nep-reg New Economics Papers
on Regulation
Issue of 2015‒09‒05
twenty papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Time series properties of the renewable energy diffusion process: Implications for energy policy design and assessment By Syed Abul, Basher; Andrea, Masini; Sam, Aflaki
  2. The Impact of Cheap Natural Gas on Marginal Emissions from Electricity Generation and Implications for Energy By J. Scott Holladay; Jacob LaRiviere
  3. Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs By Oskar Lecuyer; Adrien Vogt-Schilb
  4. Power to the People: Does Ownership Type Influence Electricity Service? By Boylan, Richard T.
  5. Clash between national and EU climate policies: The German climate levy as a remedy? By Peterson, Sonja
  6. Cost-Effectiveness of Greenhouse Gas Mitigation Measures for Agriculture: A Literature Review By Michael MacLeod; Vera Eory; Guillaume Gruère; Jussi Lankoski
  7. An Assessment of the Energy-Efficiency Gap and Its Implications for Climate-Chhange Policy By Gerarden, Todd G.; Newell, Richard G.; Stavins, Robert; Stowe, Robert C.
  8. Belt and Suspenders and More: The Incremental Impact of Energy Efficiency Subsidies in the Presence of Existing Policy Instruments By Houde, Sebastien; Aldy, Joseph E.
  9. Dynamic Pricing of Electricity: A Survey of Related Research By Dutta, Goutam; Mitra, Krishnendranath
  10. Exploring information privacy regulation, risks, trust, and behavior By Caroline Lancelot Miltgen; H. Jeff Smith
  11. Managing manipulation of electricity markets By James Bushnell
  12. Shops and the City: Evidence on Local Externalities and Local Government Policy from Big Box Bankruptcies By Shoag, Daniel; Veuger, Stan
  13. Asset Pricing in Incomplete Markets: Valuing Gas Storage Capacity By Lin Zhao; Sweder van Wijnbergen
  14. Urban Rail Development in Tokyo from 2000 to 2010 By Hironori Kato
  15. Leapfrogging or Stalling Out? Electric Vehicles in China By Howell, Sabrina; Lee, Henry; Heal, Adam
  16. The Competitiveness Impacts of Climate Change Mitigation Policies By Aldy, Joseph E.; Pizer, William A.
  17. Energy Technology Expert Elicitations for Policy: Workshops, Modeling, and Meta-analysis By Diaz Anadon, Laura; Bosetti, Valentina; Chan, Gabriel; Nemet, Gregory; Verdolini, Elena
  18. Market Power Rents and Climate Change Mitigation: A Rationale for Coal Taxes? By Philipp M. Richter; Roman Mendelevitch; Frank Jotzo
  19. Valuation of Urban Rail Service: Experiences from Tokyo, Japan By Hironori Kato
  20. The Impacts of Urban Public Transportation: Evidence from the Paris Region By T. MAYER; T. TREVIEN

  1. By: Syed Abul, Basher; Andrea, Masini; Sam, Aflaki
    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: Renewable energy policies, renewable energy diffusion, unit root, cross-sectional dependence.
    JEL: C22 C23 Q28
    Date: 2015–09–01
  2. By: J. Scott Holladay (Department of Economics, University of Tennessee); Jacob LaRiviere (Department of Economics, University of Tennessee)
    Abstract: We use quasi-experimental variation due to the introduction of fracking to estimate the impact of a decrease in natural gas prices on marginal air pollution emissions from electricity producers. We find natural gas generation has displaced coal fired generation as the marginal fuel source signicantly changing the marginal emissions prole. The impact of cheap natural gas varies across U.S. regions as a function of the existing stock of electricity generation. We demonstrate the impact of these changes on the environmental benets of energy policy by simulating the installation wind and solar generating capacity in dierent regions around the U.S. We construct an hourly data set of potential renewable generation for both wind and solar power and combine that with our estimated marginal emissions. CO2 emissions offset by wind and solar power have fallen over most, but not all of the country due to cheap natural gas.
