nep-reg New Economics Papers
on Regulation
Issue of 2018‒01‒08
seventeen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Benchmarks for Emissions Trading – General Principles for Emissions Scope By Vera Zipperer; Misato Sato; Karsten Neuhoff
  2. Assessing the Rebound Effect in Energy Intensive Industries: A Factor Demand Model Approach with Asymmetric Price Response By Dahlqvist, Anna; Lundgren, Tommy; Marklund, Per-Olov
  3. On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multileader Stackelberg Analysis By Hélène Le Cadre
  4. Optimal management of a wind power plant with storage capacity By Jérôme Collet; Olivier Féron; Peter Tankov
  5. Consumer Preferences and Soft Load Control on the Swedish Electricity Market By Broberg, Thomas; Brännlund, Runar; Persson, Lars
  6. Heterogeneity in residential electricity consumption: A quantile regression approach By Frondel, Manuel; Sommer, Stephan; Vance, Colin
  7. The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies By Sébastien Houde; Joseph E. Aldy
  8. Time-Consistent Carbon Pricing By Olga Chiappinelli; Karsten Neuhoff
  9. Energy efficiency as an instrument of regional development policy? Trading-off the benefits of an economic stimulus and energy rebound effects By Gioele Figus; Karen Turner; Patrizio Lecca; Peter G McGregor
  10. Compensating households from carbon tax regressivity and fuel poverty: a microsimulation study By Audrey Berry
  11. Spikes and memory in (Nord Pool) electricity price spot prices By Tommaso Proietti; Niels Haldrup; Oskar Knapik
  12. Exploring the effect of monetary incentives on user behavior in Online Sharing Platforms By Lu, Yixin; Ou, Carol; Angelopoulos, Spyros
  13. Bunching on the Autobahn? Speeding Responses to a 'Notched' Penalty Scheme By Christian Traxler; Franz Westermaier; Ansgar Wohlschlegel
  14. Regulation and altruism By Izabela Jelovac; Samuel Nzale
  15. Why is price useless to signal environmental quality ? By Alexandre Volle
  16. One-block train formation in large-scale railway networks: An exact model and a tree-based decomposition algorithm By Chen, C.; Dollevoet, T.A.B.; Zhao, J.
  17. The role of educational trainings in the diffusion of smart metering platforms: An agent-based modeling approach By Tomasz Weron; Anna Kowalska-Pyzalska; Rafal Weron

  1. By: Vera Zipperer; Misato Sato; Karsten Neuhoff
    Abstract: Greenhouse gas emission benchmarks are widely implemented as a policy tool, as more countries move to implement carbon pricing mechanisms for industrial emissions. In particular, benchmarks are used to determine the level of free allowance allocation in emission trading schemes, which are distributed as a measure to prevent carbon leakage. This paper analyses how benchmark designs impact firms’ production and business model decisions, particularly focusing on the coverage of direct and indirect emissions in the benchmark scope. We develop an analytical model and use the example of a steel mill to analyze and quantify how scope of indirect emissions coverage affect incentives. We seek to clarify generalized principles for efficient benchmark design, that provide a predictable policy framework for innovation and investment to decarbonize energy intensive industry.
    Keywords: Emissions Trading, Emission Benchmarking, Free allocation, Incentives, Low-Carbon Innovation
    JEL: D04 H25 L51 L61 Q58
    Date: 2017
  2. By: Dahlqvist, Anna (National Institute of Economic Research); Lundgren, Tommy (Centre for Environmental and Resource Economics, Umeå University and Swedish University of Agricultural Science); Marklund, Per-Olov (National Institute of Economic Research)
    Abstract: The purpose of this paper is to analyze the direct rebound effect poten-tially prevailing in energy intense industries. The rebound effect repre-sents economic mechanisms that will offset energy savings from energy efficiency improvements. For this purpose, a factor demand model is applied incorporating an asymmetric energy price response. Asymmetric prices imply that firms respond more strongly to energy price increases than to energy price decreases. In the empirical model we use a firm level, unbalanced panel covering the years 2001 to 2012 and four major Swedish energy-intensive industries; pulp and paper, iron and steel, chemical, and mining. The result indicates that the rebound effect is considerable in these industries. To mitigate this effect, the results sug-gest that policies stimulating an increase in energy efficiency should be combined with a raise in energy taxes.
