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on Regulation |
| By: | Ian Lange (Division of Economics and Business, Colorado School of Mines); Peter Maniloff (Division of Economics and Business, Colorado School of Mines) |
| Abstract: | The level and distribution of the costs of tradable allowance schemes are important determinants of whether the regulation is ultimately enacted. Theoretical and simulation models have shown that updating allowance allocations based on firm emissions or output can improve the efficiency of the scheme by acting as a production subsidy. Using the U.S. NOx Budget Program (NBP) as a case study, this analysis tests whether power plants in states which chose an updating allocation increase their electricity production relative to plants in states that chose a fixed allocation. Results find that updating allocations led to a 5 percentage point increase in capacity factors for natural gas combined cycle generators and no effect or a modest decrease for coal generators. These findings imply that an updating allocations confers a modest but meaningful subsidy to production relative to a fixed allocation and that firm responses are heterogeneous based on production technology and market conditions. |
| Keywords: | cap-and-trade, electricity, climate change |
| JEL: | Q48 Q58 L94 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201701&r=reg |
| By: | Florens Flues (OECD); Kurt van Dender (OECD) |
| Abstract: | This paper argues that, in situations where choices are made between mutually exclusive investment projects and where there are economic rents, free allocation of tradable emission permits in emissions trading systems can weaken incentives for firms to invest in less carbon-intensive technologies compared to the case where permits would be auctioned. The reason is that permit allocation rules affect economic rents differentially when different product benchmarks apply to products that are close substitutes. Examples of permit allocation rules favouring more emission-intensive technologies for outputs that are close substitutes are found in the California Cap and Trade Program and in the European Union Emissions Trading System. This lack of technology-neutrality is exacerbated in the long run as future patterns of substitutability between technologies are uncertain. Free permit allocation can broaden support for carbon pricing, but this paper shows that this carries a cost in terms of environmental effectiveness if it discourages investment in low-carbon assets. |
| Keywords: | average carbon prices, benchmarks, California Cap and Trade Program, carbon pricing, decarbonisation, emissions trading systems, EU ETS, permit allocation, technology neutrality |
| JEL: | D04 H23 H32 L51 Q48 |
| Date: | 2017–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ctpaaa:33-en&r=reg |
| By: | Christoph Böhringer; Thomas F. Rutherford |
| 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 a 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 with 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 |
| JEL: | Q58 D58 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6531&r=reg |
| By: | Ian A. Lange; Peter Maniloff |
| Abstract: | The level and distribution of the costs of tradable allowance schemes are important determinants of whether the regulation is ultimately enacted. Theoretical and simulation models have shown that updating allowance allocations based on firm emissions or output can improve the efficiency of the scheme by acting as a production subsidy. Using the U.S. NOx Budget Program (NBP) as a case study, this analysis tests whether power plants in states which chose an updating allocation increase their electricity production relative to plants in states that chose a fixed allocation. Results find that updating allocations led to a 5 percentage point increase in capacity factors for natural gas combined cycle generators and no effect or a modest decrease for coal generators. These findings imply that an updating allocations confers a modest but meaningful subsidy to production relative to a fixed allocation and that firm responses are heterogeneous based on production technology and market conditions. |
| Keywords: | updating allocation, tradable permits, electricity |
| JEL: | Q48 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6666&r=reg |
| By: | Kahlen, M.T.; Ketter, W.; Gupta, A. |
| Abstract: | Electric vehicles have the potential to be used as virtual power plants to provide reliable back-up power. This generates additional profits for carsharing rental firms, who rent vehicles by the minute. We show this by developing a discrete event simulation platform based on real-time locational information (GPS) of 1,100 electric cars from Daimlers carsharing service Car2Go in San Diego, Amsterdam, and Stuttgart. We design trading prices (bids and asks) for participating in the respective operating reserve markets, markets for back-up power guaranteeing replacement when a power source fails, to sell the storage from idle electric vehicles. These trading prices are calibrated and tested with operating reserve market data. We investigate the influence of the charging infrastructure density, battery technology, and rental demand for vehicles on the payoff for the carsharing operator. We show that virtual power plants create sustainable revenue streams for electric vehicle carsharing companies without compromising their rental business. |
| Keywords: | FleetPower, car sharing, virtual power plants, sustainability, smart electricity markets |
| Date: | 2017–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:102565&r=reg |
| By: | Andor, Mark Andreas; Gerster, Andreas; Peters, Jörg; Schmidt, Christoph M. |
