nep-reg New Economics Papers
on Regulation
Issue of 2016‒04‒16
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Renewable energy targets in the context of the EU ETS: Whom do they benefit exactly? By Landis, Florian; Heindl, Peter
  2. Effects of policies on patenting in wind power technologies By Schleich, Joachim; Walz, Rainer; Ragwitz, Mario
  3. The political drivers of renewable energies policies By Isabelle Cadoret; Fabio Padovano
  4. Beyond carbon pricing: the role of banking and monetary policy in financing the transition to a low-carbon economy By Emanuele Campiglio
  5. Benchmarking Heterogeneous Distribution System Operators: Evidence from Norway By George Elias
  6. Optimal Cost Overruns: Procurement Auctions and Renegotiation By Herweg, Fabian; Schwarz, Marco A.
  7. TRADE IN CARBON AND THE EFFECTIVENESS OF CARBON TARIFFS By Christoph Böhringer; Jan Schneider; Emmanuel Asane-Otoo
  8. A Market Based Solution for Fire Sales and Other Pecuniary Externalities By Weerachart T. Kilenthong; Robert M. Townsend
  9. Productivity Trends in the Canadian Transport Sector: An Overview By Matthew Calver; Fanny McKellips
  10. Incentives for early adoption of carbon capture technology: Further considerations from a European perspective By Albert Banal-Estañol; Jeremy Eckhause; Olivier Massol
  11. Not in my backyard: CCS storage sites and public perception of CCS By Braun, Carola
  12. Market Power and Joint Ownership: Evidence from Nuclear Plants in Sweden By Lundin, Erik

  1. By: Landis, Florian; Heindl, Peter
    Abstract: We study how European climate and energy policy targets affect different member states and households of different income quintiles within the member states. We find that renewable energy targets in power generation, by reducing EU ETS permit prices, may make net permit exporters worse off and net permit importers better off. This effect appears to dominate the effciency cost of increasing the share of energy provided by renewable energy sources in the countries that adopt such targets. While an increase in prices for energy commodities, which is entailed by the policies in question, affects households in low income quintiles the most, recycling revenues from climate policy allows governments to compensate them for the losses. If renewable targets reduce the revenues from ets permit auctions, member states with large allocations of auctionable permits will lose some of the ability to do so.
    Keywords: distributional effects,EU climate policy,renewable energy target
    JEL: H23 Q52 Q54
    Date: 2016
  2. By: Schleich, Joachim; Walz, Rainer; Ragwitz, Mario
    Abstract: This paper explores factors driving innovation in wind power technologies in OECD countries by employing count data panel econometrics. Transnational patent data in wind power technologies serve as the indicator for innovation. In addition to classical supply side policies, the set of explanatory variables also reflects insights from the systems of innovation and policy analysis literature. The findings suggest that patenting is positively related to public R&D in wind power (reflecting supply side regulation), to the stock of wind capacity (learning effects), to the number of patents per capita (innovation capacity), to the share of Green party voters (legitimacy of technology), to targets for electricity from renewable energy sources, to the stability of the regulatory framework, and also to power prices (profitability). Feed-in-tariffs, which have been the predominant support mechanism for electricity from renewables, are not found to be positively related to patenting activity - unless they are implemented within a stable regulatory framework. These findings are robust to alternative model specifications and distributional assumptions.
    Keywords: innovation,supply-side regulation,demand-side regulation,wind power,patent analysis,count data econometrics
    Date: 2016
  3. By: Isabelle Cadoret (UR1 - Université de Rennes 1, CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique); Fabio Padovano (Roma Tre University, CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper empirically analyzes how political factors affect the deployment of renewable energy (RE) sources and compares their explanatory power to that of other economic, energy and environmental drivers that have received greater attention in the literature so far. The sample encompasses the EU countries bound to attain the target of 20% share of gross final energy consumption by 2020. The panel data analysis shows that lobbying by the manufacturing industry negatively affects RE deployment, whereas standard measures of government quality show a positive effect; furthermore left wing parties promote the deployment of RE more than right wing ones.
