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on Regulation |
| By: | Bruno Lanz; Sebastian Rausch |
| Abstract: | We study whether to auction or to freely distribute emissions allowances when some firms participating in emissions trading are subject to price regulation. We show that free allowances allocated to price-regulated firms effectively act as a subsidy to output, distort consumer choices, and generally induce higher output and emissions by price-regulated firms. This provides a cost-effectiveness argument for an auction-based allocation of allowances (or equivalently an emissions tax). For real-world economies such as the Unites States, in which about 20 percent of total carbon dioxide emissions are generated by price-regulated electricity producers, our quantitative analysis suggests that free allowances increase economy-wide welfare costs of the policy by 40-80 percent relative to an auction. Given large disparities in regional welfare impacts, we show that the inefficiencies are mainly driven by the emissions intensity of electricity producers in regions with a high degree of price regulation. |
| Keywords: | Tradable Pollution Permits; Climate policy; Auctioning; Free Allocation; Price Regulation; Electricity Generation. |
| JEL: | C6 D4 D5 Q4 Q5 |
| Date: | 2015–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:gii:ciesrp:cies_rp_34&r=reg |
| By: | Christos Genakos; Pantelis Koutroumpis; Mario Pagliero |
| Abstract: | We study the repeal of a regulation that imposed maximum wholesale and retail markups for all but five fresh fruits and vegetables. We compare the prices of products affected by regulation before and after the policy change and use the unregulated products as a control group. We find that abolishing regulation led to a significant decrease in both retail and wholesale prices. However, markup regulation affected wholesalers directly and retailers only indirectly. The results are consistent with markup ceilings providing a focal point for collusion among wholesalers. |
| Keywords: | Markups; markup regulation; policy evaluation |
| JEL: | L0 L1 L4 L5 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60533&r=reg |
| By: | Kumar, Subhash (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | The Indian power sector is experiencing a lot of pressure to supply sustainable electricity at affordable cost due to heavy demand especially in the summer peak season. Most of India’s electricity is produced by fossil fueled power plants, which are the source of CO2 emissions. In this case, renewable energy sources play a vital role in securing sustainable energy without environmental emissions. This paper examines the effects of renewable energy use in electricity supply systems and estimates the CO2 emissions by developing various scenarios under the least cost approach. The LEAP energy model is used to develop these scenarios. The results show that in an accelerated renewable energy technology (ARET) scenario, 23% of electricity is generated by renewables only, and 74% of CO2 reduction is possible by 2050. If the maximum energy savings potential is combined with the ARET scenario, the renewables share in electricity supply rises to 36% as compared to the reference scenario, while the CO2 emission reduction in this case remains at 74%. |
| Keywords: | CO2 mitigation; Electricity generation; LEAP; Least cost method; Renewables; India |
| JEL: | C70 P48 Q41 Q42 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2014_014&r=reg |
| By: | Lindemann, Henrik |
| Abstract: | Despite the positive effect electricity grids separated from generation and supply by ownership are expected to have on the level of competition in the non-network activities, several EU member states still adhere to a solely legally unbundled transmission grid. This choice might be induced by regulators focusing on objectives other than the promotion of consumer interests: theoretically analyzing the decisions an authority takes on both the unbundling regime and the grid charge when it supervises a network monopolist providing a downstream Cournot duopoly with capacity, we find an agency pursuing consumer-oriented goals to always implement Ownership Unbundling. For a regulator acting in the interests of the industry or the government, though, results suggest the authority to be indifferent between Legal and Ownership Unbundling; minor potential drawbacks of a network separated by ownership for the agency or the companies might then tip the scales and cause the regulator to adhere to Legal Unbundling. |
| Keywords: | Legal Unbundling,Ownership Unbundling,Regulatory Authorities,Regulatory Objectives |
| JEL: | D73 L12 L13 L42 L50 L51 L94 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-544&r=reg |
| By: | Christos Genakos; Tommaso Valletti |
| Abstract: | We re-consider the impact that regulation of call termination on mobile phones has had on mobile customers’ bills. Using a large panel covering 27 countries, we find that the “waterbed” phenomenon, initially observed until early 2006, becomes insignificant on average over the 10-year period, 2002-2011. We argue that this is related to the changing nature of the industry, whereby mobile-to-mobile traffic now plays a much bigger role compared to fixed-to-mobile calls in earlier periods. Over the same decade, we find no evidence that regulation caused a reduction in mobile operators’ profits and investments. |
| Keywords: | Mobile telephony; termination rates; waterbed effect |
| JEL: | D12 D43 L5 L96 L98 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60353&r=reg |
| By: | Lindemann, Henrik |