    Keywords: energy, air pollution, natural gas, renewable energy
    JEL: E32 R10
    Date: 2015–07
  3. By: Oskar Lecuyer (Department of Economics and Oeschger Centre for Climate Change Research - University of Bern); Adrien Vogt-Schilb (CIRED - Centre International de Recherche sur l'Environnement et le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - CIRAD - Centre de coopération internationale en recherche agronomique pour le développement - École des Ponts ParisTech (ENPC) - CNRS, Climate Change Group - The World Bank)
    Abstract: This paper studies the optimal transition from existing coal power plants to gas and renewable power under a carbon budget. It solves a model of polluting, exhaustible resources with capacity constraints and adjustment costs (to build coal, gas, and renewable power plants). It finds that optimal investment in renewable energy may start before coal power has been phased out and even before investment in gas has started, because doing so allows for smoothing investment over time and reduces adjustment costs. Gas plants may be used to reduce short-term investment in renewable power and associated costs, but must eventually be phased out to allow room for carbon-free power. One risk for myopic agents comparing gas and renewable investment is thus to overestimate the lifetime of gas plants - e.g., when computing the levelized cost of electricity - and be biased against renewable power. These analytical results are quantified with numerical simulations of the European Commission's 2050 energy roadmap.
    Date: 2014–08–21
  4. By: Boylan, Richard T. (Rice University)
    Abstract: Since the 1990s, American states have deregulated electricity markets. However, there has been little effort to privatize municipal utilities. Rather, after storm related power outages, the press has relayed calls for municipalizing investor owned utilities, and claimed that profit-making utilities do not have enough of an incentive to prepare for storms. Most storm preparedness discussions have focused on regularly cutting tree branches near power lines and burying power lines underground. We provide empirical evidence that municipal utilities spend more on maintenance of their distribution network (e.g., cutting trees), but bury a smaller percent of their lines underground, compared to investor owned utilities. In order to find the overall effect of ownership type on outages, we examine a stratified random sample of 241 investor owned, 96 cooperative, and 94 municipal utilities in the United States between 1999 and 2012. We find that storms disrupt electricity sales for municipal utilities; specifically, storm damages that equal 1% of personal income lead to a 1.85% decrease in residential electricity sales by municipal utilities. However, storms do not significantly affect residential electricity sales by investor owned utilities. These results are consistent with international experience with privatization. Specifically, countries that have privatized distribution have not seen an increase in disruptions to electricity service.
    JEL: D70 L33 L94
    Date: 2014–08
  5. By: Peterson, Sonja
    Abstract: This policy brief explores the potential scope and optimal design of national climate policies in the European climate policy context. It argues that the recent German proposal of a climate levy for electricity generators (BMWi 2015) has the potential to reconcile EU and national policies. Section 2 starts with a brief introduction into the present EU climate policy regime and the rationale of national climate policies in this framework. The bottom line is that the current setting basically justifies national targets and policies only for the sectors that are not already covered by the European emissions trading scheme (EU ETS). Section 3 discusses the deficiencies of the EU ETS which is the major reason why additional national polices for the EU ETS sectors can still be justified. Section 4 focusses on how such national policies should be designed. Section 5 takes the proposed German climate level as an interesting example of a new type of national policy and discusses how it could be optimized. Section 6 summarizes and concludes.
    Date: 2015
  6. By: Michael MacLeod; Vera Eory; Guillaume Gruère; Jussi Lankoski
    Abstract: This paper reviews the international literature on the cost-effectiveness of supply-side mitigation measures that can reduce the emissions intensity of agriculture while maintaining or increasing production. Sixty-five recent international studies of cost-effectiveness covering 181 individual activities are reviewed. Nine case studies of well covered mitigation measures, generally using a cost-engineering approach, illustrate significant differences in the cost-effectiveness of measures across countries and studies, in part due to contextual differences. Although caution needs to be exercised in comparing heterogeneous studies, the results suggest that measures based on fertiliser use efficiency, cattle breeding, and potentially improving energy efficiency in mobile machinery, are often considered highly cost-effective mitigation measures across countries. A preliminary overview of policy highlights the existence of a range of options to encourage the adoption of cost-effective measures, from information to incentive-based policies. Further analysis is needed to address remaining estimation challenges and to help determine how mitigation measures may be embedded into broader climate, agricultural and environmental policy frameworks.
