nep-reg New Economics Papers
on Regulation
Issue of 2016‒12‒11
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Empirical evidence on renewable electricity, greenhouse gas emissions and feed-in tariffs in Czech Republic and Germany By Janda, Karel; Tyuleubekov, Sabyrzhan
  2. Overview of Czech and German Renewable Energy Policies By Janda, Karel; Tyuleubekov, Sabyrzhan
  3. Brown coal exit: a market mechanism for regulated closure of highly emissions intensive power stations By Jotzo, Frank; Mazouz, Salim
  4. Efficiency or Equity? Simulating the Carbon Emission Permits Trading Schemes in China Based on an Inter-Regional CGE Model By Wu, Libo; Tang, Weiqi
  5. Charging Ahead: Prepaid Electricity Metering in South Africa By B. Kelsey Jack; Grant Smith
  6. Levelling the playing field: On the missing role of network externality in designing renewable energy technology deployment policies By Jin, Wei; Zhang, ZhongXiang
  7. Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme By Zhang, ZhongXiang
  8. Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice By David Bardey; Denis Gromb; David Martimort; Jérôme Pouyet
  9. Corrective Policy and Goodhart's Law: The Case of Carbon Emissions from Automobiles By Reynaert, Mathias; Sallee, James M.
  10. Energy, carbon, and economic growth: Brief literature review By Janda, Karel; Torkhani, Marouan
  11. Optimal tariffs and firm technology choice: An environmental approach By Steffen, Nico
  12. Principles for the regulation of for-­hire road passenger transportation services By Richard Darbéra
  13. Evaluating the Performance of Alternative Municipal Water Tariff Designs: Quantifying the Trade‐offs between Equity, Economic Efficiency, and Cost Recovery By Nauges, Céline; Whittington, Dale
  14. Causality between energy, carbon, and economic growth: empirical evidence from the European Union By Janda, Karel; Torkhani, Marouan

  1. By: Janda, Karel; Tyuleubekov, Sabyrzhan
    Abstract: In this paper we estimated relation between greenhouse gas abatement and share of renewable energy resources in Germany and Czech Republic. We also analysed the dependence between annual installed capacities of RES and respective feed-in tariffs. We took the empirical data of annual installed capacities and regressed it on respective feed-in tariffs (FIT) and/or their polynomials. The analysis resulted in optimum intervals for some types of RES, which are summarised in our paper. We could not collect most of the data for the Czech Republic, since the Energy Regulatory Office of the Czech Republic does not publish the time series for RES, unlike Germany, which publishes a comprehensive database regarding RES. Optimum intervals in our paper indicate at which values of FIT the biggest amount of installed capacities is anticipated. Thus, if FIT scheme to be continued after 2017, FITs should be set inside these intervals. These intervals assume that there are not any caps and restrictions.
    Keywords: Renewable energy, feed-in tariff, Czech renewables, German Renewables
    JEL: G32 L94 Q28
    Date: 2016–12–05
  2. By: Janda, Karel; Tyuleubekov, Sabyrzhan
    Abstract: This paper provides an overview of the renewable energy policies in Germany and Czech Republic. The description of major renewable policies in both countries is complemented with the description of financial support schemes for these policies. National renewable energy plans in both countries are discussed. The emphasis is on renewable electricity energy.
    Keywords: Renewable energy, feed-in tariff, Czech renewables, German Renewables
    JEL: Q28
    Date: 2016–12–05
  3. By: Jotzo, Frank; Mazouz, Salim
    Abstract: In this paper we propose a market mechanism for regulated exit of highly emissions intensive power stations from the electricity grid. The starting point is that there is surplus capacity in coal fired power generation in Australia. In the absence of a carbon price signal, black coal generation capacity may leave the market instead of high emitting brown coal power stations. We lay out options for a mechanism of regulated power station closure using a market mechanism. Plants bid competitively over the payment they require for closure, the regulator chooses the most cost effective bid, and payment for closure is made by the remaining power stations in proportion to their carbon dioxide emissions. This could overcome adverse incentive effects for plants to stay in operation in anticipation of payment for closure and solve the political difficulties and problems of information asymmetry that plague government payments for closure and direct regulation for exit. We explore the issues theoretically and provide empirical illustrations. These suggest that closure of a brown coal fired power station in Australia could yield emissions savings at costs that are lower than the social benefits. The analysis in this paper is applicable to other countries.