    Keywords: renewable energy sources, energy policy, quality of government, lobbying, political ideology
    Date: 2016–03
  4. By: Emanuele Campiglio
    Abstract: It is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low-carbon investment. However, as this paper argues, carbon pricing in itself may not be sufficient. This is due to the existence of market failures in the process of creation and allocation of credit that may lead commercial banks – the most important source of external finance for firms – not to respond as expected to price signals. Under certain economic conditions, banks would shy away from lending to low-carbon activities even in presence of a carbon price. This possibility calls for the implementation of additional policies not based on prices. In particular, the paper discusses the potential role of monetary policies and macroprudential financial regulation: modifying the incentives and constraints that banks face when deciding their lending strategy - through, for instance, a differentiation of reserve requirements according to the destination of lending - may fruitfully expand credit creation directed towards low-carbon sectors. This seems to be especially feasible in emerging economies, where the central banking framework usually allows for a stronger public control on credit allocation and a wider range of monetary policy instruments than the sole interest rate.
    Keywords: green investment; low-carbon finance; banking; credit creation; green macroprudential regulation; monetary policy
    JEL: E50 G20 Q56
    Date: 2015–03–27
  5. By: George Elias
    Abstract: Regulatory authorities in the European electricity sector use benchmarking techniques to determine the cost-e_cient production level for an incentive regulation of distribution system operators (DSOs). With nearly 900 DSOs operating in the German electricity sector, of which 200 subject to incentive regulation, the issue of heterogeneity of DSOs has to be addressed. Using publicly available data of 133 Norwegian DSOs and replicating the model employed by the German regulator (who refuses access to the data), I show its assumption of homogeneous technology cannot be maintained. Quantile regressions (QR) across the cost distribution reveal heterogeneity in the coe_cients of the explanatory variables, resulting in biased e_ciency scores derived from stochastic frontier analysis. To correct for this heterogeneity in coe_cients, I propose a Bayesian estimation of a more flexible SFA with latent classes for selected parameters that reflect variation in technologies. This estimation has better goodness of fit, reduced variance of all coe_cients, and higher e_ciency scores for nearly all DSOs, compared to the conventional alternative.
    Keywords: E_ciency measurement; cost function; incentive regulation; electricity sector
    JEL: C11 C21 D24 L94
    Date: 2016–03
  6. By: Herweg, Fabian; Schwarz, Marco A.
    Abstract: Cost overrun is ubiquitous in public procurement. We argue that this can be the result of a constraint optimal award procedure when the procurer cannot commit not to renegotiate. If cost differences are more pronounced for more complex designs, it is optimal to fix a simple design ex ante and to renegotiate to a more complex and costlier design ex post. Specifying a simple design initially enhances competition in the auction. Moreover, the procurer cannot benefit from using a multi-dimensional auction, as the optimal scoring rule depends only on the price.
    Keywords: Auction; Cost Overrun; Procurement; Renegotiation
    JEL: D44 D82 H57
    Date: 2016–03
  7. By: Christoph Böhringer (University of Oldenburg, Department of Economics); Jan Schneider (University of Oldenburg, Department of Economics); Emmanuel Asane-Otoo (University of Oldenburg, Department of Economics)
    Abstract: Carbon-based import tariffs are discussed as policy measures to reduce carbon leakage and increase the global cost-effectiveness of unilateral CO2 emission pricing. We assess how the potential of carbon tariffs to increase cost-effectiveness of unilateral climate policy depends on the magnitude and composition of carbon embodied in trade. For our assessment, we combine multi-region input-output (MRIO) analysis with computable general equilibrium (CGE) analysis based on data from the World Input-Output Database (WIOD) for the period 1995 to 2007. The MRIO analysis confirms that carbon embodied in trade has sharply increased during this period. Yet, the CGE analysis suggests that the effectiveness of carbon tariffs in reducing leakage and improving global-cost effectiveness of unilateral climate policy does not increase over time, whereas the potential to shift the economic burden of CO2 emissions reduction from abating developed regions to non-abating developing regions increases substantially.
    Keywords: carbon tariffs; unilateral climate policy; computable general equilibrium
    JEL: Q58 D57 D58
    Date: 2016–04
  8. By: Weerachart T. Kilenthong; Robert M. Townsend
    Abstract: We show how bundling, exclusivity and additional markets internalize fire sale and other pecuniary externalities. Ex ante competition can achieve a constrained efficient allocation. The solution can be put rather simply: create segregated market exchanges which specify prices in advance and price the right to trade in these markets so that participant types pay, or are compensated, consistent with the market exchange they choose and that type's excess demand contribution to the price in that exchange. We do not need to identify and quantify some policy intervention. With the appropriate ex ante design we can let markets solve the problem.