    Keywords: Asymmetric price response; Energy efficiency; Factor de-mand model; Own-price elasticities; Voluntary Energy Efficiency Pro-grams; Rebound effect
    JEL: Q41 Q48
    Date: 2017–12–18
  3. By: Hélène Le Cadre (EnergyVille)
    Abstract: In this paper, we analytically compare centralized and decentralized market designs involving a national and local market operators, strategic generators having market power and bidding sequentially in local markets , to determine which design is more efficient for the procurement of energy. In the centralized design, used as benchmark, the national market operator optimizes the exchanges between local markets and the genera-tors' block bids. In the decentralized design, generators act as Stackelberg leaders, anticipating the local market prices and the flows on the transmission lines. Clearing of the local markets can be either simultaneous or sequential. The resulting two-stage game with competitive leaders that are not price takers is formulated as a bilevel mathematical programming problem which is reformulated as a Nash-Cournot game, and conditions for existence and uniqueness of market equilibrium are studied. Imperfect information is also considered, resulting from the lack of incentives from the generators to share their RES-based generations. Through a case study, we determine that the decentralized design is as efficient as the centralized one with high share of renewables, using as performance measure the Price of Anarchy, and that imperfect information has a limited impact on the efficiency of the decentralized market design. Furthermore, we check numerically that there exists an upper-limit on the block bid length maximizing the social welfare under both centralized and decentralized designs.
    Keywords: Bilevel Mathematical Programming,Complementarity Theory,Electricity Market,Bidding,Price of Anarchy
    Date: 2017–10–19
  4. By: Jérôme Collet (EDF R&D - Electricité de France Recherche et Développement); Olivier Féron (EDF R&D - EDF R&D - Electricité de France Recherche et Développement); Peter Tankov (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique)
    Abstract: We consider the problem of a wind producer who has access to the spot and intraday electricity markets and has the possibility of partially storing the produced energy using a battery storage facility. The aim of the producer is to maximize the expected gain of selling in the market the energy produced during a 24-hour period. We propose and calibrate statistical models for the power production and the intraday electricity price, and compute the optimal strategy of the producer via dynamic programming.
    Keywords: stochastic control,intraday electricity market,battery storage,wind power generation
    Date: 2017–11–02
  5. By: Broberg, Thomas (CERE and the Department of Economics, Umeå University); Brännlund, Runar (CERE and the Department of Economics, Umeå University); Persson, Lars (CERE and the Department of Economics, Umeå University)
    Abstract: The main purpose of the present report is to present the results of the project "The electricity customer, a new power on the electricity market?" The main purpose of the project is to estimate lost values due to various restrictions on household electricity consumption, which gives us "prices" of schematic reductions in power through behavioral adaptations among Swedish households. Another purpose is to estimate households' costs for short power outages, which gives a "price" of a targeted disconnection of electricity. The willingness of households to adjust their electricity consumption is governed by several factors - both economic and non-economic. An additional objective is therefore to analyze the extent to which households are willing to adapt for non-economic reasons, for example, to facilitate the integration of renewable electricity production such as solar and wind power. To achieve the objectives of the project, we analyze household habits and preferences for electricity usage in connection with daily demand peaks during winter time in Sweden. We have chosen an empirical approach where households are subjected to choose between hypothetical electricity contracts where different types of restrictions in the use of large-scale household appliances are included. The different characteristics of the agreements or contracts relate to (1) maximum power usage in watts, (2) the duration of the restriction, (3) number of occasions of restriction and (4) the ability to change the selection of which electrical appliances to be used during the restriction. In addition to the above-mentioned approach, we also study how