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on Regulation |
| By: | Hogan, William W. (Harvard University) |
| Abstract: | The Environmental Protection Agency issued a final rule that defines a broad and complicated set of standards for controlling carbon dioxide (CO2) emissions from affected electricity generating units. (Environmental Protection Agency, 2015b) The proposed national average reduction by 2030 is 32% from the 2005 level of emissions, about half of which has already occurred. (Environmental Protection Agency, 2015j) The rules for new power plants are relatively straightforward and imply little more than reinforcing the current economic choice of natural gas over coal fired generation, given current projections for the price of natural gas. The Clean Power Plan rules for existing power plants arise under a different section of the Clean Air Act and present a more complicated picture. The result has implications for the nature and degree of future limitations on carbon dioxide emissions from the electricity sector. In addition, some versions of the possible implementation plans could have material implications for the operations of Regional Transmission Organizations under the regulations of the Federal Energy Regulatory Commission. The purpose here is to highlight some of the possible directions for relevant policies of electricity system operators. |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:15-059&r=reg |
| By: | Sascha Kollenberg; Luca Taschini |
| Abstract: | Emissions Trading Systems (ETSs) with fixed caps lack provisions to address systematic imbalances in the supply and demand of permits due to changes in the state of the regulated economy. We propose a mechanism which adjusts the allocation of permits based on the current bank of permits. The mechanism spans the spectrum between a pure quantity instrument and a pure price instrument. We solve the firms' emissions control problem and obtain an explicit dependency between the key policy stringency parameter – the adjustment rate – and the firms' abatement and trading strategies. We present an analytical tool for selecting the optimal adjustment rate under both risk-neutrality and risk-aversion, which provides an analytical basis for the regulator's choice of a responsive ETS policy. |
| Keywords: | EU ETS reform; dynamic allocation; policy design; responsiveness; resilience; supply management |
| JEL: | E63 H23 Q52 Q58 |
| Date: | 2016–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:67774&r=reg |
| By: | Schmalensee, Richard (MIT); Stavins, Robert (Harvard University) |
| Abstract: | This essay provides an overview of the major emissions trading programs of the past thirty years on which significant documentation exists, and draws a number of important lessons for future applications of this environmental policy instrument. References to a larger number of other emissions trading programs that have been implemented or proposed are included. |
| JEL: | Q40 Q48 Q54 Q58 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:15-069&r=reg |
| By: | João Pedro Pereira; Vasco Pesquita; Paulo M.M. Rodrigues; António Rua |
| Abstract: | There is an ongoing trend of deregulation and integration of electricity markets in Europe and North America. This change in market structure has naturally affected the interaction between agents and has contributed to an increasing commoditization of electric power. This paper focuses on one specific market, the Iberian Electricity Market (MIBEL). In particular, we assess the persistence of electricity prices in the Iberian market and test whether it has changed over time. We consider each hour of the day separately, that is, we analyze 24 time-series of day-ahead hourly prices for Portugal and another 24 series for Spain. We find results consistent with the hypothesis that market integration leads to a decrease in the persistence of the price process. More precisely, the tests detect a break in the memory parameter of most price series around the year 2009, which coincides with a significant increase in the integration of Portuguese and Spanish markets. The results reinforce the view that market integration has an impact on the dynamics of electricity prices. |
| JEL: | C50 E31 F36 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201609&r=reg |
| By: | Habibi, Shiva (Chalmers); Beser Hugosson, Muriel (KTH); Sundbergh, Pia (Trafikanalys); Algers, Staffan (KTH) |
| Abstract: | The car fleet composition is important from several aspects including energy consumption, greenhouse gas and other emissions. Evaluation of car fleet policy measures is therefore vital for choosing among different car policy options. In this paper, we demonstrate how such an evaluation could have been carried out in the context of the Swedish governmental investigation of a fossil free car fleet, released early 2014. One objective of the policy package is to design a Bonus-Malus system that pushes the Swedish fleet composition towards the EU objectives of the average CO2 emissions for new cars by 2021. The proposed scenarios address cars bought by private persons as well as by companies. These scenarios differ in designs for registration tax, vehicle circulation tax, clean car premiums, company car benefits tax and fuel tax. We use the Swedish car fleet model system to predict the effects of the proposed scenarios on the Swedish car fleet composition. Also, we build a simple supply model to predict future supply. Our model results show that none of the three proposed scenarios is actually successful enough to meet the Swedish average CO2 emissions target. The average CO2 emissions in two of these scenarios are actually not much different from the business as usual scenario. In all scenarios, the number of electric and plug in hybrid cars increase. However, in all scenarios, the car fleet will still be totally dominated by fossil fuelled cars. Also, relative to a business as usual scenario the number of ethanol and gas cars is reduced in the other scenarios. Also, the Bonus-Malus system gives a positive net result in terms of budget effects showing that car buyers choose to pay the malus for a car with higher emissions rather than to be attracted by the bonus of a car with lower emissions. |
| Keywords: | Bonus-Malus; Taxation policies evaluation; Car fleet modeling; Vehicle supply model |
| JEL: | R40 |
| Date: | 2016–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_019&r=reg |
| By: | Odolinski , Kristofer (VTI) |
| Abstract: | In this paper we study the effect of contract design on the performance of railway maintenance in Sweden, using a panel data set over the period 2003-2013. The marginal effect of incentive intensity is estimated, showing that the power of incentive schemes improve performance as measured by the number of infrastructure failures. In addition, the performance incentive schemes result in a reallocation of effort from failures not causing train delays to failures causing train delays |
| Keywords: | Contract design; Incentive intensity; Maintenance; Railways |
| JEL: | D82 L92 |
