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on Regulation |
| By: | Jonathan E. Hughes; Ian A. Lange |
| Abstract: | The movement to deregulate major industries over the past 40 years has produced large efficiency gains. However, distributional effects have been more difficult to assess. In the electricity sector, deregulation has vastly increased information available to market participants through the formation of wholesale markets. We test whether upstream suppliers, specifically railroads that transport coal from mines to power plants, use this information to capture economic rents that would otherwise accrue to electricity generators. Using natural gas prices as a proxy for generators’ surplus, we find railroads charge higher markups when rents are larger. This effect is larger for deregulated plants, high-lighting an important distributional impact of deregulation. This also means policies that change fuel prices can have substantially different effects on downstream consumers in regulated and deregulated markets. |
| Keywords: | deregulation, price discrimination, electricity markets, procurement contracts |
| JEL: | L11 L51 Q48 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7374&r=all |
| By: | Simon Quemin (Paris-Dauphine University & Climate Economics Chair); Raphael Trotignon (Climate Economics Chair) |
| Abstract: | We develop a model of competitive inter-temporal emissions trading under uncertainty that features the core design elements of the EU-ETS to assess the recent market reform, essentially the market stability reserve. Modeling novelties include the introduction of myopia on the part of covered firms, of their ability to understand the interaction between their decisions and the MSR actions over time, as well as the implementation of a recursive procedure to solve for the certainty-equivalent market equilibrium solution. We calibrate the model on 2008-2017 market data to match observed price and banking paths. We find that the MSR always raises the permit price and never preserves the overall cap integrity, irrespective of the permit cancellation provision. Our results also suggest that the purported MSR responsiveness to demand shocks (e.g. recession, renewable deployment) would be limited, especially when firms are unable to anticipate future MSR-driven supply changes. |
| Keywords: | Inter-temporal emissions trading, EU-ETS reform, Supply responsiveness design, Rational expectations equilibrium, Heuristic |
| JEL: | Q58 Q54 H23 E63 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2018.19&r=all |
| By: | Cédric Clastres; Jacques Percebois; Olivier Rebenaque; Boris Solier |
| Abstract: | The deployment of renewable energies relies upon incentive policies to make their use profitable for owner. However, their development needs adjustments of network to manage intermittency and additional energy fed into the grid. Moreover, the Public Service Obligation Tariffs (PSOT) are increasing to fund policies that support renewable energy deployment. Therefore, some decisions are taken to promote self-consumption by owners of renewable energy power plants, as photovoltaic prosumers. This behavior is encouraged by payment exemptions of PSOT, special tariffs dedicated to remunerate each self-consumed energy unit or savings on the variable part of the network tariff. Thus, some cross-subsidies appear between self-consumers and other users of the network to compensate all these previous self-consumers’ gains. We show that these cross-subsidies occur but they strongly rely on self-consumption rate and on renewable energy share in the total produced or consumed energy. So, currently, the levels of cross-subsidies are not significant for consumers. We also show that regulator could fund these cross-subsidies increasing the fixed part of the network tariff for prosumers. |
| Keywords: | Self-consumption, Cross-subsidies, Network tariff, Policy instrument |
| JEL: | L94 Q42 L51 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1805&r=all |
| By: | Robles-Rovalo, Arturo; Díaz-Goti, Emiliano; Guarneros-Gutiérrez, Rodrigo |
| Abstract: | In theory, network profits are independent of the reciprocal termination rates when operators charge nondiscriminatory call prices (Laffont, Rey and Tirole, 1998). Additionally, termination rates can be used to subsidize subscriber acquisition cost. This issue is typically known as a "waterbed effect", where a reduction (increase) in termination rates leads to corresponding increase (reduction) in subscription fees to consumers. We are using a practical case for testing the effects in the final prices for regulatory policy with several changes in mobile termination rates based on an asymmetric price access regulation. In our example, the termination rates have been part of a vertical restriction strategy. The observed network-base price discrimination implemented by the major network (Telcel) resulted in deadweight efficiencies lost and created barriers to new entrance and blocked growth for the small networks OECD (2012). Historically, profits margins and mobile prices comes down whenever regulator have reduced termination rates; following the income effects in subscription (Tangeras, 2014). Having in mind this fact, regulators would diminish termination rates in order to pushdown mobile prices and stimulate competition, rest on a cost-based asymmetric price regulation. The further research allows a statistical assessment of the asymmetric price regulation implemented by the Mexican regulatory authority during January 2013 to June 2017. This paper evaluates if asymmetric regulation brings a better impact in the Mexican consumer welfare, driving the retail prices of mobile services down, also the effectivity of this policy for the next years, taking in to account that there is not significant change in the market share among all mobile networks. |
