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on Regulation |
| By: | Daniel Nachtigall (Freie Universität Berlin) |
| Abstract: | This paper analyzes the impact of declining extraction costs of shale oil producers on the choice of the policy instrument of a climate coalition in the presence of a monopolistic oil supplier such as OPEC. Shale oil producers' extraction costs represent an upper bound for the oil price OPEC can charge. Declining extraction costs ultimately limit OPEC's price setting behavior and thus impacts the optimal climate policy of the climate coalition. A pure cap-and-trade system is weakly welfare-inferior relative to a carbon tax for the climate coalition. While high extraction costs allow OPEC to appropriate the whole climate rent in case of quantity regulation, declining extraction costs imply OPEC to capture only a part of the climate rent. A carbon tax always generates positive revenue and thus is welfare-superior in general. However, low extraction costs prevent OPEC from exerting its market power, leading the climate coalition to implement the Pigouvian tax in the first place. Both market-based instruments are equivalent in this case. Complementing a quota with a base tax cannot outperform a pure carbon tax. |
| Keywords: | fossil fuel taxation, prices versus quantities, international redistribution, global warming |
| JEL: | H23 Q31 Q54 Q58 |
| Date: | 2017–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:bdp:wpaper:2017001&r=reg |
| By: | Tomaso Duso; Jo Seldeslachts; Florian Szücs |
| Abstract: | We investigate the impact of competition policy enforcement on the functioning of European energy markets, and how sectoral regulation influences these outcomes. For this purpose, we compile a new dataset on the European Commission’s (EC) and EU member states’ competition policy decisions, and combine it with firm- and sector-level data. We find that EC merger policy has a positive and robust impact on (i) the level of competition; (ii) investment; and (iii) productivity. This impact, however, only shows up in low-regulated sectors. Other competition policy decisions – EC state aid and anti-trust interventions; as well as all individual Member State policy variables – do not have a uniform effect on energy markets’ functioning. Our findings are consistent with the idea that the EC’s merger policy actions have been used to overcome significant obstacles to a well-functioning EU energy sector and may well have shaped the overall development of gas and electricity markets in Europe. |
| Keywords: | Ex-post evaluation, energy markets, competition policy |
| JEL: | D24 L4 L98 Q4 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1674&r=reg |
| By: | Hancevic, Pedro; Lopez-Aguilar, Javier |
| Abstract: | Increasing block pricing schemes represent difficulties for applied researchers who try to recover demand parameters, in particular, price and income elasticities. The Mexican residential electricity tariff structure is amongst the most intricate around the globe. In this paper, we estimate the residential electricity demand and use the corresponding structural parameter estimates to simulate an energy efficiency improvement scenario, as suggested by the Energy Transition Law of December 2015. The simulated program consists of a massive replacement of electric appliances (air conditioners, fans, refrigerators, washing machines, and light-bulbs) for more energy-efficient units. The main empirical findings are the following: overall residential electricity consumption decreases 8.9% and the associated expenditure falls 11.1%. Additionally, the electricity subsidy decreases 360 million of USD per year and there is an annual cut in CO2 emissions of 3.5 million of tons. |
| Keywords: | increasing block pricing; energy efficiency; residential electricity users; electric appliances; energy subsidies; air pollution. |
| JEL: | D12 L50 L94 Q40 Q53 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80093&r=reg |
| By: | Andreas A. Renz; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)) |
| Abstract: | It would seem that Hotelling's rule and its related models of resource extraction and electricity production as largest consumer of scarce resources are closely related. However, although fixed costs and a non-storable product are essential in characterizing electricity markets, they can hardly be found in respective literature. We show optimal extraction paths when coal, gas and a renewable with differing fixed and variable costs as well as carbon intensities are considered. The technology with lowest fixed costs will then "–" though relying on a scarce resource "–" always be used in perpetuity. The high fixed-cost fossil technology may be exploited at a definite point of time if it is relatively scarce or also used ad infinitum. |
| Keywords: | Scarce resource, Optimal control theory, Hotelling, Valuation, Non-renewable resource, Pollution target, Climate change, Peak-load-pricing |
| JEL: | C61 Q32 Q48 L94 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1707&r=reg |
| By: | Daniel Nachtigall (Freie Universität Berlin) |
| Abstract: | The allocation of free allowances for firms belonging to the carbon leakage list of the European Union Emissions Trading Scheme (EU ETS) was found to lead to substantial overcompensation, which is why some stakeholders recently have called for a phasing out of free allowances in the near term. This paper analyzes the consequences of phasing out free allowances in a dynamic two-period model when one group of countries unilaterally implements climate policies such as an emissions trading scheme. A carbon price induces firms to invest in abatement capital, but may also lead to the relocation of some firms. The social planner addresses the relocation problem by offering firms transfers, i.e. free allowances, conditional on maintaining the production in the regulating country. If transfers are unrestricted in both periods, then the social planner can implement the first best by setting the carbon price equal to the marginal environmental damage and using transfers to prevent any relocation. However, if transfers in the future period are restricted, it is optimal to implement a declining carbon price path with the first period price exceeding the marginal environmental damage. A high carbon price triggers investments in abatement capital and thus creates a lock-in effect. With a larger abatement capital stock, firms are less affected by carbon prices in the future and therefore less prone to relocate in the second period where transfers are restricted. |
