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on Regulation |
| By: | Marius Paschen (University of Oldenburg, Department of Economics) |
| Abstract: | Renewable energy such as wind or solar power currently contributes a large share to the total German electricity supply as a result of the German energy transition. This paper presents an empirical analysis of how power shocks resulting from intermittent renewable supply affect forward premiums in German electricity markets. We contribute to the existing literature by investigating determinants of forward premiums, thereby focusing on wind and on solar power. We find positive wind shock effects on forward premiums. This can be explained as a consequence of the merit order effect. The findings in this paper underline the need to introduce wind power futures at the EEX to reduce the risk mark-up for participants in forward markets. |
| Keywords: | Electricity Market, Forward Premiums, Intermittent Wind and Solar Power |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:old:dpaper:397&r=reg |
| By: | Neuhoff, Karsten; Richstein, Jörn; May, Nils |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:148282&r=reg |
| By: | Dolphin, G. G.; Pollitt, M. G.; Newbery, D. G. |
| Abstract: | In virtually all countries that explicitly price carbon, its effective price, i.e. the emissions-weighted price, remains low. Our analysis focuses on the political economy of this effective price, using data on an international panel of jurisdictions over the period 1990-2012. First, we examine the decision to introduce a carbon pricing policy. Second, we shed light on its stringency. Results show that both the odds of the implementation and the stringency of the carbon pricing policy are negatively affected by the share of electricity coming from coal and the relative share of industry in the economy. The results also broadly support an environmental Kuznets curve hypothesis as gross domestic product increases both the odds of the implementation and the policy stringency. Institutional and political factors are found to influence the implementation but not the stringency of carbon pricing schemes. |
| Keywords: | carbon pricing, panel analysis, political economy, electricity sector |
| JEL: | H23 Q58 |
| Date: | 2016–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1663&r=reg |
| By: | Clayton Munnings; William Acworth; Oliver Sartor; Yong-Gun Kim; Karsten Neuhoff |
| Abstract: | Nearly every carbon price regulates the production of carbon emissions, typically at midstream points of compliance, such as a power plant. Over the last six years, however, policymakers in Australia, California, China, Japan, and Korea implemented carbon prices that regulate the consumption of carbon emissions, where points of compliance are farther downstream, such as distributors or final consumers. This article aims to describe the design of these prices on carbon consumption, understand and explain the motivations of policymakers who have implemented them, and identify insights for policymakers considering whether to price carbon consumption. We find a clear trend of policymakers layering prices on carbon consumption on top of prices on carbon production in an effort to improve economic efficiency by facilitating additional downstream abatement. In these cases, prices on carbon consumption are used to overcome a shortcoming in the price on carbon production: incomplete pass-through of the carbon price from producers to consumers. We also find that some policymakers implement prices on carbon in an effort to reduce emissions leakage or because large producers of carbon are not within jurisdiction. Since policymakers are starting to view prices on carbon consumption as a strategy to improve economic efficiency and reduce emissions leakage in a way that is compatible with local and international law, we expect jurisdictions will increasingly implement and rely upon them. |
| Keywords: | Carbon pricing, Consumption based policy, Review |
| JEL: | D12 H23 Q54 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1620&r=reg |
| By: | Jonsson, Lina (WSP); Björklund, Gunilla (VTI) |
| Abstract: | The purpose of the present study is to estimate accident risks and marginal costs for railway level crossings in Sweden. The marginal effect of train traffic on the accident risk is used to derive the marginal cost per train passage that is due to level crossing accidents. The estimations are based on Swedish data from 2000 to 2012 on level crossing accidents, train volume, and crossing characteristics. In this study we estimate the accidents risk for both motorized road traffic and vulnerable road users. As a proxy for road traffic flow we use three categories of road type, and to capture the influences of pedestrians and bicyclists we use information about the number of persons living nearby the level crossing. The results show that both protection device, road type, traffic volume of the trains, and number of persons living nearby the level crossing have significant influences on the accident probability. The marginal cost per train passage regarding motor vehicle accidents is estimated at SEK 1.50 on average in 2012. Corresponding number for accidents with vulnerable road users is 3.32. The cost per train passage varies substantially depending on type of protection device, road type, the traffic volume of the trains, and number of persons living nearby the crossing. |
| Keywords: | Railway; Marginal cost; Accident probability; Level crossings |
| JEL: | D62 H23 R41 |
| Date: | 2016–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_022&r=reg |
| By: | Jihad Elnaboulsi (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté, UBFC - Université Bourgogne Franche-Comté); W Daher (Gulf University for Science and Technology (GUST) - Department of Mathematics and Natural Sciences); Y Saglam (Victoria University of Wellington - Victoria University of Wellington) |