| Keywords: | Mexico,Mobile Telecommunications,Termination Rates,Structural Change,Asymmetric Regulation,Convergence,Time Series Analysis |
| JEL: | L38 L51 L59 L96 O54 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190426&r=all |
| By: | Carl Gaigné (UMR-1302, SMART-LERECO INRA, AGROCAMPUS OUEST, F-35000 Rennes, France); Vincent Hovelaque (Univ Rennes, CNRS, CREM UMR 6211, F-35000 Rennes, France); Youcef Méchouar (Univ Rennes, CNRS, CREM UMR 6211, F-35000 Rennes, France) |
| Abstract: | Recent studies on facility location under the carbon pricing scheme highlight that increas-ing the carbon price can ensure meaningful reductions in transport-related greenhouse gas emissions (GHGs). Indeed, when we assume the bill of materials (BOM) as a production technology (i.e. complementary of inputs), a higher carbon price does not change the supply planning because the input proportions are fixed, but it does increase the total transport cost, which pushes the firm to make its location choice more sustainable (lower level of emissions). However, when we account for possible substitution between input quantities, this may cease to hold. In this paper, we propose to revisit the Production-Location Problem (PLP) considering transport-related carbon emission mitigation due to carbon taxation and production technologies that allow complementarity or substitution among input quantities. We first show that cost-minimizing location may differ from carbon emission minimizing location, regardless of the production technology type. We also find that an increased car-bon tax may increase carbon emissions when we enable substitution across input quantities. Gradual changes in carbon tax affect the relative delivered prices of inputs (the per-unit procurement and transportation costs of an input compared to the costs of another) such that the firm has an incentive to relocate its facility and substitute among input quantities, leading to new shipping patterns that can generate a higher level of pollution under certain parameters. |
| Keywords: | Location, transport-related carbon emissions, carbon tax, production technology, sustainability |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:2018-12&r=all |
| By: | Baikowski, Martin |
| Abstract: | Empirical findings indicate that a large share of households misperceives electricity prices and is not able to make deliberate choices in energy service consumption, which leads to biased consumption decisions and thus to inefficient energy use. To investigate the impact of misperceived electricity prices on the derived demand for electricity, the economy and domestic CO2 emissions, we make use of a computable general equilibrium (CGE) model. The model allows us to take the narrow interweaving of production and consumption sectors into account to investigate the repercussions on supply and demand in Germany and Europe. Providing information on electricity prices or the most efficient utilisation can stimulate reductions in electricity consumption if households are aware of possible trade-offs. However, if consumers perceive the electricity price to be much higher than it actually is, providing information on the true electricity price might turn out to be counter-productive in terms of electricity consumption and domestic CO2 emissions. |
| Keywords: | residential energy consumption,energy efficiency,behavioural inefficiency,electricity price misperception,consumer inattention |
| JEL: | D58 Q41 Q43 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:105&r=all |
| By: | Dagoumas, Athanasios; Polemis, Michael |
| Abstract: | In this study, we shed light into the carbon pass-through rate mechanism to wholesale prices in the Greek electric market. For this reason, we utilize a rich micro-level panel, including hourly data for 23 power plants spanning the period January 2014 to December 2017. In order to study the pass-through of emissions costs to wholesale electricity prices, we used an instrumental variable methodology. Our findings survived several robustness checks, accounting for logged linear and non-linear econometric specifications. Moreover, they are in alignment with the relevant recent literature, indicating the existence of an almost complete pass-through rate mechanism. This means that electricity firms almost fully internalize the cost of CO2 permits, incurring important policy implications to policy makers and government officials. |
