nep-reg New Economics Papers
on Regulation
Issue of 2018‒04‒23
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. State-Owned Enterprises and the Low-Carbon Transition By Andrew Prag; Dirk Röttgers; Ivo Scherrer
  2. Vehicle choices and urban transport externalities. Are Norwegian policy makers getting it right? By Wangsness, Paal Brevik; Proost, Stef; Rødseth, Kenneth Løvold
  3. The Incidence of Carbon Taxes in U.S. Manufacturing: Lessons from Energy Cost Pass-through By Sharat Ganapati; Joseph S. Shapiro; Reed Walker
  4. Dynamic Airline Pricing and Seat Availability By Kevin R. Williams
  5. Institutions and Performance of Regulated Firms: Evidence from Electric Utilities in the Indian States By Jamasb, Tooraj; Llorca, Manuel; Khetrapal, Pavan; Thakur, Tripta
  6. Relative Effectiveness of Energy Efficiency Programs versus Market Based Climate Policies in the Chemical Industry By Gale A. Boyd; Jonathan M. Lee
  7. A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms By Bublitz, Andreas; Keles, Dogan; Zimmermann, Florian; Fraunholz, Christoph; Fichtner, Wolf
  8. Excess Capacity and Effectiveness of Policy Interventions: Evidence from the cement industry By OKAZAKI Tetsuji; ONISHI Ken; WAKAMORI Naoki
  9. Addressing Europe’s failure to clean up the transport sector By Simone Tagliapietra; Georg Zachmann
  10. The renewable energy consumption and growth in the G-7 countries: Evidence from historical decomposition method By Balcilar, Mehmet; Ozdemir, Zeynel Abidin; Ozdemir, Huseyin; Shahbaz, Muhammad
  11. Behavioral Responses of Green Builders to Discontinuous Certification Schemes By Atasoy, Ayse Tugba
  12. Optimal coverage of an emission tax in the presence of monitoring, reporting, and verification costs By Stéphane De Cara; Loïc Henry; Pierre-Alain Jayet

  1. By: Andrew Prag (International Energy Agency); Dirk Röttgers (OECD); Ivo Scherrer (OECD)
    Abstract: This paper explores the role of state-owned enterprises (SOEs) in the low-carbon transition in OECD and G20 countries. It tracks GHG emissions and energy investments by SOEs and analyses the impact of SOEs on investments in renewable electricity. A descriptive analysis of SOEs’ role in the electricity sector shows the continued importance of SOEs, including prominent investments in both renewables and fossil-fuel-based electricity generation..
    Keywords: China, climate change, climate finance, decarbonisation, estimation, investment, low-carbon transition, market power, public intervention, regression, renewable energy, SOEs, state-owned enterprises
    JEL: F30 H23 L41 L94 Q42 Q48 Q54 Q58
    Date: 2018–04–18
  2. By: Wangsness, Paal Brevik (Institute of Transport Economics – Norwegian Centre for Transport Research); Proost, Stef (Department of Economics-KULeuven); Rødseth, Kenneth Løvold (Norwegian University of Life Sciences)
    Abstract: Norway has the world’s highest share of electric vehicles in its vehicle stock – in particular battery electric vehicles (BEVs). BEVs have reached a 20% share of the new car sales in Norway, thanks to a set of policies that include high purchase taxes for fossil fueled cars, and for BEVs, free parking, no tolls, and the right to drive on the bus lanes. This paper uses a stylized model of the transport market in the greater Oslo area (1.2 million inhabitants) to analyze transport policies. First, we explore the medium-term effects of the current BEV friendly policies. Second, the model is used to explore the potential of better pricing of car and public transport use, and of better car purchase taxes. We find that the current policies lead to massive penetration of BEVs and therefore to a strong reduction of CO2 emissions. However, they also lead to much more congestion and a decrease in the use of public transport. Better policies require efficient pricing of road congestion, a better use of public transport, and provide incentives for consumers to choose the most efficient combinations of cars. Such policies lead to a less extreme penetration of BEVs, and lower CO2 emissions reductions than the current transport policies. However, they do achieve a better transport equilibrium and substantial resource cost savings, leading to higher welfare levels.
    Keywords: electric vehicles; climate policy; urban transport policy; transport modeling
    JEL: H23 H71 Q54 Q58 R41 R48
    Date: 2018–04–13
  3. By: Sharat Ganapati (Dept. of Economics, Yale University); Joseph S. Shapiro (Cowles Foundation, Yale University); Reed Walker (University of California, Berkeley, IZA, & NBER)
    Abstract: This paper studies how changes in energy input costs for U.S. manufacturers a?ect the relative welfare of manufacturing producers and consumers (i.e., incidence). In doing so, we develop a novel partial equilibrium methodology designed to estimate the incidence of input taxes. This method simultaneously accounts for three determinants of incidence that are typically studied in isolation: incomplete pass-through of input costs, di?erences in industry competitiveness, and substitution amongst inputs used for production. We apply this methodology to a set of U.S. manufacturing industries for which we observe plant-level unit prices and input choices. We ?nd that about 70 percent of energy price-driven changes in input costs are passed through to consumers. We combine industry-speci?c pass-through rates with estimates of industry competitiveness to show that the share of welfare cost borne by consumers is 25-75 percent smaller (and the share borne by producers is correspondingly larger) than models featuring complete pass-through and perfect competition would suggest.