| Abstract: | This paper presents an analysis of environmental policy in imperfectly competitive market with private information. We examine how environmental taxes should be optimally levied when the regulator faces asymmetric information about production and abatement costs in an irreversible observable policy commitment game. Under our setting, the paper investigates how information disclosure can improve the efficiency of the tax setting process and may offer an efficient complement to conventional regulatory approaches. From a policy perspective, our findings suggest that access to publicly disclosed information improves the ability of the regulator to levy Örmsí specific environmental taxes. Despite its advantages, however, informational disclosure may harm the environmental policy it purports to enhance since it facilitates collusive behavior. We show that information sharing may occur and thus leads to a superior outcome in terms of industry output and emissions. Disclosure may undermine market performance and environmental policy. |
| Keywords: | Environmental Regulation, Emissions Taxes, Collusion, Disclosed Information, Private Information, Information Sharing |
| Date: | 2015–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01377918&r=reg |
| By: | Jihad Elnaboulsi (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté, UBFC - Université Bourgogne Franche-Comté) |
| Abstract: | This paper presents an analysis of environmental policy in imperfectly competitive markets. We investigate how environmental taxes should be optimally levied in a precommitment policy game and their e§ects on social welfare. The paper also examines the potential impacts of the regulatorís environmental conscience on policy setting. We start the analysis with a benchmark model where all players are environmentally dirty in the marketplace. We then extend the model to the case in which the market is composed of a mix of dirty and clean strategic players. We show that, in both cases, the regulator must necessarily trade o§ between regulation of environmental quality and the industry production ine¢ ciency problems. Furthermore, the results show how higher levels of concern for environmental issues outweigh the under taxation problem that arises in order to avoid further reductions in welfare. Finally, we show that the existence of clean players produces positive social externalities. Under an ex ante environmental policy game, higher social welfare outcomes are possible. |
| Keywords: | Environmental Policy, Emissions Tax, Environmental Conscience, Social Welfare, Strategic Behavior, Oligopoly Competition |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01377913&r=reg |
| By: | Pollitt, M. G. |
| Abstract: | This paper discusses the principles of electricity network charging in the light of increasing amounts of distributed generation and the potential for significant increases in electric vehicles or distributed electrical energy storage. We outline cost reflective pricing, traditional public service pricing, platform market pricing and customer-focussed business model pricing. We focus on the particular problem of how to recover network fixed costs and a recent example from Australia. We conclude that there are serious issues for regulators to address, but that potential solutions at the distribution level may already exist at the transmission level. |
| Keywords: | network charging methodology, platform market. |
| JEL: | L94 |
| Date: | 2016–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1656&r=reg |
| By: | Yolande Hiriart (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté, UBFC - Université Bourgogne Franche-Comté); Lionel Thomas (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UFC - Université de Franche-Comté, UBFC - Université Bourgogne Franche-Comté) |
| Abstract: | We study the potential conflict between cost minimization and investment in prevention for a risky venture. A natural monopoly is regulated i) for economic purposes; ii) because it can cause losses of substantial size to third parties (the environment or people). The regulator observes the production cost without being able to distinguish the initial type (an adverse selection parameter) from the effort (a moral hazard variable). In addition, the investment in prevention is non observable (another moral hazard variable) and the monopoly is protected by limited liability. We fully characterize the optimal regulation in this context of asymmetric information plus limited liability. We show that incentives to reduce cost and to invest in safety are always compatible. But, in some cases, higher rents have to be given up by the regulator. |
| Keywords: | Risk Regulation, Incentives, Moral Hazard, Adverse Selection, Insolvency |
| Date: | 2015–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01377921&r=reg |
| By: | Bardey, David; Gromb, Denis; Martimort, David; Pouyet, Jérôme |
| Abstract: | We consider a market in which sellers can exert an information-gathering effort to advise buyers about which of two goods best fits their needs. Sellers may steer buyers towards the higher margin good. We show that for sellers to collect and reveal information, profits on both goods must be sufficiently close to each other, i.e., lie within an implementability cone, which competition or regulation may ensure. Instruments to do so vary with the context. Controlling market power while improving the quality of advice is more difficult when sellers have private information on the profitability of the goods. |
| Keywords: | asymmetric information; Competition; Expertise; Mis-Selling; regulation; Retailing |
| JEL: | D82 G24 I11 L13 L15 L51 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11665&r=reg |
| By: | Corey Allan (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research) |
