nep-reg New Economics Papers
on Regulation
Issue of 2017‒06‒25
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Economic Cost of Carbon Abatement with Renewable Energy Policies By Jan Abrell; Mirjam Kosch; Sebastian Rausch
  2. Intermittent renewable electricity generation with smart grids By Prudence Dato; Tun Durmaz; Aude Pommeret
  3. Potential impacts of liberalisation of the EU-Africa aviation market By Eric Tchouamou Njoya; Panayotis Christidis
  4. Does Strategic Ability Affect Efficiency? Evidence from Electricity Markets By Ali Hortaçsu; Fernando Luco; Steven L. Puller; Dongni Zhu
  5. Quantifying the Benefits of Infrastructure Sharing By Matthew Andrews; Milan Bradonjic; Iraj Saniee
  6. Regulating Water an Sanitation Network Services. Accounting for Institutional and Informational Constraints By Daniel Camos-Daurella; Antonio Estache
  7. The impact of energy prices on product innovation: Evidence from the UK refrigerator market. By François Cohen; Matthieu Glachant; Magnus Söderberg
  8. Energy, poverty and development: a primer for the Sustainable Development Goals By Hannah Goozee
  9. Paris after Trump: An inconvenient insight By Christoph Boehringer; Thomas Fox Rutherford
  10. Learning from Productive Development Agencies in Brazil: Policies for Technological Innovation By Paulo F. Azevedo; Maria Sylvia Saes; Paula Sarita Bigio Schneider; Thiago Bernardino de Carvalho; Andresa Silva Neto Francischini; Synthia Kariny Silva de Santana; Maria Clara de Azevedo Morgulis
  11. Cost of controlling water pollution and its impact on industrial efficiancy By Asha Gunawardena
  12. Optimal energy policy for a carbon tax in Japan By Shibata, Tsubasa
  13. The effect of network externalities on entry in a Spence-Dixit model By Domenico Buccella Author-Name: Luciano Fanti

  1. By: Jan Abrell (ETH Zurich, Switzerland); Mirjam Kosch (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland)
    Abstract: This paper exploits the randomness and exogeneity of weather conditions to identify the economic cost of decarbonization through renewable energy (RE) support policies. We find that both the aggregate cost and the distribution of cost between energy producers and consumers vary significantly depending on which type of RE technology is promoted reflecting substantial heterogeneity in production cost, temporal availability of natural resources, and market conditions (i.e., time-varying demand, carbon intensity of installed production capacities, and opportunities for cross-border trade). We estimate that the cost for reducing one ton of CO2 emissions through subsidies for solar are EUR 500-1870. Subsidizing wind entails significantly lower cost, which can even be slightly negative, ranging from EUR 5-230. While the economic rents for energy producers always decrease, consumers incur three to five times larger costs when solar is promoted but gain under RE policies promoting wind.
    Keywords: Decarbonization, Renewable Energy Policies, Wind, Solar, Electricity, Economic Cost, Distributional impacts
    JEL: Q28 Q48 Q54 L94 C01
    Date: 2017–06
  2. By: Prudence Dato (IREGE, University of Savoie); Tun Durmaz (SEE, CityU Hong Kong and Econ. Dept., Yildiz Technical University); Aude Pommeret (SEE, CityU Hong Kong and IREGE, University of Savoie)
    Abstract: The aim of the paper is to analyse the efficient mix of investment in intermittent renewable energy and energy storage. The novelty of our model accrues from the flexibility it assigns to a household in feeding (resp. purchasing) electricity to (resp. from) the grid or store energy (or use stored energy) upon renewable energy installations. We study the consequences of demand side management by accounting for three levels of equipment in smart grids. The first level refers to the possibility to feed electricity to the grid that can simply be achieved by net metering. The second one concerns the installation of smart meters. The third level relates to energy storage. We analyse decisions concerning solar power and energy storage investments, and the consequences of energy storage and smart meters for electricity consumption and purchases of electricity from the grid. Additionally, we discuss the desirability of smart meter installation and study the implications of curtailment measures in avoiding congestion. Our results indicate that electricity prices need to be carefully contemplated when the objective is to rely less on the grid through smart grid deployment.
