nep-reg New Economics Papers
on Regulation
Issue of 2015‒02‒11
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Effect of Wind on Electricity CO2 Emissions: The Case of Ireland By Malaguzzi-Valeri, Laura; di Cosmo, Valeria
  2. Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone? By Patrice Bougette; Christophe Charlier
  3. Canada – Renewable Energy: Implications for WTO Law on Green and Not-so-Green Subsidies By Steve Charnovitz; Carolyn Fischer
  4. Carbon Price and Wind Power Support in Denmark By Claire Gavard
  5. Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes By Coria, Jessica; Jaraite, Jurate
  6. Budgetary Interests and the Degree of Unbundling in Electricity Markets - An Empirical Analysis for OECD Countries By Lindemann, Henrik
  7. How Do Drug Prices Respond to a Change from External to Internal Reference Pricing? Evidence from a Danish Regulatory Reform By Kaiser, Ulrich; Méndez, Susan J.
  8. Information v. Energy Efficiency Incentives: Evidence from Residential Electricity Consumption in Maryland By Massimo Anna Alberini; Charles Towe
  9. The effects and side-effects of the EU emissions trading scheme By Timothy Laing; Misato Sato; Michael Grubb; Claudia Comberti
  10. Time Series Properties of the Renewable Energy Diffusion Process: Implications for Energy Policy Design and Assessment By Masini, Andrea; Aflaki, Sam
  11. Regulatory Options for Local Reserve Energy Markets: Implications for Prosumers, Utilities, and other Stakeholders By Rosen, Christiane; Madlener, Reinhard
  12. Incentives for Price Manipulation in Emission Permit Markets with Stackelberg Competition By Francisco J. André; Luis M. de Castro

  1. By: Malaguzzi-Valeri, Laura; di Cosmo, Valeria
    Date: 2014–10
  2. By: Patrice Bougette (Université Nice Sophia Antipolis and GREDEG/CNRS); Christophe Charlier (Université Nice Sophia Antipolis and GREDEG/CNRS)
    Abstract: Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada – Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitutesubsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When ‘quantities’ are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement.
    Keywords: Feed-in Tariffs, Subsidies, Local Content Requirement, Industrial Policy, Canada – Renewable Energy Dispute, Trade Policy
    JEL: F18 L52 Q42 Q48 Q56
    Date: 2014–10
  3. By: Steve Charnovitz (George Washington University Law School); Carolyn Fischer (Resources for the Future (RFF) and Fondazione Eni Enrico Mattei (FEEM))
    Abstract: In the first dispute on renewable energy to come to 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: 2014–11
  4. By: Claire Gavard (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC), Italy)
    Abstract: This paper aims at characterizing the conditions of wind power deployment in order to infer a carbon price level that would provide wind power with comparable advantage over fossil fuel technologies as effective wind support policies. The analysis is conducted on Danish data from 2000 to 2010, i.e. after market liberalization took place in 2000. Probit technique is used to analyze the connection of new turbines to the grid each month and tobit analysis is employed on the additional capacity installed monthly. I find that the level and type of the support policy are the dominant drivers of deployment. Electricity price impact is not visible. The investment cost impact is not significant either, but the effect of the interest rate, although not visible in the probit analysis, is significant in the tobit analysis. The number of turbines already installed, that is taken as a proxy for the sites availability, does not have any significant effect either. A feed-in tariff significantly brings more wind power in than a premium policy. The fact that the support policy is a feed-in tariff rather than a premium increases the additional capacity installed monthly by up to several tens MW. The additional capacity installed monthly increases by up to thousand kW for each additional e/MWh of support. If the policy is a premium, I find that 24 e/MWh of support in addition to electricity price is needed to observe the connection of new turbines to the grid with a 0.5 probability. I convert this support level into a carbon price of 28 e/ton if wind power competes with coal, and 50 e/t if it competes with gas.
    Keywords: Wind Power, Renewable Energy, Subsidy, Carbon Price, Feed-in Tariff, Emissions Trading, Climate Policy
    JEL: Q4 Q42 Q48 Q5 Q54 Q58
    Date: 2015–01
  5. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Jaraite, Jurate (Centre for Environmental and Resource Economics, School of Business and Economics, Umeå University, Umeå, Sweden)
    Abstract: In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-á-vis downstream regulation by means of emission trading.
    Keywords: Carbon dioxide emissions; Carbon tax; Emissions Trading; EU ETS; Firm-level data; Sweden
    JEL: D23 H23 Q52 Q58
    Date: 2015–01
  6. By: Lindemann, Henrik
    Abstract: The degree of liberalization in OECD electricity markets varies considerably across countries. Commonly explained by diverging economic performances, corruption levels or government ideologies, this paper suggest another potential reason for cross-national differences in market reforms: given the high financial dependence of regulatory actors on public funding both in the past and nowadays, we expect regulators to increasingly refrain from [foster] the implementation of liberalization steps, the more such measures reduce [raise] the revenues of a tax; this prevents [aims at realizing] substantial decreases [increases] in public revenues (being a major source of regulatory funds) and thus most likely also in the regulators' budgets. Estimation results substantiate these considerations for both the corporate income tax and (in cases of a high price elasticity of power demand) the VAT on electricity.
    Keywords: Electricity Market Reform,Vertical Separation,Regulatory Authorities
    JEL: L50 L94 L98
    Date: 2015–01
  7. By: Kaiser, Ulrich (University of Zurich); Méndez, Susan J. (Melbourne Institute of Applied Economic and Social Research)
    Abstract: We study the effects of a change in the way patient reimbursements are calculated on the prices of pharmaceuticals using quasi-experimental data for Denmark which switched from external (where reimbursements are based on prices of similar products in foreign countries) to internal reference pricing (where they are based on the cheapest domestic substitute). We analyze three therapeutic classes with different treatment durations and show that the reform led to substantial price decreases for our lifelong treatment and to less substantial price reductions for our medium duration treatment while we do not find significant effects on our acute treatment. Moreover, the reform did only affect generics and did not impact original products or parallel imports.