| Abstract: | We update the analysis of Allan et al. (2015) and re-examine whether New Zealand households have become greener consumers using newly available data. We combine input-output data from 2006 and 2012 with detailed data on household consumption from the 2006 and 2012 Household Economic Surveys (HES) to calculate the greenhouse gas emissions embodied in household consumption. We confirm many of our previous findings; that emissions increase less than proportionately with expenditure, and that there is significant variation in expenditure elasticities across consumption categories. We test for a change in household emissions over time and decompose this change into improvements in production efficiency and changes in households. We find that average household emissions fell by 11% between 2006 and 2012. We attribute 1.7 percentage points of this decrease to changes in households, with the remaining 9.3 percentage points from changes in emissions intensities. The majority of the change due to households is a result of changes in household behaviour rather than a change in household characteristics. Emissions from household energy fell markedly between 2006 and 2012, driven by a reduction in the emissions intensity of electricity and a decrease in household electricity consumption. |
| Keywords: | Climate change; greenhouse gas emissions; household behaviour; consumption; input–output model |
| JEL: | Q56 Q57 D12 Q54 D57 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:16_20&r=reg |
| By: | Karel Janda; Jan Malek; Lukas Recka |
| Abstract: | This paper focuses on the influence of increased wind and solar power production on the transmission networks in Central Europe. To assess the exact impact on the transmission grid, the direct current load flow model ELMOD is employed. Two development scenarios for the year 2025 are evaluated on the basis of four representative weeks. The first scenario focuses on the effect of Energiewende on the transmission networks, the second one drops out nuclear phase-out and thus assesses isolated effect of increased feed-in. The results indicate that higher feeding of solar and wind power increases the exchange balance and total transport of electricity between transmission system operator areas as well as the average load of lines and volatility of flows. Solar power is identified as a key contributor to the volatility increase; wind power is identified as a key loop-flow contributor. Eventually, it is concluded that German nuclear phase-out does not significantly exacerbate mentioned problems. |
| Keywords: | Energiewende, RES, transmission networks, congestion, loop flows, ELMOD, Central Europe |
| JEL: | L94 Q21 Q48 C61 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2016-68&r=reg |
| By: | Cecile Hediger (University of Neuchatel, Institute of Economic Research, Rue Abram-Louis Breguet 2, 2000 Neuchtel, Switzerland.); Mehdi Farsi (University of Neuchatel, Institute of Economic Research, Rue Abram-Louis Breguet 2, 2000 Neuchtel, Switzerland.); Sylvain Weber (University of Neuchatel, Institute of Economic Research, Rue Abram-Louis Breguet 2, 2000 Neuchtel, Switzerland.) |
| Abstract: | Improvements in energy efficiency are seen as a key tool to decrease energy consumption, yet less is known about the reaction of household to such improvements. They could adapt (increase) their demand because the relative price of the energy service has diminished thanks to the efficiency gains. Focusing on the residential heating sector, we study how the households react to a gain in efficiency of their heating system. An increased demand for the heating service is the direct rebound effect, while the indirect rebound effect is the income effect on the consumption of all other goods. Both effects take back some of the energy savings initially expected. To estimate these rebound effects, we use a specific survey containing innovative choice experiments. We find that 10 to 15% of the expected energy savings are not realised in the space heating sector due to the direct rebound effect. Including the indirect rebound effects, it is one third of the potential savings which are lost. We also highlight the heterogeneity among people: some do not rebound at all, while others display a large rebound. We analyse this heterogeneity using socio-economic characteristics, finding that people with a low income, less educated, less environmentally friendly, and less satisfied of their heating comfort have the largest direct rebound effect. |
| Keywords: | Rebound effects, energy efficiency, residential heating. |
| JEL: | D12 Q41 Q47 R22 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:irn:wpaper:16-11&r=reg |
| By: | Odolinski, Kristofer (VTI); Wheat , Phillip (Institute for Transport Studies (ITS), University of Leeds) |
| Abstract: | In this paper we analyze the dynamics between rail infrastructure renewals and maintenance in Sweden, using a panel vector autoregressive model. The model estimation also comprises intertemporal effects for each of these activities. We find that past values of maintenance gives a better prediction of current renewal costs compared to only using past values of renewals as a predictor. Moreover, the results indicate intertemporal effects for both renewals and maintenance, where an increase in costs during a year predicts an increase in costs in the following year. The dynamic model also allows us to estimate equilibrium cost elasticities with respect to ton density, which are significantly larger than its static counterparts. Overall, this work highlights that dynamics in rail infrastructure costs are important to consider when setting track access charges with respect to the wear and tear caused by traffic. |
| Keywords: | Maintenance; Renewals; Vector autoregression; Rail infrastructure |
| JEL: | L92 R48 |
| Date: | 2016–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_023&r=reg |