| Date: | 2016–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_020&r=reg |
| By: | Klaus Gugler (Department of Economics and Research Institute for Regulatory Economics, Vienna University of Economics and Business); Mario Liebensteiner (Department of Economics, Vienna University of Economics and Business); Adhurim Haxhimusa (Research Institute for Regulatory Economics, Vienna University of Economics and Business); Nora Schindler (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | The recent transformation of European electricity markets with increasing generation from intermittent renewables brings about many challenges. Among them, decaying wholesale prices, partly due to support schemes for renewables, may send insufficient investment signals for other technologies. We investigate the investment decision in a structural equation based on the Tobin’s q-model, which we extend by both industry- and firm-technology-specific uncertainty. We utilize rich and novel data at the disaggregated firm generation technology level of European electricity generating firms for the period 2006–2014. Our results show that investment in any generation technology follows market incentives despite sunk and irreversible capital, confirming the implications of the q-model. Moreover, while firm-technology-specific uncertainty decreases firms’ investment activity, especially in coal and gas, aggregate uncertainty triggers firms’ investment. Our results raise concerns about system reliability in the long run since conventional technologies still serve as a flexible system back-up. |
| Keywords: | Tobin's q, Uncertainty, Investment, Electricity |
| JEL: | L22 L25 L51 Q48 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp234&r=reg |
| By: | Giles Atkinson; Kirk Hamilton |
| Abstract: | The UK has been an exception to the trend of channelling revenues arising from the depletion of subsoil assets into a resource fund. In this paper, we construct an asset account for the UK’s oil and gas resources to evaluate the cost of this exceptionalism and, looking forward, the implications of establishing a fund now. We show that had a decision been made to establish a resource fund in 1975, this fund could now be substantial in size (about GBP 280 billion in 2010). A significant contributor to this result is the historical efficiency of the UK fiscal regime in capturing oil and gas rents, as we demonstrate. A further benefit of the resource fund would have been a reduction in volatility of resource revenues flowing to the Treasury. An ex post cost-benefit analysis of the simulated fund suggests it could have been a sound public investment. However, our simulation of a future resource fund based on (possible) shale gas and oil revenues shows that it could reach a size similar to the 1975-2010 fund only under optimistic assumptions about prices, revenues and economic reserves. |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp250&r=reg |
| By: | Odolinski, Kristofer (VTI) |
| Abstract: | In this paper we estimate the impact of axle loads on rail infrastructure maintenance costs in Sweden. The results are contrasted to the cost impact of ton density, a common measure in the literature on rail infrastructure costs. We find non-linear cost elasticities with respect to a ton per axle density measure, with an estimate at the sample median that is larger than the corresponding estimate for ton density. The results are relevant for the setting of track access charges in Europe, considering that the econometric results in this paper give support to the engineering perspective - that is, axle loads are important to consider when estimating the damage caused by traffic. |
| Keywords: | Axle load; Maintenance; Railways; Infrastructure costs |
| JEL: | L92 R48 |
| Date: | 2016–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_021&r=reg |
| By: | Comello, Stephen (Stanford University); Reichelstein, Stefan (Stanford University) |
| Abstract: | The policy of net-metering allows the operators of residential- and commercial solar PV systems to sell surplus electricity back to their utility at the going retail rate. This policy has recently been criticized on the grounds that it provides a subsidy for solar installations, a subsidy that is paid for by all ratepayers. In response, public utility commissions have begun to take up this regulatory issue. This paper presents a theoretical and empirical analysis of the effects of net metering restrictions. We examine the impact that feed-in tariffs (FiT), set below the going retail rate, will have on the volume of future residential PV investments. Our calculations focus on three representative locations in the states of California, Nevada and Hawaii. We find that a FiT set at or above the levelized cost of electricity (LCOE) for solar PV power would provide sufficient incentives for investors to continue on the current path of residential solar installations, even though the profitability of these investments would be lowered substantially. At the same time, we find that the LCOE is a tipping point insofar as feed-in tariffs set below that level would have a sharply negative effect on the volume of new installations. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3418&r=reg |
| By: | Alistair Munro (National Graduate Institute for Policy Studies) |
| Abstract: | When the set of possible messages depends on the actual state of the world, optimal incentive schemes to control environmental problems may not always satisfy the revelation principle. As a result, in equilibrium some agents may send false messages, particularly when the information rents in the truth- telling scheme are high. I characterise optimal pollution regulation schemes and produce some numerical examples to show mechanisms which allow some dishonesty in equilibrium may frequently outperform truth-telling schemes. |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:16-16&r=reg |
| By: | Sen, Debapriya; Stamatopoulos, Giorgos |
| Abstract: | We consider a Cournot duopoly under general demand and cost functions, where an incumbent patentee has a cost reducing technology that it can license to its rival by using combinations of royalties and upfront fees (two-part tariffs). We show that for drastic technologies: (a) licensing occurs and both firms stay active if the cost function is superadditive and (b) licensing does not occur and the patentee monopolizes the market if the cost function is additive or subadditive. For non drastic technologies, licensing takes place provided the average efficiency gain from the cost reducing technology is higher than the marginal gain computed at the licensee's reservation output. Optimal licensing policies have both royalties and fees for significantly superior technologies if the cost function is superadditive. By contrast, for additive and certain subadditive cost functions, optimal licensing policies have only royalties and no fees. |
| Keywords: | Patent licensing; Superadditive function; Subadditive function; Royalties; Two-part tariff |
| JEL: | D43 D45 L13 |
| Date: | 2016–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73980&r=reg |