|
on Regulation |
| By: | Nicola De Vivo (IMT Institute for Advanced Studies Lucca (Italy)); Giovanni Marin (Department of Economics, Society and Politics, University of Urbino 'Carlo Bo') |
| Abstract: | The European Emission Trading Scheme (EU ETS) is the central EU policy instrument aimed at mitigating climate change and to comply with the target agreed in the Kyoto protocol. The EU ETS could result in an harmful impact for the competitiveness of the European firms, as it was unilaterally introduced by the EU, and so firms could be induced to relocate their carbon-intensive production activities in countries with less stringent regulations for mitigating climate change (carbon leakage effect). For this reason, European Union decided to grant most of permits for free in its first phases and to exempt leakage-exposed sectors from auctioning in its third phase. According to Coase (1960), the level of emissions for each firm in equilibrium does not depend on the assignment of property rights over the emissions but this could not be the case in a real world system, with a lot of possible frictions, as transaction costs and behavioural anomalies. The aim of the paper is to exploit the asymmetry in the allocation mechanisms introduced from the third phase of the EU ETS to evaluate whether different allocation mechanisms are neutral in terms of emission abatement decisions. Results suggest a non-neutral role of the allocation mechanisms, with establishments that received allowances for free having greater emissions than plants that were forced to buy allowances through auctions. |
| Keywords: | EU ETS, grandfathering, auctioning, carbon leakage |
| JEL: | Q54 Q58 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:0417&r=reg |
| By: | Strausz, Roland (Humboldt Universität Berlin) |
| Abstract: | Uncertainty in election outcomes generates politically induced regulatory risk. For monopoly regulation, political parties\' risk attitudes towards such risk depend on a fluctuation effect that hurts both parties and an output--expansion effect that benefits at least one party. Irrespective of the parties\' risk attitudes, political parties have incentives to negotiate away regulatory risk by pre-electoral bargaining. Pareto-efficient bargaining outcomes fully eliminate regulatory risk and are attainable through institutionalizing independent regulatory agencies with a specific objective. Key aspects of the regulatory overhaul of the US Postal system in 1970 are argued to be consistent with these results. |
| Keywords: | regulation; independent regulatory agency; regulatory risk; electoral uncertainty; |
| JEL: | D82 |
| Date: | 2017–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:44&r=reg |
| By: | Petropoulos, G.; Willems, Bert (Tilburg University, TILEC) |
| Abstract: | Coordinating the timing of new production facilities is one of the challenges of liberalized power sectors. It is complicated by the presence of transmission bottlenecks, oligopolistic competition and the unknown prospects of low-carbon technologies. We build a model encompassing a late and early investment stage, an existing dirty (brown) and a future clean (green) technology and a single transmission bottleneck, and compare dynamic efficiency of several market designs. Allocating network access on a short-term competitive basis distorts investment decisions, as brown firms will preempt green competitors by investing early. Dynamic efficiency is restored with long-term transmission rights that can be traded on a secondary market. We show that dynamic efficiency does not require the existence of physical rights for accessing the transmission line, but financial rights on receiving the scarcity revenues generated by the transmission line suffice. |
| Keywords: | network access; congestion management; renewable energy sources; power markets |
| JEL: | L94 L13 C72 D43 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutil:f70cf82e-fedd-4e68-8e8f-a189636fd474&r=reg |
| By: | Brown, David P. (University of Alberta, Department of Economics); Eckert, Andrew (University of Alberta, Department of Economics) |
| Abstract: | We investigate the impacts of default regulated products and their design on the development of competitive retail markets and retailers' pricing decisions. We analyze this question in the context of Alberta's competitive retail electricity market, using data on the prices and characteristics of both regulated and unregulated retail products from July 2006 to March 2017. Our analysis consists of a descriptive discussion of the evolution of market structure in the industry, followed by an econometric analysis of the effect of default prices on unregulated retail prices. We find that as the default product moved from being a long-term stable product, to one based on short-term forward market prices, the number of products and competitors increased substantially. This suggests that the change in the default product was successful at facilitating the development of a competitive retail market. However, our econometric analysis of the pricing of unregulated contracts suggests that competitive retailers may continue to exercise market power by adjusting prices upward in response to short-term changes in the regulated rate, even after controlling for changes in the costs of providing retail products. |