    Keywords: Pass-through, incidence, energy prices, productivity, climate change
    JEL: H22 H23 Q40 Q54
    Date: 2016–05
  4. By: Kevin R. Williams (Cowles Foundation, Yale University)
    Abstract: Airfares are determined by both intertemporal price discrimination and dynamic adjustment to stochastic demand. I estimate a model of dynamic airline pricing accounting for both forces with new flight-level data. With model estimates, I disentangle key interactions between the arrival pattern of consumer types and remaining capacity under stochastic demand. I show that the forces are complements in airline markets and lead to significantly higher revenues, as well as increased consumer surplus, compared to a more restrictive pricing regime. Finally, I show that abstracting from stochastic demand leads to a systematic bias in estimating demand elasticities.
    Keywords: Dynamic pricing, Intertemporal price discrimination, Price discrimination, Stochastic demand, Pricing, Airlines, Dynamic discrete choice
    JEL: L11 L12 L93
    Date: 2017–08
  5. By: Jamasb, Tooraj; Llorca, Manuel; Khetrapal, Pavan; Thakur, Tripta
    Abstract: It is commonly accepted that institutions influence economic development of countries. But, can we also trace the effect of institutional endowment to specific sectors and regions of a country? There is a significant gap in knowledge and evidence of this issue in the literature. This paper examines this effect in the Indian electricity distribution sector and explores the influence of state-level institutional quality and economic factors on the performance of network utilities in India. Since the 1990s, India has adopted reform steps to improve the efficiency of its electricity sector. However, there remain performance differences among the utilities. We examine the performance of 52 electricity distribution utilities in 24 Indian states for the period from 2006-07 to 2011-12. The findings confirm that the quality of institutions and state-wide economic development affect the performance of the electricity distribution utilities in different states. Additionally, we simulate the cost savings from utilities’ performance improvements linked with institutional enhancements. The results indicate the need to strengthen the institutions, for example through regulatory agencies reform to improve the performance of the sector.
    Date: 2018
  6. By: Gale A. Boyd; Jonathan M. Lee
    Abstract: This paper addresses the relative effectiveness of market vs program based climate policies. We compute the carbon price resulting in an equivalent reduction in energy from programs that eliminate the efficiency gap. A reduced-form stochastic frontier energy demand analysis of plant level electricity and fuel data, from energy-intensive chemical sectors, jointly estimates the distribution of energy efficiency and underlying price elasticities. The analysis controls for plant level price endogeneity and heterogeneity to obtain a decomposition of efficiency into persistent (PE) and time-varying (TVE) components. Total inefficiency is relatively small and price elasticities are relatively high. If all plants performed at the 90th percentile of their efficiency distribution, the reduction in energy is between 4% and 13%. A modest carbon price of between $9.48/ton and $14.01/ton CO2 would achieve reductions in energy use equivalent to all manufacturing plants making improvements to close the efficiency gap.
    Keywords: Energy efficiency, price elasticities, manufacturing, stochastic frontier, plant-level data
    Date: 2018–04
  7. By: Bublitz, Andreas; Keles, Dogan; Zimmermann, Florian; Fraunholz, Christoph; Fichtner, Wolf
    Abstract: Electricity markets are currently going through a phase of agitating transition, which is mainly characterized by an increasing share of fluctuating renewable energies. Among policy makers, this has led to growing concerns about generation adequacy and often to the introduction of different capacity remuneration mechanisms to generate less volatile sources of income for investors and, thereby, guaranteeing generation adequacy. However, these mechanisms entail new challenges regarding the best design to avoid any adverse effects. At the same time, it is disputed whether capacity remuneration mechanisms are indeed needed or whether an energy-only market is sufficient. Therefore, after discussing the peculiarities of the electricity markets, which are the starting point of the unique regulatory framework, an up-to-date overview of the debate on the need for capacity remuneration mechanisms is provided. In addition, the current status of capacity remuneration mechanisms in Europe is shown, and initial experience is presented. Furthermore, this article reflects the current state of research about capacity remuneration mechanisms in regards to, for example, cross-border effects, investment cycles or market power. In a conclusive summary, shortcomings of the existing research works and open questions that need to be addressed in future works are discussed.
    Date: 2018
  8. By: OKAZAKI Tetsuji; ONISHI Ken; WAKAMORI Naoki
    Abstract: Excess production capacity has been a major concern in many countries, in particular, when an industry faces declining demand. Strategic interaction among firms might delay efficient scrappages of production capacity, and policy interventions that eliminate such strategic incentives may improve efficiency. This paper empirically studies the effectiveness of policy interventions in such environment, using plant-level data on the Japanese cement industry. Our estimation results show that a capacity coordination policy that forces firms to reduce their excessive production capacity simultaneously can effectively reduce excess capacity without distorting firms' scrappage decisions or increasing the market power of the firms.