    Keywords: climate change, greenhouse gas mitigation, agricultural, cost-effectiveness, agriculture
    JEL: Q16 Q52 Q54 Q58
    Date: 2015–08
  7. By: Gerarden, Todd G. (Harvard University); Newell, Richard G. (Duke University); Stavins, Robert (Harvard University); Stowe, Robert C. (Harvard University)
    Abstract: Improving end-use energy efficiency--that is, the energy-efficiency of individuals, households, and firms as they consume energy--is often cited as an important element in efforts to reduce greenhouse-gas (GHG) emissions. Arguments for improving energy efficiency usually rely on the idea that energy-efficient technologies will save end users money over time and thereby provide low-cost or no-cost options for reducing GHG emissions. However, some research suggests that energy-efficient technologies appear not to be adopted by consumers and businesses to the degree that would seem justified, even on a purely financial basis. We review in this paper the evidence for a range of explanations for this apparent "energy-efficiency gap." We find most explanations are grounded in sound economic theory, but the strength of empirical support for these explanations varies widely. Retrospective program evaluations suggest the cost of GHG abatement varies considerably across different energy-efficiency investments and can diverge substantially from the predictions of prospective models. Findings from research on the energy-efficiency gap could help policy makers generate social and private benefits from accelerating the diffusion of energy-efficient technologies--including reduction of GHG emissions.
    Date: 2015–01
  8. By: Houde, Sebastien (University of MD); Aldy, Joseph E. (Harvard University)
    Abstract: The effectiveness of investment subsidies depends on the existing array of regulatory and information mandates, especially in the energy efficiency space. Some consumers respond to information disclosure by purchasing energy-efficient durables (and thus may increase the inframarginal take-up of a subsequent subsidy), while other consumers may locate at the lower bound of a minimum efficiency standard (and a given subsidy may be insufficient to change their investment toward a more energy-efficient option). We investigate the incremental impact of energy efficiency rebates in the context of regulatory and information mandates by evaluating the State Energy Efficient Appliance Rebate Program (SEEARP) implemented through the 2009 American Recovery and Reinvestment Act. The design of the program--Federal funds allocated to states on a per capita basis with significant discretion in state program design and implementation--facilitates our empirical analysis. Using transaction-level data on appliance sales, we show that most program participants were inframarginal due to important short-term intertemporal substitutions where consumers delayed their purchases by a few weeks. We find evidence that some consumers accelerated the replacement of their old appliances by a few years, but overall the impact of the program on long-term energy demand is likely to be very small. Our estimated measures of cost-effectiveness are an order of magnitude higher than estimated for other energy efficiency programs in the literature. We also show that designing subsidies that reflect, in part, underlying attribute-based regulatory mandates can result in perverse effects, such as upgrading to larger, less energy-efficient models.
    JEL: H31 Q40 Q48 Q58
    Date: 2014–09
  9. By: Dutta, Goutam; Mitra, Krishnendranath
    Abstract: In this paper, we survey 82 papers related to revenue management and dynamic pricing of electricity and lists future research avenues in this field. Dynamic pricing has the potential to modify electric load profiles by charging different prices at different demand levels and hence can act as an effective demand side management tool. There are different forms of dynamic prices that can be offered to different markets and customers. Forecasting of demand, and demand price relationship play an important role in determining prices and helps in scheduling load in dynamic pricing environments. Consumers’ willingness-to-pay for electricity services is also necessary in setting price limits. Elasticity of demand is an indication of the demand response to changing prices. Market segmentation can enhance the effects of such pricing schemes. Appropriate scheduling of electrical load enhances the consumer response to dynamic tariffs.
  10. By: Caroline Lancelot Miltgen (Audencia Recherche - Audencia); H. Jeff Smith (Miami University)
    Abstract: Over the past few decades, governments worldwide have grappled with their approaches to regulating issues associated with information privacy. However, research into individuals' perceptions of regulatory protections and the relationships between those perceptions and behavioral choices has been sparse. In this study, we develop and test a model that considers relationships between an antecedent variable (regulatory knowledge); a mediating structure that encompasses perceived privacy regulatory protection, trust, and privacy risk concerns; two outcome variables (protection behavior and regulatory preferences); and direct and moderating effects associated with perceived rewards. Using a sample of young UK consumers that we collected in cooperation with the European Commission, we find strong support for our overall model and for most of our hypotheses. We discuss implications for research, managerial practice, and regulation.
    Date: 2015–09
  11. By: James Bushnell
    Abstract: James Bushnell examines the response of regulators in the United States to apparent abuses by a newly influential segment of the industry: Banks.