this relates to other electricity usage (e.g. heating, lighting, TV, etc.). This is done by asking households for compensation requirements to accept full power outages, i.e. black-outs. By studying the difference in compensation requirements between the "soft" limitation and the black-outs, the value of different loads can be estimated. The results reveal that households on average require a compensation of SEK 2000 - 3700 depending on the severity of electricity consumption constraint. Depending on how we define the potential loss in potential electricity usage for different scenarios, the results can be translated to be between SEK 20 and 40 per kWh. In the case of total power outages, the valuation is significantly higher and corresponds to SEK 3000 to 4600. This can in turn be translated to the equivalent of SEK 400 - 600 per kWh. The results thus indicate a significant difference between the value of the load in a soft control DSM program, and the remaining load (e.g. heating, lighting and TV). Compared to previous literature on the value of lost load, VOLL, our estimates fall in the higher range, especially compared to Swedish studies. We believe this is in line with the context outlined in the present study with rather many occasions of disruptions at the peak demand hour. The results also show that a pro-environmental cheap talk make people more likely to opt into a DSM program with load controlled at many occasions. It did not, however, make people see more lenient on hard load controls in general. An immediate policy implication from the results is that specific policies aiming at stimulating behavioral changes probably are very ineffective and/or costly. As a result, policies to affect demand response should focus on automatization and passive response. A related policy implication is that it is far from obvious that demand response is always more cost effective than supply response, i.e., increasing production of electricity.
    Keywords: Demand flexibility; choice experiment; electricity market; load control
    JEL: Q41 Q42 Q50
    Date: 2017–12–08
  6. By: Frondel, Manuel; Sommer, Stephan; Vance, Colin
    Abstract: Drawing on the most recent wave of the German Residential Energy Survey (GRECS), this paper estimates the contribution of individual appliances to household electricity consumption. Moving beyond the standard focus of estimating mean effects, we combine the conditional demand approach with quantile regression methods to capture the heterogeneity in the contribution of each appliance to the distribution of household electricity consumption. While reflecting correlations, rather than causal relationships, our results indicate substantial differences in the end-use shares across households originating from the opposite tails of the electricity consumption distribution, highlighting the added value of applying quantile regression methods in estimating consumption rates of electric appliances.
    Keywords: Electricity consumption,conditional demand approach,quantile regression methods
    JEL: D12 Q41
    Date: 2017
  7. By: Sébastien Houde; Joseph E. Aldy
    Abstract: The behavioral responses to taxes and subsidies are often subject to various behavioral biases and transaction costs—what we define as “microfrictions.” We develop a theoretical framework to show how these microfrictions—and their heterogeneity across the population and policy instruments—affect the design of Pigouvian policies. Standard Pigouvian pricing still holds with transaction costs, but requires adjustment with behavioral biases. We use transaction-level data from the US appliance market to estimate the heterogeneous behavioral responses to an array of energy fiscal policies and to quantify microfrictions. We then assess optimal fiscal policies and find that it is rarely optimal to couple a Pigouvian tax on energy with an investment subsidy in this context. We also find that energy labels—intended to increase the salience of energy information—can interact in perverse ways with both taxes and subsidies.
    JEL: H31 Q4 Q48 Q58
    Date: 2017–12
  8. By: Olga Chiappinelli; Karsten Neuhoff
    Abstract: In this paper we show that carbon pricing is subject to time-inconsistency and we investigate solutions to improve on the problem and restore the incentive for the private sector to invest in low-carbon innovation. We show that a superior price- investment equilibrium can be sustained in the long-term, if the policy-maker is enough forward looking and allowed to build reputation. In the short-term, time- inconsistency can be alleviated by complementing carbon pricing with project-based carbon price guarantees.
