nep-reg New Economics Papers
on Regulation
Issue of 2018‒10‒29
eighteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. An Auction Story: How Simple Bids Struggle with Uncertainty By Jörn C. Richstein; Casimir Lorenz; Karsten Neuhoff
  2. Pipes, Taps and Vendors: Managing and Regulating the Unconnected Water Market By Meran, Georg; Siehlow, Markus; von Hirschhausen, Christian
  3. Can preferential trade agreements enhance renewable electricity generation in emerging economies? A model-based policy analysis for Brazil and the European Union By Yadira Mori-Clement; Stefan Nabernegg; Birgit Bednar-Friedl
  4. How Do Oil Prices, Macroeconomic Factors and Policies Affect the Market for Renewable Energy?: Oil Price, Macroeconomic Factors and Renewable Energy By Imran Shah; Carlie Hiles; Bruce Morley
  5. From residential energy demand to fuel poverty: income-induced non-linearities in the reactions of households to energy price fluctuations By DorothŽe CHARLIER; Sond s KAHOULI
  6. How do lenders price energy efficiency? Evidence from posted interest rates for unsecured credit in France By Louis-Gaëtan Giraudet; Anna Petronevich; Laurent Faucheux
  7. Reference Pricing Systems on the Pharmaceutical Market By Unsorg, Maximiliane
  8. Willingness or Market Power: What Induces Tenants to Pay for Energy Efficient Housing? By Carolin Pommeranz; Bertram Ingolf Steininger
  9. "Energy Performance Certificates and Rental Prices of Residential Housing in Norway -What is the impact of energy labeling on Norwegian rental prices? " By Aras KJ; Ole Jakob Sønstebø
  10. Reducing Shipping Greenhouse Gas Emissions: Lessons from Port-Based Incentives By ITF
  11. Mobile telephony in emerging markets: The importance of dual-SIM phones By Göller, Daniel; Andersson, Kjetil
  12. Reforming the Eastern Australian gas market By Xunpeng (Roc) Shi and R. Quentin Grafton
  13. Transmission Network Investment across National Borders: The Liberalized Nordic Electricity Market By Persson, Lars; Tangerås, Thomas
  14. Long-term efficiency and distributional impacts of energy saving policies in the French residential sector By Louis-Gaëtan Giraudet; Cyril Bourgeois; Philippe Quirion
  15. Energy performance certificates: The role of the energy price By Jon Olaf Olaussen
  16. A Mixed Bag: The Hidden Time Costs of Regulating Consumer Behavior By Taylor, Rebecca
  17. Measuring energy poverty: uncovering the multiple dimensions of energy poverty By Audrey Berry
  18. Decarbonising Maritime Transport: Pathways to zero-carbon shipping by 2035 By ITF

  1. By: Jörn C. Richstein; Casimir Lorenz; Karsten Neuhoff
    Abstract: Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding and find that even under optimal simple and block bidding generators face the risk of ex-post suboptimal solutions, whereas in multi-part bidding these do not occur. This points to efficiency gains of multi-part bidding in the presence of uncertainty in electricity markets.
    Keywords: market design, electricity markets, bidding formats, auctions
    JEL: D44 Q48 L94
    Date: 2018
  2. By: Meran, Georg; Siehlow, Markus; von Hirschhausen, Christian
    Abstract: Against the background of the human rights to water and the SDG No. 6, vendors play a pivotal role for an IWRM-based water supply system in the future. With the help of a micro-economic model, an optimal modal split is derived, the result of which is that not all households should be served by the pipe-based municipal supply. Instead, the non-connected households should be served by non-mobile or mobile vendors. Furthermore, we analyze different structures in the unconnected market. If vendors compete against each other, the optimal modal split can be replicated. If vendors form a cartel, market interventions, such as a cost related zonal price cap or a subsidizing strategy, are required for preventing the abuse of market power by the vendors.