| Abstract: | Independent regulatory authorities are a basic prerequisite for a successful liberalization process. However, contrary to what is expected, both graphical analyses and OLS regressions for a small sample of electricity and gas regulators operating in 16 European countries reveal a negative relationship between the authorities' formal autonomy from politicians and the scope of market reforms. These findings might suffer from endogeneity, though, so we draw on political scientists' explanations for diverging independence levels to construct appropriate instruments. The 2SLS-IV results then confirm conventional wisdom: the higher the degree of regulatory autonomy, the higher the level of liberalization. |
| Keywords: | Independent Regulatory Authorities,Energy Market Liberalization,Formal Independence |
| JEL: | L50 L94 L95 L98 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-545&r=reg |
| By: | Ralf Martin; Mirabelle Muuls; Laure B. de Preux; Ulrich J. Wagner |
| Abstract: | When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon intensive and trade exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation. |
| JEL: | H23 Q52 Q53 Q54 Q58 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:59312&r=reg |
| By: | Heinz Welsch (University of Oldenburg, Department of Economics); Charlotte von Möllendorf (University of Oldenburg, Department of Economics) |
| Abstract: | Electricity from renewable sources avoids the disadvantages of conventional power generation (air pollution, greenhouse gases, nuclear risk) but often meets with local resistance due to visual, acoustic, and odor nuisance. We use representative panel data on the subjective well-being of 36,475 individuals in Germany, 1994 -<br>2012, for identifying and valuing the local externalities from wind, solar and biomass plants. While the well-being effects of windturbines refer mainly to initial installations and tend to dissipate over time, the effects of solar and biomass plants build up gradually as their number and capacity rises. In a spatial perspective,<br>power generation from biomass creates negative spillovers to adjacent localities that are absent in the case of wind power. |
| Keywords: | renewable energy, local externality; subjective well-being, life satisfaction, non-market valuation |
| JEL: | Q42 D62 I31 Q51 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:old:dpaper:373&r=reg |
| By: | Antoine Dechezlepretre; Matthieu Glachant |
| Abstract: | This paper analyses the relative influence of domestic and foreign demand-pull policies in wind power across OECD countries on the rate of innovation in this technology. We use annual wind power generation to capture the stringency of the portfolio of demand-pull policies in place (e.g., guaranteed tariffs, investment and production tax credits), and patent data as an indicator of innovation activity. We find that wind technology improvements respond positively to policies both home and abroad, but the marginal effect of domestic policies is 12 times greater. The influence of foreign polices is reduced by barriers to technology diffusion, in particular lax intellectual property rights. Reducing such barriers therefore constitutes a powerful policy leverage for boosting environmental innovation globally. |
| Keywords: | innovation; international technology diffusion; renewable energy policy; wind power |
| JEL: | O31 O42 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58155&r=reg |
| By: | Pierre Louis Kunsch; Jean J. Friesewinkel |
| Abstract: | The Belgian nuclear phase-out law imposes closing down in the 2015-2025 period seven nuclear power plants (NPPs) producing more than 50% of the domestic electricity. This creates an urgent problem in the country because of the absence of well-defined capacity-replacement plans. Though a safety-of-supply provision in the law allows for a delayed phase-out, hopes for a technically acceptable schedule have reduced after the Fukushima nuclear disaster in March 2011. In this article policy investigations are made with system dynamics. A significant finding from such modelling is that, in contrast to common expectations, a too early nuclear phase-out will not serve the deployment of renewable energy sources and rational use of energy. It is indeed found to primarily benefit to fossil fuel, creating unwanted drawbacks regarding safety of supply, dependency on foreign suppliers, price volatility, and increased use of non-renewable and CO2-emitting fossil fuels. © 2013 Elsevier Ltd. |
| Keywords: | Nuclear energy; Renewable energy sources; System dynamics modelling |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/189447&r=reg |
| By: | Ralf Martin; Laure B. de Preux; Ulrich J. Wagner |
| Abstract: | We estimate the impact of a carbon tax on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the full tax and plants that paid only 20% of the tax. Exploiting exogenous variation in eligibility for the tax discount, we find that the carbon tax had a strong negative impact on energy intensity and electricity use. No statistically significant impacts are found for employment, revenue or plant exit. |
| Keywords: | carbon tax; climate change levy; energy use; manufacturing; policy evaluation; UK |
| JEL: | D21 H23 Q41 Q48 Q54 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57349&r=reg |
| By: | Alvarez, Francisco; André, Francisco J. |
| Abstract: | We analise emission permit auctions under leader-follower competition when the leader bids strategically and the follower acts as price-taker both at the auction and the secondary market. We obtain linear equilibrium bidding strategies for both firms and a unique equilibrium of the auction, which is optimal ex-post for the leader. Under specific distributional assumptions we conclude that the auction always awards less permits to the leader than the cost-effective amount. Our central result is a cautionary note on the properties of auctioning under market power. Under interior solution the auction allocation is dominated by grandfathering in terms of aggregated cost with probability one. As a policy implication, the specific design of the auction turns out to be crucial for cost-effectiveness. The chances of the auction to outperform grandfathering require that the former is capable of diluting the market power that is present in the secondary market. |