| Keywords: | Emissions; CO2 permits; Pass-through; Instrumental variable; Electricity industry |
| JEL: | L13 L94 Q52 |
| Date: | 2018–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91067&r=all |
| By: | Reyer Gerlagh; Roweno J.R.K. Heijmans |
| Abstract: | We develop a dynamic regulation game for a stock externality under asymmetric information and future market uncertainty. Within this framework, regulation is characterized as the implementation of a welfare-maximization program conditional on informational constraints. We identify the most general executable programs and find these yield simple and intuitive time-consistent policy rules that implement the stochastic first best as long as a future market exists. We apply our theory to carbon dioxide emissions trading schemes and find substantial welfare gains are possible, compared to current practices. |
| Keywords: | asymmetric information, regulatory instruments, policy updating, emission trading, pollution, climate change |
| JEL: | H23 Q54 Q58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7383&r=all |
| By: | Michael Pollitt (University of Cambridge); Lewis Dale (National Grid) |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:1839&r=all |
| By: | Viehmann, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Lorenczik, Stefan (IEA); Malischek, Raimund (IEA) |
| Abstract: | There is an ongoing debate on the appropriate auction design for competitive electricity balancing markets. Uniform (UPA)and discriminatory price auctions (DPA), the prevalent designs in use today, are assumed to have different properties with regard to prices and effciencies. These properties cannot be thoroughly described using analytical methods due to the complex strategy space in repeated multi-unit multiple bid auctions. Therefore, using an agent-based Q-learning model, we simulate the strategic bidding behaviour in these auctions under a variety of market conditions. We find that UPAs lead to higher prices in all analysed market settings. This is mainly due to the fact that players engage in bid shading more aggressively. Moreover, small players in UPAs learn to free ride on the price setting of large players and learn higher profits per unit of capacity owned, while they are disadvantaged in DPAs. UPAs also generally feature higher effciencies, but there are exceptions to this observation. If demand is varying and players are provided with additional information about scarcity in the market, market prices increase only in case asymmetric players are present. |
| Keywords: | Agent-based computational economics; Auction design; Electricity markets |
| JEL: | C63 D43 D44 L94 |
| Date: | 2018–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:ewikln:2018_003&r=all |
| By: | Ihle, Hans-Martin; Marsden, Richard; Traber, Peter |
| Abstract: | Auctions are now the standard approach for allocating spectrum licences for mobile use worldwide. The types of auction format used to award spectrum vary widely, including both sealed bids and open formats, such as the Simultaneous Multiple Round Auction (SMRA), clock auction (clock) and combinatorial clock auction (CCA). To a significant extent, spectrum awards have become a laboratory for testing new auction designs for simultaneous award of related products, with academic analysis of these formats lagging practice. Recent research into these formats has highlighted differences in the incentives they create for bidding behaviour by participants which may in turn lead to different pricing outcomes. This paper investigates whether there is empirical evidence to support theoretical arguments that the choice of auction format affects price outcomes. The scope for such analysis has historically been constrained by the limited number of observations, with outcomes of individual spectrum auctions being highly sensitive to local factors. However, with the growth in the number of countries using auctions to allocate spectrum (often repeatedly and using different formats), it is now possible to identify reasonably robust sample sizes. We find statistical evidence that open formats produce higher revenues than sealed bid formats. This is consistent with the theory that, in common-value settings, open formats allow for price discovery, which in turn encourages bidders to be confident in their willingness to express their valuations through bids, leading to more efficient (and higher-priced) auction outcomes. It is widely recognised that bidders for mobile spectrum typically have a high degree of common value in their valuations, given that they are typically competitors with closely related business cases. We also find evidence that the CCA produces higher prices than other open formats. Interestingly, this effect is much more pronounced for low-band (sub-1 GHz) spectrum, which is scarcer than other types of mobile spectrum, and where the stakes for mobile operators are highest. This result is consistent with recent research which suggests that prices in CCAs may be distorted upwards by incentives for bidders to bid strategically to drive up rivals' prices. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190332&r=all |