    Keywords: Carbon pricing, Time-inconsistency, Low-carbon innovation, Environmental regulation, Repeated games, Carbon contracts
    JEL: C73 L51 O31 Q58
    Date: 2017
  9. By: Gioele Figus (Centre for Energy Policy, University of Strathclyde); Karen Turner (Centre for Energy Policy, University of Strathclyde); Patrizio Lecca; Peter G McGregor (Department of Economics, University of Strathclyde)
    Abstract: Previous studies show that improving efficiency in household energy use can stimulate a national economy through an increase and change in the pattern of the aggregate demand. However, this may impact competitiveness. Here we find that in an open region, interregional migration of workers may give additional momentum to the economic expansion, by relieving pressure on the real wage and the CPI. Furthermore, the stimulus will be further enhanced by the greater fiscal autonomy that Scotland is set shortly to enjoy. By considering a range of CGE simulation scenarios we show that there is a tension between the economic stimulus from energy efficiency and the scale of rebound effects. However, we also show that household energy efficiency increases do typically generate a “double dividend†of increased regional economic activity and a reduction in carbon emissions.
    Keywords: energy efficiency, regional development policy, energy rebound, regional fiscal autonomy, general equilibrium
    JEL: D58 Q43 Q48 R28 R58
    Date: 2017–02
  10. By: Audrey Berry (CIRED)
    Abstract: For households, taxing carbon raises the cost of the energy they use to heat their home and to travel. This paper studies the distributional impacts of the recently introduced French carbon tax and the design of compensation measures. Using a microsimulation model built on a representative sample of the French population from 2012, I simulate for each household the taxes levied on its consumption of energy for housing and transport. Without recycling, the carbon tax is regressive and increases fuel poverty. However, I show how compensation measures can offset these impacts. A flat cash transfer offsets tax regressivity by redistributing
    Keywords: Carbon tax, Distributional impacts, Fuel poverty, Revenue recycling, Microsimulation
    JEL: Q5 I3
    Date: 2017–12
  11. By: Tommaso Proietti (CEIS & DEF, University of Rome "Tor Vergata"); Niels Haldrup (Aarhus University); Oskar Knapik (Aarhus University)
    Abstract: Electricity spot prices are subject to transitory sharp movements commonly referred to as spikes. The paper aims at assessing their effects on model based inferences and predictions, with reference to the Nord Pool power exchange. We identify a spike as a price value which deviates substantially from the normal price, where the latter is defined as the expectation arising from a model accounting for long memory at the zero and at the weekly seasonal frequencies, given the knowledge of the past realizations. Hence, a spike is associated to a time series innovation with size larger than a specified threshold. The latter regulates the robustness of the estimates of the underlying price level and it is chosen by a data driven procedure that focuses on the ability to predict future prices. The normal price is computed by a modified Kalman filter, which robustifies the inferences by cleaning the spikes, i.e. shrinking an observation deviating substantially from the normal price towards the one-step-ahead prediction. Our empirical application illustrates the effects of the spikes on the estimates of the parameters governing the persistence of the series; moreover, a real time rolling forecasting exercise is used to establish the amount of cleaning for optimizing the predicting accuracy at different horizons.
    Keywords: Robustness,Kalman Filter,Long Memory.
    JEL: C22 C53 Q41
    Date: 2017–12–18
  12. By: Lu, Yixin; Ou, Carol (Tilburg University, School of Economics and Management); Angelopoulos, Spyros
    Abstract: We examine the impact of monetary incentives on user onboarding in online sharing platforms. Specifically, drawing upon the literature of monetary incentives, privacy, and consumer behavior, we conduct a randomized field experiment to explore users’ initial engagement and interaction with an online car-sharing platform. Our empirical analyses show that monetary incentives are no better than simple email reminders in encouraging users’ self- disclosure of private information nor their active engagement with the platform (i.e., actual booking via the platform). Our work sheds new light on the heated debate over the design and deployment of monetary incentives in digital platforms, and provides useful implications for both academia and the industry.