| By: | Kyritsis, Evangelos (Dept. of Business and Management Science, Norwegian School of Economics); Andersson, Jonas (Dept. of Business and Management Science, Norwegian School of Economics); Serletis, Apostolos (Dept. of Economics, University of Calgary) |
| Abstract: | This paper investigates the effects of intermittent solar and wind power generation on electricity price formation in Germany. We use daily data from 2010 to 2015, a period with profound modifications in the German electricity market, the most notable being the rapid integration of photovoltaic and wind power sources, as well as the phasing out of nuclear energy. In the context of a GARCH-in-Mean model, we show that both solar and wind power Granger cause electricity prices, that solar power generation reduces the volatility of electricity prices by scaling down the use of peak-load power plants, and that wind power generation increases the volatility of electricity prices by challenging electricity market exibility. |
| Keywords: | Intermittency; Large-scale integration; Merit-order effect; Volatility; GARCH-in-Mean model |
| JEL: | C22 Q41 Q42 |
| Date: | 2016–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2016_018&r=reg |
| By: | Desiderio Romero-Jordán; Pablo Del Río; Cristina Peñasco |
| Abstract: | The deep economic crisis and the sharp rise in electricity prices have had a strong effect on electricity demand by Spanish households. This paper aims to analyse the responsiveness of household electricity demand and the welfare effects related to both factors in the 2006-2012 period. The results show that the electricity consumption of medium-high income households is particularly responsive to price increases, whereas that of medium-low income households is more responsive to changes in income. The retail electricity price increases and the economic crisis have led to generally lower and steeper U-shape price elasticities of demand and higher and steeper N-shape income elasticities of demand. The joint impact of those two factors on the welfare of lower-income households is higher in relative terms (i.e., as a share of household income) than for other income groups. These results suggest that the economic crisis and increases in retail electricity prices have had detrimental welfare effects, especially on the lower-income segment of the population. They should be taken into account when financing climate and energy policies through the electricity bill and provide a rationale to take such support, which pushes retail electricity price upwards, out of the electricity bill. |
| Keywords: | electricity demand, economic crisis, elasticities, welfare analysis |
| JEL: | D12 I31 Q41 R22 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipp:wpaper:1503&r=reg |
| By: | Zareena Begum Irfan (Madras School of Economics); Jeeva Mary Jacob (Madras School of Economics) |
| Abstract: | Management of regulated water systems has become increasingly complex due to rapid socio-economic growth and environmental changes in river basins over recent decades. This paper focusses on the public-owned river water utility river basin conflicts that are increasingly marked by a heightened attention because of the political discourse surrounding it. In order to promote cooperation and resolve conflicts between states in a basin, policy makers must vigorously try to get the dialogue process on and avoid deadlocks in the process. Little theoretical and empirical research exists to understand when these negotiations are most effective and the mechanics behind these negotiations. Here we draw from diverse literature, economic and geographical, to capture and integrate the design elements associated with effective utility regulation along rivers on a national and international level. The utility sharing of waters of the river Cauvery has been the bone of contention of a serious conflict between the Indian states of Karnataka and Tamil Nadu. Decades of negotiations have not bore fruit till date. Even if treaties have been signed, they have been rejected and till date enforcement mechanisms are not put in place so as to hasten the negotiation process so as to avoid further escalation of irregularities in the water utilization. This study aims at defining few enforcement mechanisms based on the latest agreement brought out by the Cauvery Water Disputes Tribunal 2007 which was rejected and though appeals were filed by riparian states no amendments have been made so far. Non-Cooperative games have been used to model the regulation of the water utility and policy implications there on have been drawn out. |
| Keywords: | Water utility, Game Theory, Prisoner's Dilemma, Stag Hunt Classification-JEL: C72, D74, Q25, Q34, Q58 |
| URL: | http://d.repec.org/n?u=RePEc:mad:wpaper:2016-142&r=reg |
| By: | Teng Ma (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University) |
| Abstract: | This study investigates the choices of denitration technology in the Chinese thermal power sector. Using a multinominal logit model of the choices among 1,135 boilers in thermal power plants operating in China in 2013, we analyze how the choices were inuenced by government policies, the stringency of national standards, and subsidies for using speci_c technology. The results are as follows. First, China's 12th Five-year Plan might make it more attractive for plants to choose the cheapest denitration technology among the three options examined in this study. Second, technology choices differed signi_cantly by region before the 12th Five-year Plan period. These differences have disappeared, perhaps due to the economic development across all regions of China. Third, electricity price subsidies offered to plants that use denitration equipment might affect their technology choice. These results suggests that plants might choose the cheapest technology available, in order to lower investment costs. |
| Keywords: | technology choice, NOx emissions, China, thermal power sector |
| JEL: | O33 Q53 Q55 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1644&r=reg |