    Date: 2018–03
  9. By: Simone Tagliapietra; Georg Zachmann
    Abstract: The issue Under the Paris Agreement, the European Union has committed to cut its greenhouse gas emissions to 40 percent below 1990 levels by 2030. Between 1990 and 2015, emissions decreased significantly in all sectors with the exception of transport, which has seen a 20 percent increase. Transport is thus becoming a key obstacle to EU decarbonisation and more aggressive policies are needed to decarbonise this sector. A particular focus should be decarbonisation of road transport because it is responsible for more than 70 percent of overall transport emissions. Decarbonising road transport would also improve air quality in cities, which remains a fundamental challenge for better public health in Europe. Policy challenge So far, national and EU policies have failed to foster road transport decarbonisation. However, this trend can be reversed by adopting a new EU post-2020 strategy with three main components. First, the EU should foster political momentum and encourage countries and cities to adopt plans to ban all diesel and petrol vehicles by 2030-2040. This would be a strong signal to the automotive industry to invest more strongly in clean vehicles, and to citizens to adopt more sustainable transport modes. The EU should provide support to countries and cities that take this route though a new EU Clean Transport Fund. Second, the EU should promote a Europe-wide discussion about the future of transport taxation. Third, the EU should focus its transport-related research and innovation funding on supporting new clean technologies that are not yet viable, but are potentially key to ensure deep decarbonisation of road transport in the longer term.
    Date: 2018–04
  10. By: Balcilar, Mehmet; Ozdemir, Zeynel Abidin; Ozdemir, Huseyin; Shahbaz, Muhammad
    Abstract: This paper aims to analyze the time-varying effects of renewable energy consumption on economic growth and vice versa for the G-7 countries. To this end, the historical decomposition method with bootstrap is utilized. The findings show that the effect of economic growth on renewable energy consumption is highly time-varying and strongly positive during the whole analysis period for Germany, Italy and the United States. Although the result is usually analogous in most periods for Canada, France, Japan and the United Kingdom, the contribution of economic growth on renewable energy consumption is reversed in some periods. Additionally, the effect of renewable energy consumption on economic growth shows remarkable time-variations for all the G-7 countries, but does not produce a consistent direction of effect over the entire analysis period. For Germany, Italy and the United Kingdom, renewable energy consumption appears to be a driving force for economic growth during nearly in the whole time period after early 1990s.
    Keywords: Renewable Energy, Growth, G7
    JEL: A1
    Date: 2018–03–19
  11. By: Atasoy, Ayse Tugba (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: I study behavioral responses to the green building certification system by the Leadership in Energy and Environmental Design program (LEED). LEED provides four different certification levels (‘Certified’, ‘Silver’, ‘Gold’, and ‘Platinum’) that are all defined by a threshold. Using micro data on LEED-certified buildings, I document intense bunching of buildings at or slightly above the different cutoffs. This finding is robust to different specifications, observed for different versions of LEED as well as for a comparable building certification system from the UK (the Building Research Establishment Environmental Assessment Method). Using the methods from the public finance literature, which studies bunching responses to ‘kinks’ and ‘notches’ in tax systems (e.g., Chetty et al., 2011; Kleven and Waseem, 2013), I quantify the bunching mass at the threshold. Using cross-sectional variation in bunching across different states of the US, I find a significant negative relationship between the bunching estimators and energy prices.
    Keywords: Labels; Green Buildings; Energy Efficiency; Notches; Bunching
    JEL: D62 H23 Q48
    Date: 2016–12
  12. By: Stéphane De Cara (SAE2 - Département Sciences Sociales, Agriculture et Alimentation, Espace et Environnement - INRA - Institut National de la Recherche Agronomique, ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech); Loïc Henry (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech); Pierre-Alain Jayet (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: Environmental policies often include exemptions for some firms, e.g. the small emitters. This paper explores the implications of such exemptions in the case of an emission tax, and in the presence of monitoring, reporting, and verification (MRV) costs. We develop an analytical framework capturing the trade-off between the cost-effectiveness of a broader tax base, and the savings on MRV costs enabled by a partial coverage. Second-best partial coverage is defined by a threshold value of some characteristic of the firms below which firms are exempted. We characterize the optimal threshold and discuss its welfare implications. Since determining this threshold is demanding in terms of information regarding firm-level MRV and abatement costs, we show how limited knowledge about these costs at the aggregate level can be used in practice to approximate the optimal threshold. We apply this framework to assess the welfare implications of such an instrument in the case of greenhouse gas emissions from European agriculture. The findings indicate that exempting the small emitters may provide significant savings on MRV costs compared to the full coverage, while still incentivizing cost-effective reductions in emissions.
    Keywords: Climate policy, Emission tax, Partial coverage, Greenhouse gas emissions,Agriculture
    Date: 2018–05

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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