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on Regulation |
| By: | Schusser, Sandra (CERE and the Department of Forest Economics, SLU); Jaraite, Jurate (CERE and the Department of Economics, Umeå University) |
| Abstract: | The European Union's Emissions Trading System (EU ETS) and the Swedish-Norwegian Tradable Green Certicate System (Swedish-Norwegian TGC system) are two market-based instruments that have the overlapping goal to mitigate greenhouse gas (GHG) emissions by shifting economies to cleaner energy sources. Understanding the price signals and interactions of these two newly created markets is essential for all decisions makers, regulators and direct market participants, who aim to reach the predefined environmental policy goals in the most efficient manner. The interaction between these policy instruments has been widely examined from the theoretical perspective. This research contributes to the literature by empirically examining the interplay between the prices of three markets: (1) the price of tradable green certificates in the Swedish-Norwegian TGC system, (2) the price of carbon in the EU ETS and (3) the price of electricity in Nord Pool. We use a multivariate vector-autoregression (VAR) approach to take into account the endogenous relationships between these prices. To date, our empirical results do not support the theoretical considerations that the impacts of carbon price on green certicate prices and on renewable electricity production are negative. Contrary, we find that, to date, increases in carbon prices positively affect green certificate prices at least in the short-run. |
| Keywords: | Renewable energy; Electricity; Green certificates; Emissions trading; EU ETS; interactions; tradable green certificates; Sweden; VAR model |
| JEL: | Q28 Q41 Q42 Q48 |
| Date: | 2016–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2016_010&r=reg |
| By: | Mary Jialin Li |
| Abstract: | Well over half of all electricity generated in recent years in Denmark is through cogeneration. In U.S., however, this number is only roughly eight percent. While both the federal and state governments provided regulatory incentives for more cogeneration adoption, the capacity added in the past five years have been the lowest since late 1970s. My goal is to first understand what are and their relative importance of the factors that drive cogeneration technology adoption, with an emphasis on estimating the elasticity of adoption with respect to relative energy input prices and regulatory factors. Very preliminary results show that with a 1 cent increase in purchased electricity price from 6 cents (roughly current average) to 7 cents per kwh, the likelihood of cogeneration technology adoption goes up by about 0.7-1 percent. Then I will try to address the general equilibrium effect of cogeneration adoption in the electricity generation sector as a whole and potentially estimate some key parameters that the social planner would need to determine the optimal cogeneration investment amount. Partial equilibrium setting does not consider the decrease in investment in the utilities sector when facing competition from the distributed electricity generators, and therefore ignore the effects from the change in equilibrium price of electricity. The competitive market equilibrium setting does not consider the externality in the reduction of CO2 emissions, and leads to socially sub-optimal investment in cogeneration. If we were to achieve the national goal to increase cogeneration capacity half of the current capacity by 2020, the US Department of Energy (DOE) estimated an annual reduction of 150 million metric tons of CO2 annually – equivalent to the emissions from over 25 million cars. This is about five times the annual carbon reduction from deregulation and consolidation in the US nuclear power industry (Davis, Wolfram 2012). Although the DOE estimates could be an overly optimistic estimate, it nonetheless suggests the large potential in the adoption of cogeneration technology. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:16-30&r=reg |
| By: | Fischer, Carolyn (Resources for the Future) |
| Abstract: | Globally and locally, government support policies for green goods (like renewable energy) are much more popular internationally than raising the cost of bads (as through carbon taxes). These support policies may encourage downstream consumption (renewable energy deployment) or upstream development and manufacturing of those technologies. The use of subsidies — particularly upstream ones — is disciplined by World Trade Organization agreements, and its subsidies code lacks exceptions for transboundary externalities such as human health or resource conservation, including those related to combating global climate change. The strategic trade literature has devoted little attention to the range of market failures related to green goods. This paper considers the market for a new environmental good that when consumed downstream may provide external benefits such as reduced emissions. The technology is traded internationally but provided by a limited set of upstream suppliers that may operate in imperfect markets, such as with market power or external scale economies. We examine the national incentives and global rationales for offering production and consumption subsidies in producer countries, allowing that some of the downstream market may lie in nonregulating third-party countries. Although technology producer countries can benefit from restraints on upstream subsidies, global welfare is higher without them, and market failures imply that optimal subsidies are even higher. We supplement the analysis with numerical simulations of the case of renewable energy, exploring optimal subsidies for the major renewable energy producing and consuming regions and the cost of restrictions on upstream subsidies. |
| Keywords: | International Trade, Subsidies, Imperfect Competition, Externalities, Emissions Leakage |
| JEL: | F13 F18 H21 Q5 |
| Date: | 2016–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-16-12&r=reg |