    Keywords: Greenhouse gas emissions, electricity, brown coal, early retirement, regulation, market mechanism, contract for closure., Marketing, Resource /Energy Economics and Policy, Q48, Q58,
    Date: 2015–11
  4. By: Wu, Libo; Tang, Weiqi
    Abstract: Energy conservation and greenhouse gas (GHG) abatement have been included in the national development strategy of China. However, the rigidity in command-and-control mechanisms and arbitrariness in assignment of GHG abatement burden across regions have caused unnecessary losses in both economic efficiency and social equity. In this paper, we use an Inter-Regional Dynamic CGE (IRD-CGE) model to simulate economic and welfare impacts of climate policies on national and regional level, including carbon intensity targets, regional emission constraints and cap-and-trade mechanism. Comparison among alternative emission reduction policy mechanisms indicates that emission trading scheme can not only moderate the economic and social welfare losses, but also improve social equity by decoupling the allocation of emission permits from economic optimization of emission reduction scheme. From this perspective, emissions trading bridges the concerns for economic efficiency and social equity, since emission permits could be reallocated as an income transfer so as to promote inter-regional equity, while economic efficiency is maintained.
    Keywords: Greenhouse gas emissions, energy conservation, emission reduction, pollution, cap-and-trade mechanism, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q54, Q56,
    Date: 2015–05
  5. By: B. Kelsey Jack; Grant Smith
    Abstract: The standard approach to recovering the cost of electricity provision is to bill customers monthly for past consumption. If unable to pay, customers face disconnection, the utility loses revenue, and the service provision model is undermined. A possible solution to this problem is prepaid metering, in which customers buy electricity upfront and use it until the prepaid amount is consumed. We use data from Cape Town, South Africa to examine the effects of prepaid electricity metering on residential consumption and returns to the electric utility. Over 4,000 customers on monthly billing were involuntarily assigned to receive a prepaid electricity meter, with exogenous variation in the timing of the meter replacement. Electricity use falls by about 13 percent as a result of the switch, a decrease that persists for the following year. This creates a tradeoff for the utility: revenue from consumption falls but more of it is recovered on time and at a lower cost. The benefits to the electric utility outweigh the costs, on average, though results are very heterogeneous. Poorer customers and those with a history of delinquent payment behavior show the greatest improvement in profitability when switched to a prepaid meter. These findings point to an important role for metering technologies in expanding energy access for the poor.
    JEL: H2 L94 O13 Q41
    Date: 2016–12
  6. By: Jin, Wei; Zhang, ZhongXiang
    Abstract: In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps.
    Keywords: Renewable energy deployment, energy technology adoption, network externality, climate technology policies, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy, Q41, Q42, Q48, Q54, Q55, Q58, H23, O13,
    Date: 2015–08
  7. By: Zhang, ZhongXiang
    Abstract: The Chinese central government has approved the seven pilot carbon trading schemes. These seven pilot regions are deliberately selected to be at varying stages of development and are given considerable leeway to design their own schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the key common and varying features of these carbon trading pilots and their first-year performance, draws the lessons learned, discusses the potential pathways for evolution of regional pilot carbon trading schemes into a nationwide carbon trading scheme, and raises fundamental issues that must be addressed in order to make such an emissions trading scheme to work reliably and effectively and with an increasingly expanded coverage and scope.