| Keywords: | unilateral climate policy, relocation, lock-in effect, rebating |
| JEL: | Q54 Q56 Q58 H23 |
| Date: | 2016–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:bdp:wpaper:2016007&r=reg |
| By: | Rey, Patrick; Salant, David |
| Abstract: | We study the design of auctions for the allocation of essential inputs, such as spectrum rights, transmission capacity or airport landing slots, to firms using these inputs to compete in a downstream market. When welfare matters in addition to auction revenues, there is a trade-off: provisions aimed at fostering post-auction competition in the downstream market typically result in lower prices for consumers, but also in lower auction proceeds. We first characterize the optimal auction design from the standpoints of consumer and total welfare. We then examine how various regulatory instruments can be used to implement the desired allocation. |
| Keywords: | Auctions; Market design; Essential inputs; Regulation; Antitrust. |
| JEL: | D43 D44 D47 D61 L13 L42 L43 L51 |
| Date: | 2017–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:31784&r=reg |
| By: | De Donder, Philippe; Rodriguez, Frank; Soteri, Soterios |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:31790&r=reg |
| By: | Fabio Moliterni (Fondazione Eni Enrico Mattei) |
| Abstract: | This study investigates the connection between rent-seeking behaviour, corruption activity and quality of institutions to empirically evaluate the unexpected implications of an energy policy for criminal activity. The object of this research is a program of public subsidies introduced in Italy in 2005, which successfully boosted the solar energy sector but seems to have generated a growth of corruption activity, arisen from the opportunity of rent extraction. In particular, according to the main hypothesis of this research, bribery is expected to rise significantly where big photovoltaic plants are concentrated and administrative procedures are more complicated. To determine the causal effect of the subsidies on corruption, the study employs a Difference-in-Difference methodology on a sample of 76 Italian provinces and exploits solar radiation as exogenous variable to discriminate the profitability of investments and bribing. Results confirm that, in poor-institutions areas, the growth of the solar sector in sunniest provinces has gone hand in hand with increasing corruption. Results suggest that policy makers should pay additional attention to the potential distortions of public policies implying large rent opportunities, in areas where the weakness of institutional settings and the bureaucratic complexities encourage illegal behaviour. |
| Keywords: | Renewable Energy, Corruption, Public Subsidies, Legal Institutions |
| JEL: | O13 D73 P47 H23 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2017.33&r=reg |
| By: | Mark D. Manuszak; Krzysztof Wozniak |
| Abstract: | We study the pricing of deposit accounts following a regulation that capped debit card interchange fees in the United States and provide the first empirical investigation of the link between interchange fees and granular deposit account prices. This link is broadly predicted by the theoretical literature on two-sided markets, but the nature and magnitude of price changes are key empirical issues. To examine the ways that banks adjusted their account prices in response to the regulatory cap on interchange fees, we exploit the cap's differential applicability across banks and account types, while accounting for equilibrium spillover effects on banks exempt from the cap. Our results show that banks subject to the cap raised checking account prices by decreasing the availability of free accounts, raising monthly fees, and increasing minimum balance requirements, with different adjustment across account types. We also find that banks exempt from the cap adjusted prices as a competitive response to price changes made by regulated banks. Not accounting for such competitive responses underestimates the policy's impact on the market, for both banks subject to the cap and those exempt from it. |
| Keywords: | Equilibrium effects ; Financial supervision and regulation ; Interchange fees ; Retail banking and debit cards ; Two-sided markets |
| JEL: | G21 G28 L51 |
| Date: | 2017–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-74&r=reg |
| By: | Jonathan D. Hall; Craig Palsson; Joseph Price |
| Abstract: | How Uber affects public transit ridership is a relevant policy question facing cities worldwide. Theoretically, Uber's effect on transit is ambiguous: while Uber is an alternative mode of travel, it can also increase the reach and flexibility of transit's fixed-route, fixed-schedule service. We use a difference-in-differences design to measure the effect of Uber on public transit ridership. The design exploits variation across U.S. metropolitan areas in both the intensity of Uber penetration (as measured using data from Google Trends) and the timing of Uber entry. We find that Uber is a complement for the average transit agency. This average effect masks considerable heterogeneity, with Uber being more of a complement in larger cities and for smaller transit agencies. Comparing the effect across modes, we find that Uber's impact on bus ridership follows the same pattern as for total ridership, though for rail ridership, it is a complement for larger agencies. |
| Keywords: | public transportation; difference-in-differences |
| JEL: | R40 H42 |
| Date: | 2017–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-585&r=reg |