    Keywords: Renewable energy, Intermittency, Distributed generation, Energy Storage, Demand response
    JEL: D24 D61 D81 Q41 Q42
    Date: 2017–06
  3. By: Eric Tchouamou Njoya (University of Huddersfield); Panayotis Christidis (European Commission – JRC)
    Abstract: Intercontinental air services between Europe and Africa are mainly governed by bilateral agreements negotiated between the individual countries of the EU and the various African governments. This paper provides an overview of the regulatory trends and development of air transport between EU and Africa, focussing on passenger traffic developments over the past five years and discusses the impact of liberalisation between Africa and the EU on the degree of concentration in airport traffic shares. Results indicate a growing role of Dubai and Istanbul and a decreasing role of European hubs as gateways to Africa. While Johannesburg, Cairo, Nairobi and Lagos remain the main international hubs in Africa, regional airport hubs have emerged in Algiers, Dar es Salaam and Casablanca. Liberalisation of EU-African aviation markets is likely to result in the emergence of further African regional hubs.
    Keywords: Transport economics, transport policy, aviation, air transport, EU, Africa
    JEL: R40 R41 R49
    Date: 2017–06
  4. By: Ali Hortaçsu; Fernando Luco; Steven L. Puller; Dongni Zhu
    Abstract: Oligopoly models of short-run price competition predict that large firms can exercise market power and generate inefficiencies. Inefficiency, however, can arise from other sources as well, such as from heterogeneity in strategic sophistication. We study such a setting in the Texas electricity market, in which bidding behavior of some firms persistently and significantly deviates from Nash-equilibrium bidding. We use information on bids and valuations to estimate the level of strategic sophistication of specific firms in the market. We do this embedding a Cognitive Hierarchy model into a structural model of bidding into auctions. We show that strategic sophistication increases with the size of the firm and it is also related to managers' educational backgrounds. We then use our model to perform counterfactual calculations about market efficiency under different scenarios that increase strategic sophistication of low-type firms either exogenously or through mergers with more sophisticated firms.
    JEL: D03 D22 L1
    Date: 2017–06
  5. By: Matthew Andrews; Milan Bradonjic; Iraj Saniee
    Abstract: We analyze the benefits of network sharing between telecommunications operators. Sharing is seen as one way to speed the roll out of expensive technologies such as 5G since it allows the service providers to divide the cost of providing ubiquitous coverage. Our theoretical analysis focuses on scenarios with two service providers and compares the system dynamics when they are competing with the dynamics when they are cooperating. We show that sharing can be beneficial to a service provider even when it has the power to drive the other service provider out of the market, a byproduct of a non-convex cost function. A key element of this study is an analysis of the competitive equilibria for both cooperative and non-cooperative 2-person games in the presence of (non-convex) cost functions that involve a fixed cost component.
    Date: 2017–06
  6. By: Daniel Camos-Daurella; Antonio Estache
    Abstract: The main purpose of this chapter is to argue that the optimal design of regulation of water and sanitation monopolies should be the outcome of a detailed diagnostic of the institutional constraints impacting the ability of the operator - whether public or private - to deliver the services.Tailoring the regulatory processes and instruments to account for institutional and informational weaknesses stands a better chance of improving the performance of the sector than the adoption of imported standardized or pre-packaged regulatory tools.
    Date: 2017–06
  7. By: François Cohen; Matthieu Glachant; Magnus Söderberg
    Abstract: This paper uses product-level data from the UK refrigerator market to evaluate the impact of electricity prices on product innovation. Our best estimate is that a 10% increase in the electricity price reduces the average energy consumption of commercialized refrigerator models by 2%. A large share of this reduction is explained by a reduction of freezing space. We also show that the exit of energy-inefficient products contributes more to energy reduction than the launch of new energy-efficient models. These findings suggest that innovation – the development of better technologies embodied in new products – does not respond strongly to energy price variations.
    Keywords: Induced Innovation; Energy Efficiency; Electricity Prices; Multiple Imputations; Product entry and exit.
    JEL: D12 L68 Q41 Q55
    Date: 2017–06–13
  8. By: Hannah Goozee (IPC-IG)
    Abstract: "The seventh goal of the Sustainable Development Goals (SDGs) is dedicated to ensuring access to affordable, reliable, sustainable and modern energy for all by 2030. While energy was implicit in the Millennium Development Goals (MDGs), the SDGs explicitly recognise the direct linkage between energy access and consumption and poverty and development. This evolution of the development agenda is closely related to an expanded understanding of poverty, as it moves beyond a monetary definition, to be seen as a more holistic measure of overall quality of life. Energy has thus become recognised as an important aspect of alleviating extreme poverty. However, what remains unclear is the impact that poverty reduction will have on worldwide energy consumption. There is a significant amount of literature concerning the connection between energy consumption?in particular electricity?and development, ranging from engineering modelling to development policy. Nevertheless, there is a lack of attention given to the direct causal relationship between poverty reduction and energy consumption. This paper reviews a variety of the current literature concerning energy and electricity consumption and poverty and development, to show that there is a need to directly address how poverty levels will shape future energy consumption. This relationship will have an impact on a number of issues critical to the achievement of the SDGs ranging from health to gender and the environment". (?)