| Abstract: | The seminal studies by Allcott and Mullainathan (2010), Allcott (2011), and Allcott and Rogers (2014) suggest that social comparison-based home energy reports (HER) are a cost-effective non-price intervention to stimulate energy conservation. The present paper demonstrates the context-dependency of this result. We show that, outside the US, electricity consumption levels and carbon intensities are typically much lower and, hence, HER interventions can only become cost-effective when treatment effect sizes are substantially higher. Yet, our evidence from a large-scale randomized controlled trial in Germany suggests that effect sizes are actually much lower than in the US. |
| Keywords: | social norms,energy demand,external validity,randomized field experiments,non-price interventions |
| JEL: | D12 D83 L94 Q41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:714&r=reg |
| By: | Dürr, Niklas S.; Hüschelrath, Kai |
| Abstract: | We study patterns of entry and exit in the German interurban bus industry in the first three years after its deregulation in January 2013. Using a comprehensive data set of all firm and route entries and exits, we find that the industry grew much quicker than originally expected - with particularly a few new entrants being most successful in quickly extending their route networks from regional to national coverage. Although the clear majority of routes is operated on a monopoly basis, competition does play a key role on routes with a sufficiently large base of (potential) customers. From a spatial perspective, three years after deregulation, the entire interurban bus network connects 60 percent of all 644 larger German cities - with the intensity of entry being dependent on the number of inhabitants, average income, the share of under 24 years old and the presence of intermodal competition by intercity railway services. |
| Keywords: | deregulation,interurban bus services,entry,exit,competition |
| JEL: | L11 L41 L43 L92 K21 K23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17041&r=reg |
| By: | Onur A. Koska (Department of Economics, Middle East Technical University, Ankara, Turkey); Frank Stähler (School of Business and Economics, University of Tübingen, Tübingen, Germany; University of Adelaide, Adelaide, Australia; CESifo, Germany) |
| Abstract: | This paper discusses the role of reserve prices when the signal of each bidder is positively affiliated with the seller's signal. We distinguish three reserve price designs: a public reserve price, announced before the auction starts, a revealed reserve price, disclosed when a bid matches it, and a secret reserve price that is disclosed after the highest bid has been reached. We show that a public or a revealed reserve price are strategically equivalent, and we show that no seller will set a secret reserve price. |
| Keywords: | Auctions with affiliation, optimal reserve prices. |
| JEL: | D44 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:met:wpaper:1712&r=reg |
| By: | Steve Dahlke (Division of Economics and Business, Colorado School of Mines) |
| Abstract: | This paper estimates the effect of starting the Midcontinent ISO electricity market in 2005 on wind generation. We find an average increase in wind plant capacity factors of 5.0-6.7% associated with the start of the market, relative to neighboring wind plants not in the market. These results are robust to potentially confounding variation associated with wind speed differences determined by weather. The increased capacity factors are likely attributed to reduced wind plant curtailment from operational improvements associated with starting the market, including improved transmission interconnections and more granular generator dispatch scheduling. We formulate a simulation model that demonstrates this mechanism. While there has been plenty of anecdotal evidence from technical experts and market participants that competitive wholesale markets are beneficial for wind energy, this analysis provides the first statistical evidence to support that claim. |
| Keywords: | electricity market, renewable energy, wind energy, energy economics, wind generation |
| JEL: | Q40 Q42 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201702&r=reg |
| By: | Xavier Timbeau (OFCE-Sciences PO Paris, France); Pawel Wiejski (European Affairs Programme of Sciences Po Paris) |
| Abstract: | The EU ETS is one of the main European climate policies, covering 45 percent of EU’s greenhouse gas emissions. Its main goal is to limit emissions cost-effectively, and to trigger innovations using a strong price signal, making low-carbon technologies more competitive. While emissions reduction targets for 2020 have already been achieved, the exact role of the ETS in this success remains controversial. The assessment is crucial, as more and more countries and regions plan to adopt similar policies to achieve their targets expressed in the Intended Nationally Determined Contributions, communicated at the Paris Conference of the Parties. The EU ETS, as the longest running and largest carbon market in the world, will undoubtedly serve as a point of reference. This paper attempts to provide a comprehensive analysis of the policy. First part outlines the historical development of emission trading systems, as well as the development of the EU ETS since its inception in 2005. Second part uses FASTER principles developed by the World Bank and the OECD to perform a multi-criteria, qualitative analysis of the EU ETS in its current form. Third part concentrates on the upcoming revision for the fourth phase, evaluating whether the proposals correctly address the policy’s shortcomings. It also provides some alternative reform proposals. |
| Keywords: | Cap-and-trade, EU ETS, Market stability reserve, Carbon price |
| JEL: | H23 H87 Q56 |
| Date: | 2017–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1724&r=reg |