| By: | Boskovic, Branko (University of Alberta); Nøstbakken, Linda (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | Regulation often evolves, and affected consumers or firms may adjust their behavior in anticipation of potential changes to regulation. Using shifting land use regulation boundaries and oil lease prices from Canada, we estimate the effect of anticipated regulatory change on the value of land. We find that anticipated rezoning decreases the price of unregulated leases. Based on our estimates, not accounting for anticipation underestimates the total cost of the regulation by nearly one-third. Overall, the evidence suggests that anticipation effects are signi cant and that the cost of anticipated regulation is capitalized into land values. |
| Keywords: | Regulation; anticipation; land values; zoning; oil leases; endangered species. |
| JEL: | D44 Q30 Q52 Q58 |
| Date: | 2016–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2016_009&r=reg |
| By: | Sophie BERNARD (Polytechnique Montreal) |
| Abstract: | This paper studies the impact of environmental policies when firms can adjust product design as they see fit. In particular, it considers cross relationships between product design dimensions. For example, when products are designed to be more durable, this may add production steps and increase pollutant emissions during production. More generally, changes applied to one dimension can affect the cost or environmental performance of other dimensions. In this theoretical model, a firm interacts with consumers and a regulator. Before the production stage, the firm must choose the levels of three design dimensions: 1) energy performance during production, 2) energy performance during use, and 3) durability. Depending on the assumptions, the dimensions are said to be complementary, neutral, or competitive. The regulator can promote greener designs by applying targeted environmental taxes on emissions during production or consumption. The main results shed light on the consequences of modifying public policies. When some design dimensions are competitive, a targeted emission tax can result in environmental burden shifting, with an overall increase in pollution. This paper also explores the social optimum and the development of second-best policies when some policy instruments are imperfect. Under given conditions, a government would want to regulate and constraint the level of durability. |
| Keywords: | green design, environmental policies, durability |
| JEL: | L10 O13 Q53 Q55 Q58 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:epm:wpaper:2016-01&r=reg |
| By: | Bennett, John; Chioveanu, Ioana |
| Abstract: | We examine optimal price ceilings when the regulator is uncertain about demand and supply conditions and maximizes expected consumer surplus. We consider both a perfectly competitive benchmark and imperfectly competitive settings where symmetric firms compete in supply functions. Our analysis indicates that regulatory uncertainty does not eliminate the scope for intervention with a price ceiling. Instead, sufficient uncertainty calls for softer intervention, with the price ceiling set at a relatively high level. We formalize the relationship between competitive pressure and the optimal price ceiling and show that, if uncertainty is great enough, the optimal price ceiling is increasing in the degree of competition, so that greater competitive pressure justifies less restrictive regulatory intervention. For the perfectly competitive case, we also explore how the optimal price ceiling is related to the level of rationing efficiency, pinning down a cut-off level of efficiency below which a price ceiling should not be used. |
| Keywords: | price regulation, consumer surplus, uncertainty |
| JEL: | D4 D8 L5 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72161&r=reg |
| By: | G. Cornelis van Kooten |
| Abstract: | California was the first jurisdiction to mandate a reduction in greenhouse gas (GHG) emissions by 80% below 1990 levels by 2050. This target was subsequently endorsed by the G8 in 2009 and the European Commission in 2014, and is the guiding principle of the 2015 Paris Agreement. To achieve these targets will require near elimination of fossil fuels and/or a technological breakthrough that might be considered a black swan event. Eschewing nuclear power, countries are relying on renewable energy sources to meet future energy needs. In this paper, I examine the prospects of reducing GHG emissions by 80% by first summarizing extant global energy sources and production, trends and projections of energy demand, and the potential mix of future energy sources. I consider the role of conservation and then focus on the electricity sector to determine how wind and biomass could contribute to the 80% target. I conclude that these ambitious targets cannot be attained without nuclear power. |
| Keywords: | Climate change; intermittent energy; biofuels; nuclear power; fossil fuels |
| JEL: | H41 L51 L94 Q42 Q48 Q54 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:rep:wpaper:2016-05&r=reg |
| By: | Wichman, Casey J. (Resources for the Future); Taylor, Laura O.; von Haefen, Roger H. |
| Abstract: | Although prescriptive policies are commonly employed by resource managers to encourage conservation, economists tend to advocate for pricing mechanisms on efficiency grounds. However, many environmental management contexts involve resources whose prices are regulated by utility commissions or federal oversight. As such, the use of pricing tools to encourage conservation is politically challenging. This is particularly true with water resource management. Efficiency would dictate that price should reflect long-run marginal cost of provision, including scarcity rents, which is typically greater than regulated market prices (Mansur and Olmstead 2012). As such, nonprice strategies, also referred to as prescriptive policies, have become popular demand management tools for water conservation during periods of drought when the short-run reliability of water resource systems is at risk. These strategies can take the form of restrictions on outdoor water use (Castledine et al. 2014; Renwick and Green 2000), information campaigns (Coleman 1999), social comparisons (Ferraro and Price 2013), or financial incentives for technology adoption (Bennear et al. 2013; Renwick and Archibald 1998). A noteworthy case where nonprice (and to a lesser degree, price) policies have been adopted to reduce water consumption is that of California, where Governor Jerry Brown recently issued an executive order that mandates a 25 percent reduction in urban potable water use to combat the ongoing statewide drought. |