    JEL: D52 D53 D61 D62
    Date: 2016–03
  9. By: Matthew Calver; Fanny McKellips
    Abstract: In recent decades, the overall growth in productivity of many subsectors of the Canadian transportation and warehousing sector has been above average. In particular, while labour productivity (real GDP per worker) grew an average of 0.64 per cent per year between 2000 and 2014 in the transportation and warehousing sector, labour productivity grew an average of 1.83 per cent per year in the truck transportation subsector, 3.25 per cent per year in the air transportation subsector and 2.09 per cent in the train transportation subsector for the same period. Conversely, in the urban transit subsector, labour productivity decreased an average of 0.76 per cent per year between 2000 and 2014. This report provides a detailed analysis of output, input and productivity trends in four subsectors of the Canadian transportation and warehousing sector. It also examines drivers of the productivity growth for each subsector as well as policies that could enable faster growth. Given the impact that the transportation sector has on many Canadian industries as well as the Canadian economy, maintaining productivity growth is important.
    Keywords: Transportation, Canada, Productivity, Rail Transportation, Air Transportation, Trucking Transportation, Urban Transit, Public Policy, Technological Change
    JEL: O33 R41 L90 L91 L92 L93 L98
    Date: 2016–04
  10. By: Albert Banal-Estañol (Université de Londres - Université de Londres); Jeremy Eckhause (RAND Corp - RAND Corp); Olivier Massol (IFPEN - IFP Energies Nouvelles - IFP Energies Nouvelles, IFP School - IFP Energies Nouvelles)
    Abstract: This note details two comments on a recent policy proposal in Comello and Reichelstein (2014) aimed at favoring the early adoption of Carbon Capture (CC) technology in the next generation of thermal-based power plants to be installed in the United States. First, we examine the implications of a worst-case scenario in which no new CC is adopted internationally beyond what is in place in 2014. Second, we show the potential, under the original proposed subsidy, for the emergence of coordination failures capable of hampering the desired early CC deployment. We propose and evaluate modified schedules of tax-credits sufficient to overcome these concerns. These additions strengthen the argument in the original article: namely, though higher incentive levels are necessary, our findings confirm that the cost of the proposed policy is not out of reach.
    Keywords: Coordination failure,Levelized cost,Learning effects,Tax incentives,Carbon Capture and Storage
    Date: 2016
  11. By: Braun, Carola
    Abstract: Carbon capture and storage (CCS) is a technology that counteracts climate change by capturing atmospheric emissions of CO2 from human activities, storing them in geological formations underground. However, CCS also involves major risks and side effects, and faces strong public opposition. Recently, the whereabouts of 408 potential CCS storage sites in Germany have been released. Using detailed survey data on the public perception of CCS, I quantify how living close to a potential storage site affects the acceptance of CCS. I also analyse the influence of other regional characteristics on the acceptance of CCS. I find that respondents who live close to a potential CCS storage place have significantly lower acceptance rates than those who do not. Living in a tourism or mining region also markedly decreases acceptance.
    Keywords: carbon capture and storage,NIMBY,climate change mitigation
    JEL: Q54 D19 C93
    Date: 2016
  12. By: Lundin, Erik (Research Institute of Industrial Economics (IFN))
    Abstract: This paper presents an empirical test of the anticompetitive effects of joint ownership, by examining the operation of three nuclear plants in Sweden. Since maintenance is the main conduit explaining the variation in output, I formulate a model of intertemporal choice in which firms choose how to allocate a given amount of maintenance within each year. Using data on production and bidding curves on the day-ahead market, I test the model against data given three behavioral assumptions: Unilateral profit maximization; joint profit maximization; and a social planner. Modeling for joint profit maximization best matches data, indicating that joint ownership has facilitated coordination of maintenance decisions. Terminating the joint ownership and modeling for unilateral profit maximization would lead to a 5 percent decrease in prices and a 6 percent decrease in system production costs. I identify positive supply shocks in the form of inflow to the hydro power reservoirs as important determinants of the incentives to exercise market power. Therefore, the mechanisms discussed in this paper should be of relevance also in other electricity markets where the share of intermittent production is increasing. As a motivation for the structural exercise,I use a difference-in-differences estimator to identify a shift in the allocation of maintenance towards the winter season (when demand and prices are peaking) at the time of the introduction of the joint ownership. This is in line with the results from the structural model, as the ability to influence the price is also higher during the winter season.
    Keywords: Joint ownership; Electricity; Nuclear; Maintenance; Collusion
    JEL: D22 D43 D44 D92
    Date: 2016–02–29

This nep-reg issue is ©2016 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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