| Keywords: | Cap-and-trade systems, auctions, grandfathering, market power, Bayesian games of incomplete information. |
| JEL: | D44 L13 Q58 |
| Date: | 2015–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61698&r=reg |
| By: | Jason Pearcy (Montana State University); Scott J. Savage (University of Colorado at Boulder) |
| Abstract: | By allowing carriers to route telephone calls over low-cost private lines, international simple resale (ISR) makes it possible for carriers to provide international telephone service without owning an international circuit. When approved, ISR reduces entry barriers and can increase competition. Using data from US markets from 1995 to 2004, we estimate the effects of ISR on entry and retail prices. Results show that ISR has no effect on entry and actual competition. However, controlling for actual competition, ISR authorization causes an average reduction in prices of 32.7 percent. Markets with relatively high carrier surplus experience an additional reduction in the price by 0.4 percent, and prices are 3.4 percent lower in markets with relatively high private line capacity. Our findings suggest that ISR promotes potential competition and lower prices in markets where the threat of hit-and-run entry is more credible. |
| Keywords: | Crop Insurance, Contestable Markets, Barriers to Entry, Competition, Policy Evaluation, Treatment Effects |
| JEL: | C21 D04 L1 L13 L96 |
| Date: | 2014–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:mnu:wpaper:1005&r=reg |
| By: | Charalampous, Georgios (International Hellenic University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | This study revisits risk management in the German power market, specifically focusing on conventional thermal power generation. The subsidizing and prioritizing of electricity produced from renewable energy sources (RES) by means of the Renewable Energy Sources Act (EEG) has changed the market’s structure. Specifically, it has led to an erosion of the revenues gained by coal- and natural-gas-fired power plants and, therefore, undermined the competitiveness of traditional power generation. This fact has brought to the forefront the necessity of mitigating the risk exposure in order to tackle the worsening situation for conventional power plant owners. The approach adopted in this paper is to assess and choose the optimum forward contract for hedging the power output and fuel purchase simultaneously. This is done by evaluating the hedging effectiveness of the futures contracts available at the European Energy Exchange (EEX) in Leipzig. The hedging performance is evaluated on the basis of a multivariate GARCH model (the BEKK model). Finally, in the framework of portfolio optimization, we construct the efficient frontier, so as to identify the point at which the combination of spot and forward prices gives the minimization of risk exposure. |
| Keywords: | Risk management; Energy markets; Energy derivatives; Hedging strategies |
| JEL: | G11 Q59 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2013_023&r=reg |
| By: | Justin Schlosberg |
| Abstract: | Since the Leveson Inquiry, academic and civil society experts have proposed a range of new limits on media ownership, both ceiling limits and threshold triggers of targeted behavioural intervention. The impact of these limits in the current situation would be relatively minor, even if the ceiling limits were set at the lower bounds of 15% or 20%, and need not necessarily result in enforced divestment or equate to a cap on growth. The BBC should be included in the measurement and monitoring of media plurality, but not in prescribed remedies. Plurality policy should address both individual markets for news and information (newspapers, radio, television and internet) as well as the total media market that extends beyond news providers. |
| JEL: | R14 J01 L91 L96 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:56428&r=reg |
| By: | Claudia Schwirplies (University of Kassel); Andreas Ziegler (University of Kassel) |
| Abstract: | This paper contributes to the economic literature on pure and impure public goods by consid-ering two alternatives for contributing to the public good climate protection: compensating carbon emissions from conventional consumption or paying higher prices for climate-friendly products. We analytically and empirically examine a wide range of motives and their impact on individuals’ choice in favor of these two alternatives. Relying on data from representative surveys among more than 2000 participants from Germany and the USA, our results indicate that environmental awareness, warm glow motives, and the desire to set a good example sig-nificantly motivate the choice of both climate protection activities in both countries. However, some motives differ considerably between both alternatives and countries. A green identity enhances the willingness to pay a price premium for climate-friendly goods or services in Germany, while social norms seem to be of much higher relevance in the USA. Our results further suggest that the choice of climate protection activities, especially of carbon offsetting, entails a high degree of uncertainty. |
| Keywords: | Public good; climate change; climate protection; carbon offsetting; price premium |
| JEL: | H41 Q54 Q58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201504&r=reg |