    Keywords: Pilot carbon trading schemes, environmental taxes, compliance, carbon offsets, energy prices, China, Demand and Price Analysis, Environmental Economics and Policy, H23, O13, P28, Q43, Q48, Q52, Q54, Q58,
    Date: 2015–04
  8. By: David Bardey (Toulouse School of Economics, Universidad de Los Andes); Denis Gromb (HEC Paris - GROUPE HEC); David Martimort (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics); Jérôme Pouyet (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics)
    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: Mis-Selling, Expertise, Retailing, Competition, Regulation, Asymmetric Information Keywords Mis-Selling, Asym- metric Information
    Date: 2016–11
  9. By: Reynaert, Mathias; Sallee, James M.
    Abstract: Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming.
    Keywords: gaming, corrective taxation, environmental regulation, carbon emissions, automobiles, fuel economy
    JEL: H2 L5 Q5
    Date: 2016–12
  10. By: Janda, Karel; Torkhani, Marouan
    Abstract: This paper serves as a brief introduction to the complex relationship between energy consumption and economic growth and between energy consumption and greenhouse emissions. We provide a critical overview of recent literature dealing with energy, carbon emissions and economic growth. We focus mainly on econometric literature examining causal effects between energy consumption and economic growth and on literature adding carbon emissions into the investigation of this topic.
    Keywords: Economic growth, energy consumption, oil consumption, natural gas consumption, renewable energies, biomass
    JEL: O40 Q28 Q42
    Date: 2016–12–05
  11. By: Steffen, Nico
    Abstract: This paper analyzes environmental concerns by a government in a setting of rent-extracting strategic trade policy with endogenous firm investment into production technologies. The simple analysis highlights the importance of investment incentives caused by tariffs in general and shows that the resulting implications for the optimal tariff decision can be completely different between traditional tariff considerations and an environmentally conscious government. We show that an importing country in a dynamic setting with endogenous firm technology choices prefers to impose discriminatory tariffs both ex post and ex ante when emissions matter, while a commitment to uniform tariffs is optimally chosen when environmental concerns do not play a role.
    Keywords: Climate policy,Carbon tariffs,Technology choice,Discriminatory tariffs
    JEL: F13 F18 D24 Q58
    Date: 2016
  12. By: Richard Darbéra (LATTS - Laboratoire Techniques, Territoires et Sociétés - École des Ponts ParisTech (ENPC) - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique)
    Abstract: All over the world, the rapid spread of app-based private for-hire transport services competing with the traditional taxis has taken regulators by surprise and faced massive and sometimes violent reaction from the taxi drivers and taxi licence owners. Everywhere, politicians are pressed to legislate. And they face a dilemma: whether to satisfy the social demands of taxis for protection against this new competition or whether to support change so as to cater for the tremendous popularity of these new services. The social and political reasons for responding to the claims of the traditional taxi industry are well grounded but they are mostly short-term. We are here more interested by a longer-term perspective and propose to present some principles for the regulation of for-hire road passenger transportation services based on economic considerations. Some of these principles have already been partly applied by regulators in some countries; in some other countries they have been wilfully ignored. We draw examples from both to identify feasibility and pitfalls of some principles we put forward. For nearly four centuries, taxicab regulation was justified by two market failures that largely disappeared with the advent of smartphones. However, the fact that taxicab regulations were rendered obsolete does not mean that the for-hire road passenger transportation services do not need to be regulated, much to the contrary. There must first be regulations regarding the vehicles, the drivers and the operators. The principles underlying most of these regulations are now well established, drawing on the experience of cities like London. But the smartphone revolution brought a new actor in the field: the app-based platform that dispatches drivers to the potential riders. Although some of these firms present themselves as a mere market place that allows buyers, i.e. passengers, and sellers, i.e. drivers, to meet, the truth is quite different. The “equilibrium” prices are in fact set by the platform with a wide propensity to manipulation, as recent price wars have demonstrated. It is our opinion that this new market is prone to natural monopolies. We have shown some of the potential drawback of these monopolies and proposed some policy tools to prevent their emergence. Some of our recommendation may seem farfetched and much too premature. We believe that it is easier to implement them now that they still have little bearing. It will give time to adjust them to a situation that is rapidly evolving.