| By: | Behnert, Marika; Bruckner, Thomas |
| Abstract: | Against the background of the energy transition accompanied by a rising penetration of renewable energy (REN) sources and a stepwise phase out of conventional power plants in order to fulfill climate protection targets, the requirements for a reliable transmission grid infrastructure increased in the last years. High coordination and communication efforts among market and system operators as well as weather extremes that occur more frequently enhance the probability of critical network states. In this paper, causes and impacts of 250 prominent transmission grid collapses in the period from 1965 to 2012 were analyzed. Based on historical events, blackout data sets were clustered inter alia by their date, affected continent as well as the duration of interrupted supply, respectively. We find an ascending number of outages along with a longer averaged duration over time. It is studied how different categories of causes evoking large-scale power blackouts are distributed regionally and temporally. Furthermore, challenges to prevent grid malfunctions, both from a technical and societal perspective, are elaborated focusing on the German power system. |
| Keywords: | transmission grid stability,power network blackouts,cascading outages,critical infrastructures |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iirmco:032018&r=all |
| By: | Grzybowski, Lukasz; Nicolle, Ambre |
| Abstract: | In this paper, we use a unique database on switching between mobile handsets in a sample of about 5,000 subscribers using tariffs without commitment from a single mobile operator on monthly basis between March 2012 and December 2014. We estimate discrete choice model in which we account for disutility from switching to a different operating systems and handset brands and for unobserved time-persistent preferences for operating systems and brands. Our estimation results indicate presence of significant state-dependency in the choices of operating systems and brands. We find that it is harder for consumers to switch from iOS to Android and other operating systems than from Android and other operating systems to iOS. Moreover, we find that there is significant time-persistent heterogeneity in preferences for different operating systems and brands, which also leads to state-dependent choices. We use our model to simulate market shares in the absence of switching costs and conclude that the market share of Android and smaller operating systems would increase at the expense of the market share of iOS. |
| Keywords: | Smartphones,Consumer Inertia,Switching Costs,Mixed Logit,iOS,Android |
| JEL: | L13 L50 L96 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190389&r=all |
| By: | Kattumuri, Ruth; Kruse, Tobias |
| Abstract: | The tangible benefits of renewable energy technologies are a crucial parameter when determining the political feasibility of adopting a low-carbon development path, particularly for emerging economies. We present that these potential benefits consist of ‘green jobs’ and of a wider set of socio-economic and environmental ‘co-benefits’ that are generated simultaneously from renewable technologies in India. Based on case studies from the Indian state of Karnataka, we obtain estimates for jobs and describe co-benefits enabled by wind, off-grid solar and biomass technologies. Furthermore, we use these estimates to project the potential for future benefits that could be generated by further enhancing the use of renewable technologies towards sustainable energy policy and security. We show that enhancing green economy offers benefits that include the creation of jobs, but also delivers a much wider set of socio-economic and environmental welfare gains for emerging economies such as India. Our paper also provides valuable evidence-based analyses for policy-makers when assessing the benefits of low-carbon sustainable development |
| Keywords: | renewable technologies; green jobs; co-benefits; socio-economic benefits; low-carbon sustainable development |
| JEL: | R14 J01 |
| Date: | 2017–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:86551&r=all |
| By: | Étienne Billette de Villemeur; Justin Leroux |
| Abstract: | We envision the creation of a climate liability market to address climate change. Each period, countries are issued liability commensurate to their emissions of the period. Liability bearers are required to pay over time, as climate harm materializes. Revenues are used to compensate participating countries in proportion of climate harm. Because liabilities are traded like financial debt among participants, the mechanism achieves a unique carbon price through decentralization of the choice of a discount rate as well as beliefs about the severity of the climate problem. We discuss properties of such a mechanism along the dimensions of efficiency, fairness, exposure to risk, commitment, participation, as well as implementation challenges. |
| Keywords: | Climate Liability,Market Instruments,Pigovian Tax,Risk Sharing, |