    Keywords: Production,Pricing,Market Structure,Economics of Regulation,Water,Size and Spatial Distributions of Regional Economic Activity
    JEL: L11 L51 Q25 R12
    Date: 2018
  3. By: Yadira Mori-Clement (University of Graz, Austria); Stefan Nabernegg (University of Graz, Austria); Birgit Bednar-Friedl (University of Graz, Austria)
    Abstract: Preferential trade agreements with climate-related provisions have been suggested as alternative to a New Market Mechanism due to its potential not only to achieve Nationally Determined Contributions (NDCs) in emerging economies but also to lead to more ambitious targets in the first UNFCCC global stocktake in 2023. The objective of this research is therefore to analyze the effectiveness and quantify the economic impacts of such a trade agreement between Brazil and the European Union that aims to support renewable electricity generation. Using a multi-regional computable general equilibrium model, we find that the environmental effectiveness of a preferential trade agreement targeting renewable electricity generation strongly depends on its design. In particular, preferential trade agreements require additional elements to effectively contribute to mitigation as the sole removal of import tariffs on renewable energy technology is quite ineffective in scaling up the share of wind, solar, and biomass in Brazil. In contrast, a preferential trade agreement triggering FDI flows towards renewable electricity generation is effective in increasing the share of renewables in the generation mix and in reducing CO2 emissions, while positively affecting the Brazilian economic performance. Finally, we compare the two previous approaches to a domestic energy policy: a combination of higher fossil fuel taxes and subsidies to renewable electricity generation. We find that although this domestic energy policy is more effective in mitigation terms than the FDI policy, economic performance is negatively affected in several sectors. When such economic costs are socially not acceptable, as it is likely in many emerging economies, properly designed preferential trade agreements could therefore be a suitable instrument for supporting the achievement of NDCs, and potentially increase their stringency for the next stock taking period.
    Keywords: Preferential Trade Agreements with climate-related provisions; environmental goods; renewable energy; FDI; emerging economies; Brazil; European Union
    JEL: Q27 Q28 Q42
    Date: 2018–10
  4. By: Imran Shah (University of Bath); Carlie Hiles; Bruce Morley (University of Bath)
    Abstract: The aim of this study is to determine the nature of any relationship between renewable energy investment, oil prices, GDP and the interest rate, using a time series approach. We concentrate on three countries with different relationships to the renewable energy industry, with Norway and the UK being oil-exporters for most of the sample and the USA an importer. Following estimation using a VAR model, the results provide evidence of considerable heterogeneity across the countries, with the USA having a strong relationship between oil prices and renewable energy, Norway having a less pronounced relationship and the UK no relationship. These results reflect the fact that the USA is predominantly an oil-importer during most of this sample and supports renewable energy relatively less than the other countries, so changes to renewable energy investment reflect other factors in the market such as the price of substitutes to a greater extent than countries where renewable energy receives more government support. The main policy implications from this study are that in countries where there is little support for the renewable energy sector, investment will be more dependent on macroeconomic aspects as well as substitutes such as oil, therefore the authorities will need to potentially increase support when oil prices are low or when the economy is in a downturn.
    Keywords: renewable energy;var;oil price;government policy
    Date: 2017–04–06
  5. By: DorothŽe CHARLIER (USMB IREGE); Sond s KAHOULI (UniversitŽ Bretagne Occidentale AMURE)
    Abstract: The residential energy demand is growing steadily and the trend is expected to continue in the near future. At the same time, under the impulse of economic crises and environmental and energy policies, many households have experienced reductions in real income and higher energy prices. In the residential sector, the number of fuel-poor households is thus expected to rise. A better understanding of the determinants of residential energy demand, in particular of the role of income and the sensitivity of households to changes in energy prices, is crucial in the context of recurrent debates on energy efficiency and fuel poverty. We propose a panel threshold regression (PTR) model to empirically test the sensitivity of French households to energy price fluctuations Ð as measured by the elasticity of residential heating energy prices Ð and to analyze the overlap between their income and fuel poverty profiles. The PTR model allows to test for the non-linear effect of income on the reactions of households to fluctuations in energy prices. Thus, it can identify specific regimes differing by their level of estimated price elasticities. Each regime represents an elasticity-homogeneous group of households. The number of these regimes is determined based on an endogenously PTR-fixed income threshold. Thereafter, we analyze the composition of the regimes (i.e. groups) to locate the dominant proportion of fuel-poor households and analyse their monetary poverty characteristics. Results show that, depending on the income level, we can identify two groups of households that react differently to residential energy price fluctuations and that fuel-poor households belong mostly to the group of households with the highest elasticity. By extension, results also show that income poverty does not necessarily mean fuel poverty. In terms of public policy, we suggest focusing on income heterogeneity by considering different groups of households separately when defining energy efficiency measures. We also suggest paying particular attention to targeting fuel-poor households by examining the overlap between fuel and income poverty.
    Keywords: Fuel poverty, Residential energy demand, Price elasticity, Income elasticity, Panel threshold regression
    JEL: C23 C24 C26 Q43 Q48
    Date: 2018–10
  6. By: Louis-Gaëtan Giraudet (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech); Anna Petronevich (Banque de France - Banque de France - Banque de France); Laurent Faucheux (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Basic principles of loan pricing predict that the interest rate charged for energy efficiency investment is lower than for conventional investment. We test this hypothesis using a unique dataset of posted interest rates retrieved on a weekly basis from the websites of 15 lending institutions covering the near totality of the French market for unsecured credit. Crucially, our data are immune from sorting bias based on borrower characteristics. We find that the interest rate spread between conventional and energy efficiency investment was negative in 2015 and turned positive in 2016. A similar switch occurred to the spread between home renovation investment and vehicle investment. These results together imply that loans for home energy renovation were consistently charged relatively high interest rates. This can be interpreted as a new barrier to energy efficiency, with adverse consequences for scaling up home energy renovation. One possible explanation is that lenders use project characteristics as a screening device of unobservable borrower characteristics.