    Keywords: pharmaceutical markets, regulation, reference pricing, treatment duration
    JEL: I18 C23
    Date: 2015–01
  8. By: Massimo Anna Alberini (University of Maryland,USA); Charles Towe (Department of Agricultural and Resource Economics - University of Connecticut.)
    Abstract: We focus on two utility programs intended to reduce energy usage and the associated CO2 emissions—a home energy audit and rebates on the purchase of high-efficiency air-source heat pumps. We use a unique panel dataset from participating and non-participating households to estimate the average treatment effect of participating in either program on electricity usage. We fit models with household-by-season, season-by-year, and household-by-year fixed effects to account for all possible confounders that might be influence energy usage. Since the programs are voluntary, we seek to restore near-exogeneity of the program “treatment” by matching participating households with control households. We deploy coarsened exact matching (CEM; Iacus et al., 2011) as our main matching method. We ask whether it is sufficient to match households based on past electricity usage, or if we gain by adding structural characteristics of the home, including heating system type. We find that the two programs reduce electricity usage by 5% on average. The effects are strong in both winter and summer for the energy audit group but appear to be stronger in the winter for the heat pump rebate group. Adding house characteristics to the matching variables does seem to affect results, suggesting that using past usage alone may not be sufficient to identify the effects of program participation.
    Keywords: Energy Efficiency; Household Behavior; Energy Efficiency Incentives; Electricity Usage; Home Energy Audit.
    JEL: Q41 D12 H3
    Date: 2015–01
  9. By: Timothy Laing; Misato Sato; Michael Grubb; Claudia Comberti
    Abstract: As many countries, regions, cities, and states implement emissions trading policies to limit CO2 emissions, they turn to the European Union's experience with its emissions trading scheme since 2005. As a prominent example of a regional carbon pricing policy, it has attracted significant attention from scholars interested in evaluating the effectiveness and impacts of emissions trading. Among the key difficulties faced by researchers is isolating the effect of the EU ETS on industry operation, investment, and pricing decisions from other dominant factors such as the financial crisis, and establishing credible counterfactual scenarios against this backdrop. This article reviews the evidence, focusing on two intended effects (emissions abatement and investment in low-carbon technologies) as well as two side-effects (profits and price impacts). We find that the EU ETS cut CO2 emissions by 40–80 million t/year on average, or 2–4% of the total capped, while the evidence on innovation and investment impacts is inconclusive. There is strong empirical support for cost-pass through in electricity (20–100%), in diesel and gasoline (>50%), and some preliminary evidence of pricing power in other industrial sectors. Windfall profits have amounted to billions of Euros, and concentrated in a few large companies.
    JEL: D24 H23 Q54 Q58
    Date: 2014–07
  10. By: Masini, Andrea; Aflaki, Sam
    Abstract: Confronted by increasingly tight budgets and a broad range of alternative options, policy makers need empirical methods to evaluate the effectiveness of policies aimed at supporting the diffusion of renewable energy sources (RES). Rigorous empirical studies of renewable energy policy effectiveness have typically relied on panel data models to identify the most effective mechanisms. A common characteristic of some of these studies, which has important econometric implications, is that they assume that the contribution of RES to total electricity generation will be stationary around a mean. This paper reviews such assumptions and rigorously tests the time series properties of the contribution of RES in the energy mix for the presence of a unit root. To that end, we use both individual and panel unit root tests to determine whether the series exhibit non-stationary behavior at the country level as well as for the panel as a whole. The analysis, applied to a panel of 19 OECD countries over the period 1990-2012, provides strong evidence that the time series of the renewable share of electricity output are not stationary in 17 of the 19 countries examined. This finding has important implications for energy policy assessment and energy policy making, which are discussed in the paper.
    Keywords: Unit root; cross-sectional dependence; renewable energy diffusions; renewable energy policies
    JEL: C22 C23 Q28
    Date: 2014–09–01
  11. By: Rosen, Christiane (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: While the share of fluctuating renewable energy resources is constantly increasing, the centralized, hierarchical organization of the current energy system cannot adequately accommodate such decentralized electricity generation. New ideas have been developed for improved integration, especially in the lead market Germany. One of these concepts is the microgrid, a grid within the grid. This paper presents a local reserve energy market, which can facilitate the operation and allow trading within the microgrid. Emphasis is put on the regulatory options and current market framework, mainly from a European and German perspective, which serve as a basis for implementing the local market.
    Keywords: local reserve energy market; balance group; prosumer
    JEL: C91 D03 D44 D83
    Date: 2014–10
  12. By: Francisco J. André (Universidad Complutense de Madrid, Spain); Luis M. de Castro (Universidad Complutense de Madrid, Spain)
    Abstract: It has been shown in prior research that cost effectiveness in the competitive emissions permit market could be affected by tacit collusion or price manipulation when the corresponding polluting product market is oligopolistic. We analyze these cross market links using a Stackelberg model to show that under reasonable assumptions, there are no incentives to collude for lobbying prices up. However, incentives for manipulating the price of permits up appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. Moreover, the changes for price manipulation increase with those changes that tend to undermine the leader's advantage in output production or to reduce the leader’s abatement cost.
    Keywords: Emissions Permits, Collusion, Market Power, Duopoly, Stackelberg Model
    JEL: D43 L13 Q58
    Date: 2015–02

This nep-reg issue is ©2015 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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