    Abstract: Partout dans le monde, le développement rapide des plateformes de mise en relation entre clients et transport public particulier de personnes (TPPP) concurrençant les taxis traditionnels a surpris les régulateurs. Partout il a provoqué une réaction massive et parfois violente des chauffeurs de taxi et des propriétaires de licences de taxi. Partout, les politiciens sont pressés de légiférer. Et ils sont confrontés à un dilemme: répondre aux demandes sociales des taxis pour les protéger contre cette nouvelle concurrence ou bien accompagner le changement afin de répondre à l'énorme popularité de ces nouveaux services. Les raisons sociales et politiques pour répondre aux revendications de l'industrie traditionnelle du taxi sont bien fondées, mais elles sont pour la plupart à court terme. Nous sommes ici plus intéressés par une perspective à plus long terme et proposons de présenter quelques principes pour la réglementation des services de TPPP basés sur des considérations économiques. Certains de ces principes ont déjà été appliqués en partie par les régulateurs de certains pays; dans d'autres pays, on les a délibérément ignorés. Nous en tirons des exemples pour évaluer la faisabilité de certains principes que nous proposons. Pendant près de quatre siècles, la réglementation des taxis a été justifiée par deux défaillances du marché qui ont largement disparu avec l'arrivée des smartphones. Toutefois, le fait que la réglementation des taxis soit obsolète ne signifie pas que les services de TPPP n'ont pas besoin d'être réglementés, bien au contraire. Il doit d'abord y avoir des règlements concernant les véhicules, les conducteurs et les opérateurs. Les principes sous-jacents à la plupart de ces règlements sont maintenant bien établis, en s'appuyant sur l'expérience de villes comme Londres. Mais la révolution smartphone a apporté un nouvel acteur dans le domaine: la plate-forme qui met en relation les chauffeurs avec leurs clients potentiels. Bien que certaines de ces entreprises se présentent comme un simple marché qui permet aux acheteurs, c'est-à-dire aux passagers et aux vendeurs, c'est-à-dire aux conducteurs, de se rencontrer, la vérité est tout à fait différente. Les prix « d'équilibre » sont en fait fixés par la plate-forme avec une large propension à la manipulation, comme les récentes guerres de prix ont démontré. Nous sommes d'avis que ce nouveau marché est sujet aux monopoles naturels. Nous avons montré quelques-uns des inconvénients potentiels de ces monopoles et proposé certains instruments de politique pour empêcher leur émergence.
    Keywords: regulation, app-based transport companies, taxicab,private hire vehicles
    Date: 2015–11
  13. By: Nauges, Céline; Whittington, Dale
    Date: 2016–10
  14. By: Janda, Karel; Torkhani, Marouan
    Abstract: This paper examines the relationship between energy consumption and economic growth and between energy consumption and greenhouse emissions for the EU countries, using time series data from 1996 to 2012 within a multivariate framework for 26 EU countries. The energy sources considered are oil consumption, natural gas consumptions, and renewable energies including biomass as a distinct part. Unit Root Tests, cointegration test, Pairwise Granger causality tests, and Error Correction Model are employed to find out the type of the causal relationship. We find out that there is in the short run, a positive unidirectional causal relationship running from oil consumption to economic growth. There is also a positive bidirectional causal relationship between renewable energies and economic growth and between greenhouse emissions and economic growth. However, there is also an unexpected negative bidirectional causal relationship between biomass consumption and gas consumption. From the greenhouse emissions perspective, we can see in the short run, a negative bidirectional causal relationship between greenhouse emissions and renewable energies, and a positive unidirectional causal relationship running from both oil consumption and biomass consumption to greenhouse emissions.
    Keywords: Economic growth, energy consumption, oil consumption, natural gas, renewable energies, biomass
    JEL: Q28 Q42 Q43
    Date: 2016–12–05

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.