    Keywords: energy efficiency gap,unsecured loan,home energy retrofit
    Date: 2018–10–08
  7. By: Unsorg, Maximiliane
    Abstract: Constantly rising expenditures for pharmaceuticals and uninformed consumers require government intervention in firms’ pricing strategies. To this end, reference pricing systems are frequently employed as regulatory mechanisms. This paper considers a duopoly market with vertically differentiated firms: a brand-name firm and a firm producing a generic version or a branded copy (depending on competition type). It can be proven that the introduction of a reference price leads to lower equilibrium prices for both firms and that it can induce fiercer competition between brand-name and generic/branded copy firms. Additionally, it can be shown that reference pricing promotes generic usage under sequential price competition. When implementing a reference pricing system, an increased market coverage and, hence, an improved provision of medical supply can be achieved due to the lower prices and the stimulated demand for drugs. Even under a higher supply the consumers’ expenditures decrease under reference pricing. Finally, the model proves the superiority of reference prices over price caps and therefore indicates that reference pricing systems should be preferred.
    Keywords: reference pricing,pharmaceutical market,copayment,price cap,price competition,consumer expenditure
    JEL: I11 I18 L51
    Date: 2018
  8. By: Carolin Pommeranz; Bertram Ingolf Steininger
    Abstract: In this study, we analyze whether additional payments for energy efficiency are induced by either tenants’ willingness to pay, the market power of landlords, or both. With a German housing dataset from 2011 to 2016, we identify price discrimination for the energy performance certificate using hedonic regressions in a single and double sort setting. Results indicate that a high willingness to pay -– indicated by purchasing power and environmental awareness -– leads to price discrimination effects of 7-8%. These potential extra profits can stimulate investments in energy-based refurbishments by landlords. However, additional market power of landlords –- indicated by housing market conditions –- does not amplify these discrimination effects and is therefore not exploited against tenants.
    Keywords: Energy Efficiency; energy performance certificates; green housing; price discrimination
    JEL: R3
    Date: 2018–01–01
  9. By: Aras KJ; Ole Jakob Sønstebø
    Abstract: Energy efficiency in the residential housing market can play an important role in the reduction of global carbon emissions. Energy Performance Certificates (EPCs) provide actors with information that can be used to make better-informed decisions and integrate energy efficiency into their decision making process. In addition, the information from EPCs should provide an incentive for actors in this market to invest in energy efficiency, as it can be assumed that improving the energy performance of a building may lead to higher transaction prices and rents on the market. This paper reports the first Norwegian evidence on the economic implication of EPCs on rental market prices. Applying the multilevel estimation approach to investigate the relation between energy labeling and rental prices in Norway for 860 000 observations, we find strong evidence of a positive price premium. Moreover, the premium is higher for bigger cities than in rural areas.
    Keywords: energy performance certificates; Environmental regulation; Housing rental prices; Information and decisions; Real Estate Economics
    JEL: R3
    Date: 2018–01–01
  10. By: ITF
    Abstract: This report reviews port-based incentive schemes to reduce shipping emissions, such as environmentally differentiated port fees. Greenhouse gas emissions from shipping currently represent around 2.6% of total global emissions, but this share could more than triple by 2050. Ports have a crucial role to play in facilitating the reduction of shipping emissions, alongside the ship operators themselves. Which incentives are currently used? What are their impacts? How could positive effects be increased? The report also explores lessons learned that could inform international negotiations on the reduction of shipping greenhouse gas emissions.
    Date: 2018–04–17
  11. By: Göller, Daniel; Andersson, Kjetil
    Abstract: A substantial share of customers in emerging markets use dual-SIM phones and subscribe to two mobile networks. A primary motive for so called multi-simming is to take advantage of cheap on-net services from both networks. In our modelling effort, we augment the seminal model of competing telephone networks á la Laffont, Rey and Tirole (1998b) by a segment of flexible price hunters that may choose to multi-sim. According to our findings, in equilibrium, the networks set a high off-net price in the linear tariffs to achieve segmentation. This induces the price hunters to multi- sim. We show that increased deployment of dual-SIM phones may induce a mixing equilibrium with high expected on-net prices. Thus, somewhat paradoxically, deployment of a technology that increases substitutability, and thereby competition, may end up raising prices.