| JEL: | Q54 H23 |
| Date: | 2018–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2018s-43&r=all |
| By: | Edouard Civel; Nathaly Cruz |
| Abstract: | Labels are increasingly popular among policy-makers, companies and NGOs to improve consumers’ awareness, especially about environmental footprints. Yet, the efficiency of these informational tools is mostly looked as their ability to shift behaviors, whereas their first goal is to enable people to discriminate labelled goods. This paper studies how the complex information displayed by houses’ Energy Performance Certificates is processed by real economic agents. Through a randomized artefactual field experiment on 3,000 French subjects, we test the impact of these labels on people’s perception of a home energy performance. Results evidence that 24% of subjects did not pay attention to the energy label. Unexpectedly, we find out that gender is the most critical socio-demographic characteristic in this changing attention. We interpret this effect by the Selectivity Hypothesis: energy labels design engages more male subjects. Among attentive subjects, energy labels’ efficiency to transmit information is mixed. Subjects do identify separately each label’s grade, but their judgment is biased by prior beliefs and blurred by idiosyncratic features. Aggregated reading is Bayesian: subjects infer the label information to revise their belief on energy quality. Moreover, our results shed light on strong asymmetries. While worsening grades induce decreasing judgments on energy quality, top level quality label seems to undergo skepticism, intensifying idiosyncratic noise. |
| Keywords: | Information treatment, Experimental economics, Cognitive psychology, Green Value, Energy efficiency |
| JEL: | D03 D12 D83 L15 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1809&r=all |
| By: | Gustav Fredriksson; Alexander Roth; Simone Tagliapietra; Reinhilde Veugelers |
| Abstract: | The automotive sector is currently at the centre of a global transformation, driven by four key trends - electrification, autonomous driving, sharing and connected cars. While each of these interconnected trends is already visible in daily life, their full deployment is not yet guaranteed, nor is the speed of take-up. This Policy Contribution investigates the position of the European automotive industry in a scenario in which electrification substantially progresses. The results are encouraging for Europe - EU companies entered the global electric vehicle race late, but on the basis of our analysis it is not yet too late for them to catch up and make the best of this change. European car manufacturers can rely on a large internal market, long experience in automotive manufacturing and a portfolio of research and development projects and patents that is diversified across various power-train technologies. But if Europe wants to succeed in the global electric vehicle race, its automotive industry will have to move into higher gear to meet the global – notably Chinese – competition. Nevertheless, industry needs the proper framework conditions as the basis for more ambitious investments in electrification – as examples such as Norway or China demonstrate. This Policy Contribution formulates a broad policy framework for deployment and production of electric vehicles in Europe, combining demand and supply-side instruments. Europe cannot follow China in the adoption of centrally-planned industrial policy measures. But it certainly can and should do more to stimulate the transformation of its automotive industry through more ambitious policies. On February 12, Bruegel is hosting an event on electric vehicles in European automotive industry, which will feature among others a presentation from the authors of this Policy Contribution. Click here to register. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:28892&r=all |
| By: | Knaus, Michael C.; Lechner, Michael; anthony.strittmatter@unisg.ch |
| Abstract: | We investigate the finite sample performance of causal machine learning estimators for heterogeneous causal effects at different aggregation levels. We employ an Empirical Monte Carlo Study that relies on arguably realistic data generation processes (DGPs) based on actual data. We consider 24 different DGPs, eleven different causal machine learning estimators, and three aggregation levels of the estimated effects. In the main DGPs, we allow for selection into treatment based on a rich set of observable covariates. We provide evidence that the estimators can be categorized into three groups. The first group performs consistently well across all DGPs and aggregation levels. These estimators have multiple steps to account for the selection into the treatment and the outcome process. The second group shows competitive performance only for particular DGPs. The third group is clearly outperformed by the other estimators. |
| Keywords: | Causal machine learning, conditional average treatment effects, selection-on-observables, Random Forest, Causal Forest, Lasso |
| JEL: | C21 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2018:17&r=all |