| Keywords: | water demand, nonprice policies, price regulation, conservation, drought |
| JEL: | Q25 D12 H42 L51 L95 |
| Date: | 2016–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-16-10&r=reg |
| By: | Houévoh Amandine R. Gnonlonfin (LEAD, Université de Toulon) |
| Abstract: | This study investigates the preventive effect and substitution effect of the Municipal Solid Waste (MSW) pricing policy in France. We examine the relationship between quantities of MSW and incentive taxes with the use of a panel of 96 French metropolitan departments between 2005 and 2011, and we use panel data and Heckman two-step estimation in order to consider sample selection. We perform the analysis for the collection of MSW and six technologies of management of the waste, namely recycling materials, composting, incineration with and without energy recovery, landfilling and dumping. We estimate the elasticity of the collection of MSW and the elasticity of these technologies in relation to three incentive taxes of the French pricing system by considering the endogeneity of municipality’s decisions about both local incentive tax and technology choice. The results confirm that the French MSW pricing system has a preventive and a substitution effect and show that these effects are complementary. |
| Keywords: | municipal solid waste pricing system, user fee, Extend Producer Responsibility, tax on elimination, preventive effect, substitution effect |
| JEL: | H21 H23 Q53 Q56 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2016.18&r=reg |
| By: | Bento, Antonio (University of Southern California, Sol Price School of Public Policy and NBER); Kanbur, Ravi; Leard, Benjamin |
| Abstract: | Incorporating carbon offsets in the design of cap-and-trade programs remains a controversial issue because of its potential unintended impacts on emissions. At the heart of this discussion is the issue of crediting of emissions reductions. Projects can be correctly, over- or under-credited for their actual emissions reductions. We develop a unified framework that considers the supply of offsets within a cap-and-trade program that allows us to compare the relative impact of over-credited offsets and under-credited emissions reductions on overall emissions under different levels of baseline stringency and carbon prices. In the context of a national carbon pricing scheme that includes offsets, we find that the emissions impacts of over-credited offsets can be fully balanced out by under-credited emissions reductions without sacrificing a significant portion of the overall supply of offsets, provided emissions baselines are stringent enough. In the presence of high predicted business-as-usual (BAU) emissions uncertainty or low carbon prices, to maintain the environmental integrity of the program, baselines need to be set at stringent levels, in some cases below 50 percent of predicted BAU emissions. As predicted BAU emissions uncertainty declines or as the carbon market achieves higher equilibrium prices, however, less stringent baselines can balance out the emissions impacts of over-credited offsets and under-credited emissions reductions. These results imply that to maintain environmental integrity of offsets programs, baseline stringency should be tailored to project characteristics and market conditions that influence the proportion of over-credited offsets to under-credited emissions reductions. |
| Keywords: | Carbon Offsets, Crediting, Environmental Integrity |
| Date: | 2016–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-16-11&r=reg |
| By: | Se-il Mun |
| Abstract: | This paper considers the following scheme for the joint provision of an international transport infrastructure: two countries jointly establish an operator for the infrastructure who is then responsible for collecting the user charges. The costs of the infrastructure investment are covered by nancial contributions from the two countries, and the revenue from the user charges is distributed according to the share of contribution. The governments of the two countries choose the contribution that maximizes their national welfare. Assuming that the infrastructure use is non-rival, we show that nancing the infrastructure with revenue from user charges is better than nancing with tax revenue. We extend the analysis by incorporating congestion in infrastructure use. It is shown that independent decisions on contributions by two governments attain the rst-best optimum when the operator sets the user charge such that the toll revenue just covers the cost of the investment. We further examine the conditions under which joint provision is realized at Nash equilibrium. |
| Keywords: | international transport infrastructure, joint provision, congestion, self- nancing |
| JEL: | H54 L91 R41 R48 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-15-015&r=reg |
| By: | Wolfgang Kerber (University of Marburg); Julia Wendel (University of Marburg) |
