nep-reg New Economics Papers
on Regulation
Issue of 2016‒07‒16
seven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Optimal Transmission Planning under the Mexican New Electricity Market By Juan Rosellón; Eric Zenón
  2. Governmental platform intermediation to promote alternative fuel vehicles By Dietrich, Antje-Mareike
  3. Renewable energy intermittency and its impact on thermal generation By Christoph Graf; Claudio Marcantonini
  4. The transnationalisation of law: rethinking law through transnational environmental regulation By Veerle Heyvaert
  5. Prices versus Quantities with Policy Updating By William A. Pizer; Brian Prest
  6. Measuring policy-driven innovation in energy efficiency By Nabitz, Lisa; Plötz, Patrick; Braungardt, Sibylle; Reuter, Matthias
  7. Offering Energy Efficiency under Imperfect Competition and Consumer Inattention By Tode, Christian

  1. By: Juan Rosellón (Division of Economics, CIDE); Eric Zenón (Centro del Cambio Global y la Sustentabilidad en el Sureste, CCGSS)
    Abstract: This paper addresses electricity transmission planning under the new industry and institutional structure of the Mexican electricity market, which has engaged in a deep reform process after decades of a state-owned vertically-integrated non-competitive closed industry. Under this new structure, characterized by a nodal pricing system and an independent system operator (ISO), we analyze welfare-optimal network expansion with two modeling strategies. In a first model, we propose the use of an incentive price-cap mechanism to promote the expansion of Mexico networks. In a second model, we study centrally-planned grid expansion in Mexico by an ISO within a power-flow model. We carry out comparisons of these models which provide us with hints to evaluate the actual transmission planning process proposed by Mexican authorities (Prodesen). We obtain: 1) the Prodesen plan appears to be a convergent welfare optimal planning process, and 2) incentive regulation in Mexico could further help to implement such an optical process.
    Keywords: Electricity market reform, vertical and horizontal disintegration, transmission planning, nodal prices, Mexico.
    JEL: L51 L91 L94 Q40
    Date: 2016–04
  2. By: Dietrich, Antje-Mareike
    Abstract: Many governments promote green technological innovation within the automobile sector as a means of combating climate change. Most of these innovations are driven by alternative fuels. Buyer's premiums and governmental investment in service infrastructure are widely used. This paper investigates the question regarding whether market intervention is adequate by considering the two-sided market character of the automobile market. This study shows that network effects, competition effects triggered by more automobile users and decreasing marginal utilities of further service stations determine the welfare-efficient extent of governmental intervention. The results of the analysis indicate that governmental promotion of service infrastructure is reasonable, although governments should be cautious about buyer's premiums.
    Keywords: network effects,two-sided markets,platform intermediation,alternative fuel vehicles,climate change,regulation
    JEL: L15 L92 L98 O33 Q55 Q58
    Date: 2016
  3. By: Christoph Graf; Claudio Marcantonini
    Abstract: Electricity production from renewable sources generally displaces thermal generation, which leads to lower CO2 emissions in the power sector. However, the intermittent nature of many renewable technologies leads to greater inefficiencies in the operation of existing fossil power plants. This inefficiency translates into higher production costs as well as a higher rate of emissions relative to output. In this paper we focus on Italian power installations. Using panel econometrics, we show that a 10% increase in photovoltaics and wind infeed has reduced yearly CO2 emissions of the average thermal installation by about 4% while the average plants emissions relative to its output have increased by about 0.3% between 2005 and 2014. Given the additional inefficiency caused by intermittent renewables, our results suggest that the average installation actually only achieves around 94% of the expected reductions. The effect is more pronounced for installations that have not been retrofitted and for installations serving peak demand.
