nep-reg New Economics Papers
on Regulation
Issue of 2016‒08‒28
seven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Subsidies and Myopia in Technology Adoption: Evidence from Solar Photovoltaic Systems By De Groote, Olivier; Verboven, Frank
  2. Competition in Retail Electricity Markets : An Assessment of Ten Years Dutch Experience By Willems, Bert; Mulder, M.
  3. On the Treatment of Emissions Trading and Green and White Certificates in Cost–Benefit Analysis By Johansson, Per-Olov
  4. How Do Users Value a Network Expansion? Evidence from the Public Transit System in Singapore By Fesselmeyer, Eric; Liu, Haoming
  5. What Would it Take to Reduce US Greenhouse Gas Emissions 80% by 2050? By Geoffrey Heal
  6. Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas By Richard G. Newell; Brian C. Prest; Ashley Vissing
  7. Traffic Externalities and Housing Prices: Evidence from the London Congestion Charge By Cheng Keat Tang

  1. By: De Groote, Olivier; Verboven, Frank
    Abstract: Many countries have relied on subsidies to promote the adoption of renewable energy technologies. We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop and estimate a tractable dynamic model of technology adoption, also accounting for local market heterogeneity. We exploit rich variation at pre-announced dates in the future production subsidies. Although the program led to a massive adoption, we find that households significantly undervalued the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost, so that the government essentially shifted the subsidy burden to future generations of electricity consumers.
    Keywords: dynamic discrete choice; myopia; renewable energy technologies
    JEL: C51 Q48 Q58
    Date: 2016–08
  2. By: Willems, Bert (Tilburg University, TILEC); Mulder, M.
    Abstract: This paper examines a decade of retail competition in the Dutch electricity market and discusses market structure, regulation, and market performance. We find a proliferation of product variety, in particular by the introduction of quality-differentiated green-energy products. Product innovation could be a sign of a well-functioning market that caters to customer’s preferences, but it can also indicate a strategic product differentiation to soften price competition. Although slightly downward trending, gross retail margins remain relatively high, especially for green products. Price dispersion across retailers for identical products remains high, as also across products for a single retailer. We do not find evidence of asymmetric pass-through of wholesale costs. Overall, the retail market matured as evidenced by fewer consumer complaints and higher switching rates. A fairly intensive regulation of mature energy retail markets appears to be needed to create benefits for consumers.
    Keywords: retail electricity market; competition; regulation; ex-post assessment
    JEL: L94 L43 L11
    Date: 2016
  3. By: Johansson, Per-Olov (CERE and HHS)
    Abstract: There are conflicting views on how to handle permits for greenhouse gases in cost-bene fit analysis. This paper aims at clarifying within a simple general equilibrium model how to treat di fferent kinds of tradable permits in economic evaluations of projects. Within a framework that reminds of the EU Emissions Trading System (EU ETS), the paper looks at cost-benefi t rules for a small project providing a public good, interpreted as a shortcut for infrastructure, using a fossil fuel and a renewable as inputs. In addition, it illustrates the Samuelson condition for the optimal provision of the public good, discusses briefly how to assess the EU permit system for sectors not covered under the EU ETS, as well as taxes and permits used to combat acid rain, and provides an illustration of the magnitude of the bias incurred if permits are valued at the marginal damage cost. The paper also introduces electricity ("green") certi ficates, a cousin to tradable permits, as well as well as energy savings ("white") certi ficates. Finally, a cap on the output of a commodity is considered.
    Keywords: Cost-benefit analysis; greenhouse gases; emissions trading; tradable permits; general equilibrium; Samuelson condition; EU ETS; non-ETS; acid rain; electricity certificates; renewable portfolio standards; energy savings certificates; output cap
    JEL: H21 H23 H41 H43 I30 L13
    Date: 2016–08–16
  4. By: Fesselmeyer, Eric (National University of Singapore); Liu, Haoming (National University of Singapore)
    Abstract: We estimate the network externality of a public transit system by examining the effects of its expansion on the housing market. Our results show that a major expansion of Singapore's Mass Rapid Transit (MRT) system increased the price of apartments within 0.5 km of a pre-expansion station by 1.6% to 2.1% relative to apartments that were further away from a station. Evaluated at the mean housing price, the expansion increased the value of pre-connected apartments by at least S$386 million, which is equivalent to about 8% of the estimated S$5 billion cost of the expansion.
    Keywords: public transportation, housing, network effects
    JEL: H4 R21 R42 H23
    Date: 2016–08
  5. By: Geoffrey Heal
    Abstract: I investigate the cost and feasibility of reducing US GHG emissions by 80% from 2005 levels by 2050. The US has stated in its Paris COP 21 submission that this is its aspiration, and Hillary Clinton has chosen this as one of the goals of her climate policy. I suggest that this goal can be reached at a cost in the range of $42 to $176 bn/year, but that it is challenging. I assume that the goal is to be reached by extensive use of solar PV and wind energy (66% of generating capacity), in which case the cost of energy storage plays a key role in the overall cost. I conclude tentatively that more limited use of renewables (less than 50%) together with increased use of nuclear power might be less costly.
    JEL: Q40 Q42 Q54
    Date: 2016–08
  6. By: Richard G. Newell; Brian C. Prest; Ashley Vissing
    Abstract: We analyze the relative price elasticity of unconventional versus conventional natural gas extraction. We separately analyze three key stages of gas production: drilling wells, completing wells, and producing natural gas from the completed wells. We find that the important margin is drilling investment, and neither production from existing wells nor completion times respond strongly to prices. We estimate a long-run drilling elasticity of 0.7 for both conventional and unconventional sources. Nonetheless, because unconventional wells produce on average 2.7 times more gas per well than conventional ones, the long-run price responsiveness of supply is almost 3 times larger for unconventional compared to conventional gas.
    JEL: D24 L71 Q41
    Date: 2016–08
  7. By: Cheng Keat Tang
    Abstract: This study exploits the introduction of the London Congestion Charge (CC) that greatly improves traffic conditions in Central London to provide new evidence on the capitalization of traffic externalities onto housing values. The Congestion Charge restricts traffic into the cordoned area by imposing a flat fee on drivers whenever they enter during charging periods. I show that the introduction of the CC in the Western Extension Zone (WEZ) increases home prices by 3.68\% relative to untreated housing units within 1 kilometre away from the CC boundary. These estimates, which measures the marginal willingness to pay to avoid negative traffic externalities, are robust to many changes in specifications, suggesting that homeowners pay to avoid traffic so as to reduce commuting time, to enjoy better air quality and less traffic noise, and to travel on safer roads.
    Keywords: housing prices, capitalization effects, congestion charge, traffic externalities, marginal willingness to pay, difference-in-difference
    JEL: R21 R31 R38 R41 Q25
    Date: 2016–08

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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