| Abstract: | Transnational regulatory networks play important roles in multi-level regulatory regimes, as e.g, the European Union. In this paper we analyze the role of regulatory networks from the perspective of the economic theory of legal federalism. Often sophisticated intermediate institutional solutions between pure centralisation and pure decentralisation can help to solve complex tradeoff problems between the benefits and problems of centralised and decentralised solutions. Drawing upon the insights of the political science literature about regulatory networks, we show that regulatory networks might be an institutional innovation that can fulfill a number of functions (rule-making, best practices and policylearning, effective enforcement, conflict resolution) that might allow for a better intermediate solution between centralised and decentralised regulatory powers. We apply our approach in three case studies to very different regulatory networks, the Body of European Regulators for Electronic Communication (BEREC), the European Competition Network (ECN), and the International Competition Network (ICN). An important result is that regulatory networks might not only be a temporary phenomenon but part of long-term institutional solutions in European multi-level regulatory regimes. |
| Keywords: | Regulatory networks, multi-level regulatory systems, legal federalism, EU regulation |
| JEL: | K2 F55 H11 H77 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201613&r=reg |
| By: | Lazkano, Itziar (Dept. of Economics, Norwegian School of Economics and Business Administration); Nøstbakken, Linda (Dept. of Economics, Norwegian School of Economics and Business Administration); Pelli, Martino (Université de Sherbrooke) |
| Abstract: | We analyze the role of electricity storage for technological innovations in electricity generation. We propose a directed technological change model of the electricity sector, where innovative rms develop better electricity storage solutions, which a ect not only the relative competitiveness between renewable and nonrenewable electricity Sources but also the ease with which they can be substituted. Using a global rm-level data set of electricity patents from 1963 to 2011, we empirically analyze the determinants of innovation in electricity generation, and the role of storage in directing innovation. Our results show that electricity storage increases innovation not only in renewables but also in conventional technologies. This implies that efforts to increase innovation in storage can benefit conventional, fossil fuel- red electricity plants as well as increasing the use of renewable electricity. |
| Keywords: | Innovation; Directed technical change; Electricity storage; Electricity markets; Power generation |
| JEL: | O30 O40 O50 Q20 Q30 Q40 Q50 |
| Date: | 2016–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2016_011&r=reg |
| By: | Weisbach, David (The University of Chicago Law School); Kortum, Sam |
| Abstract: | We consider the economics and the design of border adjustments (BAs) under a carbon tax. BAs are taxes on imports and rebates on exports on the emissions from the production of a good. They are thought to be a method of reducing inefficiencies from a unilateral carbon price, such as shifts in the location of production, known as leakage. After examining the basic economics of BAs, we examine three design issues: which goods BAs should apply to, which emissions from the production of those goods should be taxed, and from and to which countries BAs should apply. We conclude that BAs will impose high administrative costs and need strong welfare justifications. |
| Keywords: | carbon taxes, leakage, border adjustments |
| Date: | 2016–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-16-09&r=reg |
| By: | Nikolaos Danias (Department of Economics, University of Strathclyde); J Kim Swales (Department of Economics, University of Strathclyde) |
| Abstract: | This paper looks at the use of asymmetric tariffs as a regulatory instrument. We use a monopolistic market setup with two markets and we introduce price controls in one of the two. The purpose of the regulator is to maximise consumer welfare through this price discriminatory practice. We consider cases where the welfare of the consumers in the two markets is weighted equally and cases where it is not. In some cases we allow for the two markets to be linked through a monopsonistic input market. The paper focuses on the welfare implications of this regulatory approach, with the firm operating under a profit restriction. Results suggest that having only one price-controlled market is in certain cases a good option from a welfare perspective. |
| Keywords: | D42,D61, I31, I38, L12, L51 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1609&r=reg |
| By: | Yingying Lu; Yu Liu; Meifang Zhou |
| Abstract: | This paper explores the rebound effect of different energy types in China based on a static computable general equilibrium model. A one-off 5% energy efficiency improvement of using five different types of energy is imposed, respectively, in all the 135 production sectors in China. The rebound effect is measured both on the production level and on the economy-wide level by each type of energy. The results show that improving energy efficiency of using electricity has the largest positive impact on GDP among the five energy types. Inter-fuel substitutability does not affect the macroeconomic results significantly, but long-run impact is usually greater than the short-run impact. For those exports-oriented sectors, the capital-intensive sectors get big negative shock in the short run while the labor-intensive sectors get hurt in the long run. There is no “backfire” effect; however, improving efficiency of using electricity can cause negative rebound, which implies that improving the energy efficiency of using electricity might be a good policy choice under China’s current energy structure. In general, macro-level rebound is larger than production-level rebound. Primary energy goods show larger rebound effect than secondary energy goods. In addition, the paper points out that the policy makers in China should look at the rebound effect in the long term rather in the short term. The energy efficiency policy would still be a good and effective policy choice for energy conservation in China who has small inter-fuel substitution in that higher inter-fuel substitution may lead to larger rebound effect. |
| Keywords: | Rebound Effect, Energy Efficiency Policy, China, CGE Model |
| JEL: | Q43 Q48 C68 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2016-38&r=reg |