    Keywords: Energy, poverty, development, Sustainable Development Goals
    Date: 2017–05
  9. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Thomas Fox Rutherford (University of Wisconsin, Madison, WI 53706, USA)
    Abstract: With his announcement to pull the US out of the Paris Agreement US President Donald Trump has snubbed the international climate policy community. Key remaining parties to the Agreement such as Europe and China might call for carbon tariffs on US imports as sanctioning instrument to coerce US compliance. Our analysis, however, reveals an inconvenient insight for advocates of carbon tariffs: Given the possibility of retaliatory tariffs across all imported goods, carbon tariffs do not constitute a credible threat for the US. A tariff war with its main trading partners China and Europe might make the US worse off than compliance to the Paris Agreement but China, in particular, should prefer US defection to a tariff war.
    Keywords: Paris Agreement, US withdrawal, carbon tariffs, optimal tariffs, tariff war, computable general equilibrium
    Date: 2017–06
  10. By: Paulo F. Azevedo; Maria Sylvia Saes; Paula Sarita Bigio Schneider; Thiago Bernardino de Carvalho; Andresa Silva Neto Francischini; Synthia Kariny Silva de Santana; Maria Clara de Azevedo Morgulis
    Abstract: This paper presents and comparatively analyzes three case studies of productive development agencies (PDAs) in Brazil: Embrapa, Finep, and ABC Foundation. Following a discussion of the main hypotheses and the methodology employed, the paper describes each case, the related counterfactual and an analysis of each PDA's capabilities. A subsequent section presents a comparative analysis of the PDAs, studying: i) the use of hybrid forms to assemble complementary capabilities: short-run effects on technological policy; ii) the effect of strategic alliances on building capabilities and dynamic effects; and iii) how industry structure and innovation should affect PDAs' strategies. Finally, the paper presents conclusions, summarizing results, methodological shortcomings and policy implications.
    Keywords: Productive Development Policies, Productivity and Competitiveness, Industrial Productivity, Innovation Policy, Research & Development, Governance, State-owned Enterprises, New Technologies, Intellectual property, Industrial Policy, Technical assistance, research and development, innovation policy, technological innovation
    JEL: L38 D73
    Date: 2016–12
  11. By: Asha Gunawardena
    Abstract: This paper estimates the cost of effluent discharge regulations for firms located in the lower Kelani River catchment in Sri Lanka. The river provides water for many economic purposes including drinking water and avariety of ecosystem services. Employing multi-input and multi-output translog production technology, we estimate shadow prices of effluents and technical efficiency of firms belonging to eight industries. We also compute total abatement cost for firms under different policy scenarios related to simultaneous reduction in concentration of three water pollutants including current regulatory standards. Wide variations in firm and industry shadow prices (marginal abatement costs) provide a strong case for a comprehensive redesign of environmental policy to control water pollution by industries in Sri Lanka.
    Keywords: Shadow prices, Technical efficiency, environmental regulation, water pollution, distance functions
  12. By: Shibata, Tsubasa
    Abstract: Climate change is a global challenge that must be addressed at the international level. In December 2015, the Paris Agreement was adopted at the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) held in Paris. The Paris agreement is aimed at keeping global temperature increases below 2 °C. Toward this goal, the Japanese government plans to reduce greenhouse gas emissions by 26% by fiscal year 2030 compared with fiscal year 2013. In this study, we evaluate the feasibility of Japan’s energy policy for reducing CO2 emissions. We construct a macroeconometric model linked to an energy model to show the optimal future energy policy for Japan by applying optimal control to the social welfare function.
    Keywords: Energy policy,Climatic change,Environmental problems,Carbon tax,Energy model,Macroeconometric model,Optimal control
    JEL: C30 P28 Q43 Q48
    Date: 2017–03
  13. By: Domenico Buccella Author-Name: Luciano Fanti
    Abstract: This paper studies the effect of consumption externalities on entry decision in network industries in a Spence-Dixit entry model. It is shown that, when entry is considered, the presence of network externalities raises the sunk cost threshold that blocks the potential competitor’s entry. However, the difference between the thresholds to deter and accommodate entry enlarges: entry is relatively “less blockaded” but “more deterred” than in a standard goods industry..Creation-Date: 2016-01-01
    Keywords: Network externalities, Entry, Deterrence; Monopoly; Duopoly.

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