties, the Internet is far from being a “regulation-free” space as there are various industry standards, co-regulatory agreements between industry and the government, and in some cases also state regulation. Most of them aim at protecting personal data and consumers more generally. In many cases generally applicable laws and regulations exist that address privacy, security and consumer protection issues both in the traditional and the digital economy.<P>L'économie internet - Enjeux et pratiques de la réglementation<BR>L'Internet fait partie intégrante de la vie quotidienne des ménages, des entreprises et des gouvernements. Son bon fonctionnement sur le long terme est donc crucial pour la croissance économique et le bien-être de la population en général. Le succès de l'Internet dépend de son ouverture et de la confiance des utilisateurs. Concevoir des politiques qui protègent les utilisateurs et la société, mais aussi qui permettent que les grands avantages de l'Internet soit pleinement récoltés est une tâche difficile. Cette étude discute quelques-uns des défis liés au développement d’Internet et fait le bilan de la réglementation en vigueur dans l'OCDE et certains pays non membres de l'OCDE dans des domaines spécifiques liés de l'économie numérique. Il constate que, malgré les difficultés réglementaires, l'Internet est loin d'être un espace "libre de réglementation". Il existe diverses normes de l'industrie, des accords de co-régulation entre l'industrie et le gouvernement, et dans certains cas, la réglementation de l'État. La plupart de ces règles visent à protéger les données personnelles et plus généralement les consommateurs. Dans de nombreux cas des lois et règlements d'application générale existent qui adressent les questions de confidentialité, de sécurité et de protection des consommateurs à la fois dans l’économie traditionnelle et numérique.
    Keywords: internet, competition, regulation, consumer protection, digital economy, économie numérique, protection des consommateurs, Internet, concurrence, réglementation
    JEL: D18 K2 L1 L5 L81 L82 L86
    Date: 2014–11–12
  11. By: Kim, Sung-min
    Date: 2014
  12. By: Domingo, Albert; Oliver, Miquel
    Abstract: Both users and operators are aiming for faster networks to host higher-quality contents. Legacy infrastructure models are still mainly based into facilities investment competition. The large investment to deploy a new network into the market has been a huge barrier for new entrants and it has moved regulators to favor infrastructure sharing and unbundling models to seek for competition. Moreover, the in-building deployment problems and the high costs of civil-works are hindering the optical fiber deployment to the home. On the other hand, the high demand for broadband creates new consumer habits towards digital contents and does not only rely on the network access technology to get connected. This need brings new opportunities for more innovative deployment models. This paper estimates the impact of having the end-users more actively involved in the deployment of fiber networks to reduce the overall investment. The techno-economic model drawn in this paper is based in the self-aggregation of users to share a broadband connection. More precisely, the model consists of a neighboring community of users that decides to build their own in-building access network to share a single broadband Internet connection. Services that are offered over the top of the network are contracted individually by end-user. The model allows comparing the effect of users contracting their Internet access in an aggregated way (at community/building level) in a highly competitive scenario. As noticed above, the expected effect of the involvement of users as a key element of a fiber network is to lower the overall investment up to a 45% mainly sustained by communities that will afford the in-building access network costs. The article analyzes the effect of users sharing a single connection that can lead to operator's reducing the risk and the length of the investment. It has been measured the investment length in terms of positive net present value, ROI over a certain interest rate and the payback period as the main indicators to explore how the higher engagement affects the deployment model in terms of risks and returns. In some cases, the investment periods increase by a factor of three or even can become non-sustainable if there is the pricing strategy ignores the aggregated demand. In addition to the new access network scenario, the model has implications on pricing, which directly affects the return of investment from the operator's side. In that way, the paper also compares the effect of keeping the same pricing scheme for individual and user-aggregate retail offer, to another pricing scheme that differentiates the offers for single users and communities.
    Keywords: Broadband,Techno-economic,FFTH,FTTH,Statistical multiplexing
    Date: 2014
  13. By: Catherine Benjamin (CREM UMR CNRS 6211, University of Rennes 1, France); Isabelle Cadoret (CREM UMR CNRS 6211, University of Rennes 1, France); Marie-Hélène Hubert (CREM UMR CNRS 6211, University of Rennes 1, France)
    Abstract: We investigate the carbon emission trends among the Member States by testing the assumption of -type convergence for per capita CO2 emissions, conditional upon per capita output and energy use per capita. Our results reveal that: EU-15 countries switch to a less carbon intensive economy from the early nineties, e-g, the relation emission growth/income is strictly negative. This result is robust to the inclusion of the new Member States. Thus, we argue that the decline in EU carbon emissions s a long term-trend and not the result of the economic crisis. Then, we discuss the eectiveness of the 20/20/20 climate package and the burden-sharing agreement. Some countries like Germany and Great-Britain can meet their carbon target without putting more eorts. Other historical Member States like France, Luxembourg, Sweden and Belgium can meet their carbon target by decreasing their energy use by 10%, ceteris paribus. Most of the New Member States can reach their target by increasing their energy per capita to the 1990 level while stabilizing their carbon emissions. This implies that their investment in renewable energy should be substantial.
    Keywords: Convergence, Dynamic Panel Data Models, Carbon Dioxide, European-Union, Climate Policy
    JEL: Q42 Q48
    Date: 2014–10
  14. By: Salant, Stephen (Resources for the Future); Seegert, Nathan
    Abstract: We reconsider an important debate between Pigou (1920) and Knight (1924) nominally about congestible roads. Contrary to Knight's contention, allowing independent players to set tolls on congestible roads does not necessarily induce an efficient allocation of motorists. Toll- setting does result in efficient allocation in the limit of a large economy even in the absence of any uncongestible road. But in the more realistic circumstance of a finite economy, toll- setting—unlike Pigouvian taxes—will not in general achieve efficiency. We use these results to demonstrate a role for government in producing an uncongestible option that provides the necessary “competitive conditions” for toll-setting to reach the efficient outcome. These results are important for other allocation problems involving congestion. They even apply to the allocation of researchers across different contests where prize setters offer each winner a monetary prize and must compete with other prize setters and with jobs offering riskless compensation.
    Keywords: congestion externality
    JEL: H21 H23
    Date: 2014–08–13

This nep-reg issue is ©2014 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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