    Keywords: Emission factors, load-cycling, inefficiency
    Date: 2016–03
  4. By: Veerle Heyvaert
    Abstract: This working paper argues that the rise of transnational regulation has a transformative impact on law. It examines the field of transnational environmental regulation to show that its proliferation challenges the continued appropriateness of representations of law as: (i) territorial, (ii) emanating from the state, (iii) composed of a public and private sphere, (iv) constitutive and regulatory in function, and (v) cohesive and regimented. Instead, law is increasingly perceived as (i) delocalised, (ii) flowing from a plurality of sources, (iii) organisationally inchoate, (iv) reflexive and coordinating in function, and (v) polycentric. Together, these shifts in perception amount to a transformation that the paper identifies as the transnationalisation of law. The paper then explores three responses to the transnationalisation of law. It distinguishes responses motivated by a desire to reclaim the traditional conception of law from those that seek to reconstruct law at the transnational level and, thirdly, responses that advocate a context-responsive reconceptualisation of law. Each response, it will be shown, creates a different set of opportunities for and challenges to the relevance of law for transnational regulation.
    Date: 2016–06
  5. By: William A. Pizer; Brian Prest
    Abstract: This paper considers how policy updates and trading of regulated quantities over time changes the traditional comparative advantage of prices versus quantities. Quantity regulation that can be traded over time leads firms to set current prices equal to expected future prices. A government seeking to maximize net societal benefits can take advantage of this behavior with a sequence of quantity policy updates that achieves the first best in all periods. Under price regulation where current prices remain fixed until future policy changes occur, no such opportunity exists to achieve the first best, and prices are never preferred. However, if we assume policy updates are driven in part by political "noise" rather than maximizing net societal benefits, the result changes and prices can again be preferred. The comparative advantage now depends the relative variance of noise shocks compared to true cost and benefit shocks. This contrasts sharply with the traditional comparative advantage that depends on the relative slopes of marginal costs and benefits. Applied to climate change, we estimate the comparative advantage of intertemporally tradable quantities (over prices) to be $2 billion over five years. This estimate grows if updates occur less frequently or could be made negative by political noise.
    JEL: D62 D92 H41 Q58
    Date: 2016–06
  6. By: Nabitz, Lisa; Plötz, Patrick; Braungardt, Sibylle; Reuter, Matthias
    Abstract: Innovation plays a crucial role in the transition towards a sustainable energy system. In order to simultaneously achieve the objectives of sustainability, energy security and competitiveness of the European economy, various energy policies are active. In recent years, the effect of energy policies on both technological and non-organisational innovations has gained interest. However, the complexity of the systems renders it difficult to disentangle the innovation effects of energy and innovation policies. Here, we outline a unifying framework based on the notion of technological innovation systems. It distinguishes between different phases of the innovation process, actors and functions in the innovation systems and allows studying the effects of policies on these in a systematic fashion. We apply our framework to case studies from the field of energy efficiency in industry for a technological and organisational innovation. Our results help to organise previous research findings and to identify gaps for further studies.
    Keywords: energy efficiency,innovation,policy measures,technology diffusion
    Date: 2016
  7. By: Tode, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Energy efficiency is considered to be a win-win situation for both the economy and the environment. Producing products and services at lower energy input and related input costs can contribute to climate change abatement and economic competitiveness. Actual implementation of energy efficiency falls short to expectations, though. For one thing, research suggests that consumer inattention is an underlying force for underinvestments. For another thing, energy supply markets are often characterized by imperfect competition. Do firms in the energy retail market have incentives to voluntarily introduce energy efficiency? Or should informational regulation inform inattentive consumers? In this article I show that consumer inattention and imperfect competition are the crucial drivers for firms' decisions to introduce or conceil energy efficiency to customers. I find two symmetric equilibria: One in which both firms introduce energy efficiency and one in which both firms conceil energy efficiency. Equilibrium coordination depends on the distribution of consumers that are attentive to energy effienciency and consumers that are not. Further, mandatory disclosure laws are found to be weakly welfare increasing.
    Keywords: Imperfect Competition; Consumer Inattention; Product Differentiation; Disclosure; Energy Efficiency
    JEL: D83 L13 L41
    Date: 2016–07–06

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