    Keywords: Network competition,multi-sim,dual-SIM phones,price discrimination
    JEL: D43 L13 L96 D43 L13 L96
    Date: 2018
  12. By: Xunpeng (Roc) Shi and R. Quentin Grafton
    Abstract: We analyse the deficiencies behind the Eastern Australian gas market by applying a framework proposed by the International Energy Agency. We show that this gas market has structural weaknesses that include inadequate supplies at hubs; limited pipeline capacity; predominance of long†term gas supply contracts; deficiencies in design; and difficulties with third party access. We provide five policy actions to help remedy these deficiencies and to help establish a functional gas market. Although our study is limited to Australia, it, nevertheless, provides insights for countries in the Asia Pacific region, which may wish to move towards more competitive gas markets, including trading hubs.
    Keywords: competition, hub, LNG, market regulation, prices
    Date: 2018–10–08
  13. By: Persson, Lars (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: The world’s first multinational electricity market was formed with the creation of the Nordic power exchange, Nord Pool. We analyze the incentives to undertake transmission network investment in the context of the liberalized Nordic electricity market. Welfare improving investment in a multinational electricity market requires accounting for the cross-border effects of capacity expansion. We propose methods to increase voluntary cooperation on international infrastructure projects, with an aim to increase aggregate efficiency and achieve equitable distribution of the gains from market integration.​
    Keywords: Coalition formation; Cross-border transmission investment; Multilateral bargaining; Nordic electricity market; Shapley Value
    JEL: C71 F15 L43 L94
    Date: 2018–10–17
  14. By: Louis-Gaëtan Giraudet (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech); Cyril Bourgeois (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech, CNRS - Centre National de la Recherche Scientifique); Philippe Quirion (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Using an energy-economy model that integrates behavioural and technological detail, we evaluate the impact of key policies-energy efficiency subsidies (tax credits, zero-interest loans, reduced VAT, white certificates), the carbon tax and building codes-on residential energy demand for space heating in France. We find that the carbon tax is the most effective, yet most regressive, instrument. Taking into account all possible interactions among instruments, we find that they imply on average a 10% variation in policy effectiveness. Subsidies save energy at a cost of 0.05-0.08 euro per lifetime discounted kilowatt-hour, with a leverage of 0.9 to 1.4 in 2015, decreasing over time as the potential for energy-saving opportunities is being exhausted. Targeting subsidies towards low-income households, who tend to live in energy inefficient dwellings, increases leverage, thus reconciling economic efficiency and equity. The public cost of subsidies-3 billion euros in 2013-is outweighed by carbon tax receipts from 2025 onwards. Meeting the long-term energy saving targets set by the French Government however requires increasing subsidy rates and maintaining them through 2050. In particular, an order-of-magnitude discrepancy between simulated and observed numbers of zero-interest loans points to cognitive or strategic barriers that need to be removed to increase policy effectiveness.
    Keywords: residential buildings,space heating,energy-economy modelling,energy efficiency subsidies,carbon tax,fuel poverty
    Date: 2018–10–08
  15. By: Jon Olaf Olaussen
    Abstract: Energy Performance Certificates (EPCs) are introduced to give property buyers better information about the energy efficiency of dwellings, and provide incentives to make energy efficient investment. Previous studies on EPCs effect on property value has given divergent results, some studies find that energy label affect property value, while others find that energy labels have low or no effect. The present paper takes it one step further. Indeed, by using data on energy price in combination with transaction data from Oslo, we conclude not only that the energy label – but the energy performance of dwellings in general – has minor or no effect on transaction prices. This result falls in line with what is inferred by several survey studies; at the moment people buy a dwelling, they pay considerably less attention to the energy performance as compared to other factors, like the availability of garden and outdoor space, location, the neighborhood and the size of the property.
    Keywords: Energy Efficiency; energy performance certificates; Housing Policy; Price Premium; Valuation
    JEL: R3
    Date: 2018–01–01
  16. By: Taylor, Rebecca
    Keywords: Behavioral & Institutional Economics, Resource and Environmental Policy Analysis, Household and Labor Economics
    Date: 2018–06–20
  17. By: Audrey Berry (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Date: 2018–10–16
  18. By: ITF
    Abstract: This report examines what would be needed to achieve zero CO2 emissions from international maritime transport by 2035. It assesses measures that can reduce shipping emissions effectively and describes possible decarbonisation pathways that use different combinations of these measures. In addition, it reviews under which conditions these measures could be implemented and presents concrete policy recommendations.
    Date: 2018–03–26

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