| Keywords: | Electricity; Retail Markets; Market Power; Regulation; Default Rates |
| JEL: | D43 L51 L94 Q40 |
| Date: | 2017–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2017_006&r=reg |
| By: | Christian Jaag; Matthias Finger |
| Abstract: | Incumbent postal operators are particularly challenged by rapid technological developments and especially by digitalization which substitutes their letter mail, yet generally boosts parcel volumes. As a consequence, they have to rethink their strategy, especially for their post office network. The paper presents potential strategies and discusses the main trends in postal network evolution among incumbent postal operators, focusing in particular on the examples of Australia, New Zealand, Switzerland, the United Kingdom, Italy and the United States, and assesses these strategies against a set of key performance and development indicators. |
| Keywords: | Postal Sector, Postal network, Postal strategy |
| JEL: | L43 L51 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:chc:wpaper:0059&r=reg |
| By: | Christian A. L. Hilber; Charles Palmer; Edward W. Pinchbeck |
| Abstract: | We explore the impact of historical preservation policies on domestic energy consumption. Using panel data for England from 2006 to 2013 and employing a fixed effects-strategy, we document that (i) rising national energy prices induce an increase in home energy efficiency installations and a corresponding reduction in energy consumption and (ii) this energy saving effect is significantly less pronounced in Conservation Areas and in places with high concentrations of Listed Buildings, where the adoption of energy efficiency installations is typically more costly and sometimes legally prevented altogether. Preservation policies increase private energy costs and the social cost of carbon per designated dwelling by around £8,000 and £2,550, respectively. These costs ought to be weighed against any benefits of preservation. |
| Keywords: | preservation policies, land use regulation, energy efficiency, energy consumption, climate change |
| JEL: | Q48 Q54 R38 R52 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:sercdp:0217&r=reg |
| By: | Ann E. Ferris; Richard Garbaccio; Alex Marten; Ann Wolverton |
| Abstract: | Concern regarding the economic impacts of environmental regulations has been part of the public dialogue since the beginning of the U.S. EPA. Even as large improvements in environmental quality occurred, government and academia began to examine the potential consequences of regulation for economic growth and productivity. In general, early studies found measurable but not severe effects on the overall national economy. While price increases due to regulatory requirements outweighed the stimulative effect of investments in pollution abatement, they nearly offset one another. However, these studies also highlighted potentially substantial effects on local labor markets due to the regional and industry concentration of plant closures. More recently, a substantial body of work examined industry-specific effects of environmental regulation on the productivity of pollution-intensive firms most likely to face pollution control costs, as well as on plant location and employment decisions within firms. Most econometric-based studies found relatively small or no effect on sector-specific productivity and employment, though firms were less likely to open plants in locations subject to more stringent regulation compared to other U.S. locations. In contrast, studies that used economy-wide models to explicitly account for sectoral linkages and intertemporal effects found substantial sector-specific effects due to environmental regulation, including in sectors that were not directly regulated. It is also possible to think about the overall impacts of environmental regulation on the economy through the lens of benefit-cost analysis. While this type of approach does not speak to how the costs of regulation are distributed across sectors, it has the advantage of explicitly weighing the benefits of environmental improvements against their costs. If benefits are greater than costs, then overall social welfare is improved. When conducting such exercises, it is important to anticipate the ways in which improvements in environmental quality may either directly improve the productivity of economic factors – such as through the increased productivity of outdoor workers – or change the composition of the economy as firms and households change their behavior. If individuals are healthier, for example, they may choose to reallocate their time between work and leisure. While introducing a role for pollution in production and household behavior can be challenging, studies that have partially accounted for this interconnection have found substantial impacts of improvements in environmental quality on the overall economy. |