    Date: 2014–03–01
  12. By: Shoag, Daniel (Harvard University); Veuger, Stan (?)
    Abstract: Large retailers have significant positive spillovers on nearby businesses, and both private and public mechanisms exist to attract them. We estimate these externalities using detailed geographic establishment data and exogenous variation from national chain bankruptcies. We show that local government policy responds to the size of these spillovers. When political boundaries allow local governments to capture more of the gains from these large stores, governments are more likely to provide retail subsidies. However, these public incentives also crowd out private mechanisms that subsidize these stores and internalize their benefits. On net, we find no evidence that government subsidies affect the efficiency of these large retailers' location choice as measured by the size of the externalities at a given distance, rather than within a certain border.
    Date: 2014–04
  13. By: Lin Zhao (University of Amsterdam, the Netherlands); Sweder van Wijnbergen (University of Amsterdam, the Netherlands)
    Abstract: We investigate the relationship between the gas spot market and the price of gas storage capacity. Contrary to the common belief, the auction prices for gas storage are mostly affected by the volatility of current market prices rather than by the winter-summer price differences. This paper provides a numerical solution for pricing storage capacity, by taking investor's activities through the spot market and storage service into account. A bivariate Generalized Autoregressive Score (GAS) model is employed for modeling the dynamics of the day-ahead and month-ahead spot market prices, as well as the time-varying volatilities and correlations. Under an incomplete market setting, our model is able to approximate the realized auction prices. Moreover, one interesting implication is that the implied average risk aversion of investor for a storage contract increases with the volatility of the spot market. This is an intuitive result because storage capacity can serve as an effective hedging product for the spot market, and the demand for this product is high when the market becomes risky: more risk averse investors are participating in the auctions. Moreover, a sensitivity analysis on different injection/withdrawal rates is also included, and particularly, contracts with higher capacity rates are priced at a higher level.
    Keywords: stochastic volatility; Generalised Autoregressive Score modeling; incomplete markets; real options; utility indifference pricing; gas storage; capacity constraints
    JEL: C61 C63 G12 G13 Q41
    Date: 2015–08–28
  14. By: Hironori Kato
    Abstract: Tokyo is well known as a rail-oriented city where the huge traffic demand generated from the megacity is well supported by a sophisticated urban rail system. The results of the 2008 Person Trip Survey show that rail’s modal share was 30% as of 2008; the economy of Tokyo is highly dependent on an efficient urban rail network. As shown in Kato (2014), Tokyo’s urban rail market has unique characteristics: private rail companies provide many of the rail services, the rail network was developed under the guidance of the central government, rail users suffered from chronic traffic congestion for many years, and the rail market has recently been significantly influenced by a rapidly aging demographic. In spite of its uniqueness, the experiences of urban rail development in Tokyo could be useful for other OECD member countries.
    Date: 2014–04–16
  15. By: Howell, Sabrina (Harvard University); Lee, Henry (Harvard University); Heal, Adam (Harvard University)
    Abstract: China has ambitious goals for developing and deploying electric vehicles (EV). The stated intention is to "leapfrog" the auto industries of other countries and seize the emerging EV market. Since 2009, policies have included generous subsidies for consumers in certain locations, as well as strong pressure on local governments to purchase EVs. Yet four years into the program, progress has fallen far short of the intended targets. China's EV industry faces the same challenges as companies in the West: a) high battery costs; b) inadequate range between charges; and c) no obvious infrastructure model for vehicle charging. In addition, China's industry is constrained by four domestic barriers. Mass EV deployment in China likely requires substantial policy adjustment. In particular, it will be necessary to permit foreign EV technologies relatively free market entry. In turn, this requires greater foreign IP protection. China must also consolidate its domestic industry and place greater emphasis on smaller, cheaper vehicles aimed at domestic, lower-end markets. If EVs are to contribute to air quality improvement, the government must ensure that the electricity powering EVs is cleaner than the current mix, particularly in Northeast regions of China.
    Date: 2014–07
  16. By: Aldy, Joseph E. (Harvard University and Resources for the Future); Pizer, William A. (Duke University and Resources for the Future)
    Abstract: We develop a precise definition of the competitiveness impacts of environmental regulation that can be estimated with available domestic production, trade, and energy price data. We use this definition and a 9-year panel of nearly 450 U.S. manufacturing industries to estimate and predict the effects of a U.S.-only $15 per ton CO2 price. We find competitiveness effects on the order of a 0.5 to 0.8 percent decline in production among energy-intensive manufacturing industries, representing about one-sixth of the policy's impacts on these firms' output.