    Date: 2018
  13. By: Christian Traxler; Franz Westermaier; Ansgar Wohlschlegel
    Abstract: This paper studies drivers’ responses to a ‘notched’ penalty scheme in which speeding penalties are stepwise and discontinuously increasing in speed. We present survey evidence suggesting that drivers in Germany are well aware of the notched penalty structure. Based on a simple analytical framework we analyze the impact of the notches on drivers’ optimal speed choices. The model’s predictions are confronted with data on more than 150,000 speeding tickets from the Autobahn and 290,000 speed measures from a traffic monitoring system. The data provide evidence on modest levels of bunching, despite several frictions working against it. We analyze the normative implications and assess the scope for welfare gains from moving from a simple, notched penalty scheme to a more complex but less salient Pigouvian scheme.
    Keywords: notches, speeding tickets, stepwise penalty function, salience
    JEL: K40 D04
    Date: 2017
  14. By: Izabela Jelovac (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Samuel Nzale (AMU - Aix Marseille Université)
    Abstract: We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent's effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator's input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection.
    Keywords: altruism, moral hazard, adverse selection, regulator-agent joint production
    Date: 2017–10–17
  15. By: Alexandre Volle (Laboratoire CEE-M, Université Montpellier)
    Abstract: The present paper investigates the pricing behavior of a green firm competing against a brown firm where the polluting quality is sell in a perfect competitive market. The distorsion of the price to signal a green product is too high to face any demand. Pooling price equilibria emerge as most plausible as long as the brown firm has the possibility to mimic the pricing behavior of the green firm. A green producer is thus constrained to practice uninformative prices which can conduct it to leave the market.
    Keywords: Environmental Quality, Asymmetric Information, Price Signaling
    JEL: D43 D82 Q5
    Date: 2017–12
  16. By: Chen, C.; Dollevoet, T.A.B.; Zhao, J.
    Abstract: We investigate the one-block train formation problem (TFP) in the railway freight transportation industry given a car route for each shipment. The TFP considers both the block design and the car-to-block assignment in the tactical level. Moving beyond current researches on service network design, the unitary rule and the intree rule are taken into account in this study based on the Chinese railway background. We develop a linear binary programming formulation to minimize the sum of train cost and classication delay subject to limitations on the classication capacity and the number of sort tracks at each station. Furthermore, we propose a novel solution methodology that applies a tree-based decomposition algorithm. Here, we rst decompose the whole network into a series of rooted trees for each destination separately. Then, we divide the trees into suciently small subtrees, whose size is regulated by a node size parameter. Finally, we construct a restricted linear binary model for each subtree and solve these models sequentially to nd their optimal solutions. Our computational results on a realistic network from the Chinese railway system with 83 stations, 158 links and 5700 randomly generated demands show that the proposed algorithm can derive high-quality solutions within 3 hours. These solutions are on average 43.89% better than those obtained after solving the linear binary program for 1 day.
    Keywords: Railway Freight Transportation, Train Formation Problem, Service Network Design, Tree-based Decomposition, Arborescence Structure
    Date: 2017–12–01
  17. By: Tomasz Weron; Anna Kowalska-Pyzalska; Rafal Weron
    Abstract: Using an agent-based modeling approach we examine the impact of educational programs and trainings on the diffusion of smart metering platforms (SMPs). We also investigate how social responses, like conformity or independence, mass-media advertising as well as opinion stability impact the transition from predecisional and preactional behavioral stages (opinion formation) to actional and postactional stages (decision-making) of individual electricity consumers. We find that mass-media advertising (i.e., a global external field) and educational trainings (i.e., a local external field) lead to similar, though not identical adoption rates. Secondly, that spatially concentrated 'group' trainings are never worse than randomly scattered ones, and for a certain range of parameters are significantly better. Finally, that by manipulating the time required by an agent to make a decision, e.g., through promotions, we can speed up or slow down the diffusion of SMPs.
    Keywords: Smart meter; Smart metering platform (SMP); Behavioral strategy; Demand response; Diffusion of innovations; Agent-based model
    JEL: C63 O33 Q40 Q55 Q56
    Date: 2017–11–25

This nep-reg issue is ©2018 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.
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