| Keywords: | Economic impacts, environmental regulation, economic productivity, employment, plant location, social welfare, health benefits |
| JEL: | Q52 Q53 Q58 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:nev:wpaper:wp201701&r=reg |
| By: | Samuel de Haas (Justus-Liebig-University Giessen); Jan Thomas Schaefer (Justus-Liebig-University Giessen) |
| Abstract: | We study effects on prices and quantities of a takeover in the rather concentrated German interurban bus industry. We empirically asses the effect of the takeover of Postbus by Flixbus on industry key features, using a route-level price data set containing prices for more than 6,000 routes in Germany for a period between September and December 2016. We find that average prices significantly increase and quantities decrease in the post-takeover phase. However, these results are mainly driven by the fact that Postbus was a low-cost supplier. The remaining providers do not seem to have increased their prices significantly in the post-takeover phase. This absence of a price increase despite the removal of a close competitor could be an indication of a strong impact of intermodal competition. This suggestion is confirmed by our empirical findings. |
| Keywords: | Competition, Takeover, Interurban Bus Services, Germany |
| JEL: | L11 L41 L92 K21 K23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201731&r=reg |
| By: | Anna Airoldi; Michele Polo |
| Abstract: | The Italian electricity retail market is fully liberalized since 2007, allowing all households to choose between a regulated tariff and those offered in the free market. However, as of 2015, almost 70% of households remain with the regulated contract and only 4.5% moves every year to the free market. Moreover, contracts more costly than the regulated default one are offered and subscribed. In this paper we first analyze the best and worst offers on the free market, identifying significant potential gains but also losses when switching from the regulated tariff to the free market. Then we build up a sequential search model that extends Janssen et al. (2005) to explain this evidence. Consumers have zero (shoppers) and positive (non-shoppers) search costs. These latter receive upward (pessimistic) or downward (optimistic) biased signals of their current regulated price. We obtain a rich set of mixed strategy equilibria with continuous support and, in some cases, an atom, different level of participation of non-shoppers of either type and some contracts more costly than the regulated one. Equilibria with a larger participation of non-shoppers are associated with higher expected and minimum prices. Search costs and perception bias are key parameters in comparative statics, with policy implications to improve market performance. Finally, by mid 2019 the Government has planned to lift the regulated tariff. We use the model to predict possible outcomes including an initial increase in prices. |
| Keywords: | Search costs, liberalized retail markets, price dispersion, gains and losses from switching. |
| JEL: | L13 L15 L94 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp97&r=reg |
| By: | Hancevic, Pedro; Margulis, Diego |
| Abstract: | Daylight saving time (DST) has been actively used as a mechanism for energy conservation and reduction of GHG emissions. In the case of Argentina, the most recent experiences with DST occurred during the austral summer periods of 2007-08 and 2008-09, when the policy was finally abandoned. The benefits of DST and the size of the (potential) energy savings are still part of an ongoing discussion in a country where energy subsidies imply a heavy fiscal burden. Using a difference-in-differences framework that exploits the quasi-experimental nature of the program implementation, we use hourly data for the 2005-2010 period at the province level and estimate the impact of DST on electricity consumption and on peak demand. The main results are: DST increases total electricity consumption between 0.4% and 0.6%, but decreases peak demand between 2.4% and 2.9%. |
| Keywords: | daylight saving time; electricity consumption; peak demand; energy conservation; air pollution |
| JEL: | L94 Q4 Q54 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80481&r=reg |
| By: | Brown, David P. (University of Alberta, Department of Economics); Sappington, David E. M. (University of Florida, Department of Economics) |
| Abstract: | We analyze the optimal design of policies to motivate electricity distribution companies to adopt efficient distributed energy resources (DER) and manage associated project costs. The optimal policy often entails a bias against new DER projects and implements considerable cost sharing when DER projects are undertaken in order to limit the utility's rent. Failure to adequately tailor the degree of cost sharing to the prevailing environment can raise procurement costs substantially. It can be optimal to reward a distribution company with more than the cost saving it achieves. |
| Keywords: | distributed energy resources; procurement; regulation |
| JEL: | L51 L94 |
| Date: | 2017–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2017_005&r=reg |