    JEL: F18 Q52 Q54
    Date: 2014–05
  17. By: Diaz Anadon, Laura (Harvard University); Bosetti, Valentina (Harvard University); Chan, Gabriel (Harvard University); Nemet, Gregory (Harvard University); Verdolini, Elena (Harvard University)
    Abstract: Characterizing the future performance of energy technologies can improve the development of energy policies that have net benefits under a broad set of future conditions. In particular, decisions about public investments in research, development, and demonstration (RD&D) that promote technological change can benefit from (1) an explicit consideration of the uncertainty inherent in the innovation process and (2) a systematic evaluation of the tradeoffs in investment allocations across different technologies. To shed light on these questions, over the past five years several groups in the United States and Europe have conducted expert elicitations and modeled the resulting societal benefits. In this paper, we discuss the lessons learned from the design and implementation of these initiatives in four respects. First, we discuss lessons from the development of ten energy-technology expert elicitation protocols, highlighting the challenge of matching elicitation design with a particular modeling tool. Second, we report insights from the use of expert elicitations to optimize RD&D investment portfolios. These include a discussion of the rate of decreasing marginal returns to research, the optimal level of overall investments, and the sensitivity of results to policy scenarios and selected metrics for evaluation. Third, we discuss the effect of combining online elicitation tools with in-person group discussions on the usefulness of the results. Fourth, we summarize the results of a meta-analysis of elicited data across research groups to identify the association between expert characteristics and elicitation results.
    Date: 2014–11
  18. By: Philipp M. Richter (German Institute for Economic Research (DIW Berlin)); Roman Mendelevitch (German Institute for Economic Research (DIW Berlin)); Frank Jotzo (Crawford School of Public Policy, The Australian National University)
    Abstract: In this paper we investigate the introduction of an export tax on steam coal levied by an individual country (Australia), or a group of major exporting countries. The policy motivation would be twofold: generating tax revenues against the background of improved terms-of-trade, while CO2 emissions are reduced. We construct and numerically apply a two-level game consisting of an optimal policy problem at the upper level, and an equilibrium model of the international steam coal market (based on COALMOD-World) at the lower level. We find that a unilaterally introduced Australian export tax on steam coal has little impact on global emissions and may be welfare reducing. On the contrary, a tax jointly levied by a Òclimate coalitionÓ of major coal exporters may well leave these better off while significantly reducing global CO2 emissions from steam coal by up to 200 Mt CO2 per year. Comparable production-based tax scenarios consistently yield higher tax revenues but may be hard to implement against the opposition of disproportionally affected local stakeholders depending on low domestic coal prices.
    Keywords: Export tax; steam coal; supply-side climate policy; carbon leakage; Australia; Mathematical Program with Equilibrium Constraints (MPEC)
    JEL: Q48 F13 Q58 Q41 C61
    Date: 2015–08
  19. By: Hironori Kato
    Abstract: Promoting public transportation, which includes rail, metro, bus rapid transit, and bus services is one of the most popular urban transportation policies among transportation authorities in many countries. This popularity may reflect the social requirement to pursue a sustainable transportation system by motivating people to use an environmentally friendly transportation mode. In particular, the modal shift from the automobile to public transportation is highlighted in urban transportation planning because many cities have suffered from serious traffic congestion, which has caused economic losses as well as negative impacts on local, regional, and global environments. In order to attract individuals to use public transportation, the improvement of service is critical. This includes increasing service frequency, decreasing travel time, upgrading station facilities, and introducing higher-capacity vehicles.
    Date: 2014–04–14
  20. By: T. MAYER (Sciences-Po,CEPII et CEPR); T. TREVIEN (Insee)
    Abstract: Evaluating the impact of transport infrastructure meets a major challenge since rail lines are not randomly located. We use the natural experiment offered by the opening and progressive extension of the Regional Express Rail (RER) between 1970 and 2000 in the Paris metropolitan region, and in particular the deviation from original plans due to budgetary constraints and technical reasons, in order to identify the causal impact of urban rail transport on firm location, employment and population growth. We use a difference-in-differences approach on a specific subsample, selected to avoid endogeneity bias which occurs when evaluating transportation effects. We find that the increase in employment is 12.8% higher in municipalities connected to the new network compared to the existing suburban rail network. Places located within 20 km from Paris are the only affected. While we find no effect on overall population growth, our results suggest that the commissioning of the RER may have increased the competition for land since high-skilled households are more likely to locate in the vicinity of a RER station.
    Keywords: Public policy evaluation, Public transportation, Firm and household location choices
    JEL: D04 H43 R42
    Date: 2015

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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