nep-reg New Economics Papers
on Regulation
Issue of 2019‒01‒28
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Searching for Carbon Leaks in Multinational Companies By Antoine Dechezleprêtre; Caterina Gennaioli; Ralf Martin; Mirabelle Muûls; Thomas Stoerk
  2. Can product service systems support electric vehicle adoption? By Ensslen, Axel; Gnann, Till; Jochem, Patrick; Plötz, Patrick; Dütschke, Elisabeth; Fichtner, Wolf
  3. Transition from Copper to Fiber Broadband: The Role of Connection Speed and Switching Costs By Lukasz Grzybowski; Maude Hasbi; Julienne Liang
  4. Heterogeneous Impacts of Cost Shocks, Strategic Bidding and Pass-Through: Evidence from the New England Electricity Market By Harim Kim
  5. How to Deal with the Risks of Phasing out Coal in Germany through National Carbon Pricing By Sebastian Osorio; Robert C. Pietzcker; Michael Pahle; Ottmar Edenhofer
  6. Auction Design by an Informed Seller: The Optimality of Reserve Price Signaling By Xin Zhao
  7. Regulating Cancellation Rights with Consumer Experimentation By Florian Hoffmann; Roman Inderst; Sergey Turlo
  8. Subsidy Bidding Wars and the Structure of Multi-Plant Firms By Lapointe, Simon; Morand, Pierre-Henri
  9. Why Has China Overinvested in Coal Power? By Mengjia Ren; Lee G. Branstetter; Brian K. Kovak; Daniel E. Armanios; Jiahai Yuan
  10. Regulating Global Externalities By Heijmans, Roweno J.R.K.; Gerlagh, Reyer
  11. The Value of Flexibility in Power Markets By Stéphane Goutte; Philippe Vassilopoulos
  12. Estimating Consumer Inertia in Repeated Choices of Smartphones By Lukasz Grzybowski; Ambre Nicolle
  13. Energy Consumption in the French Residential Sector: How Much do Individual Preferences Matter? By Salomé Bakaloglou; Dorothée Charlier
  14. Trajectories for energy transition in the countries of the European Union over the period 2000-2015: a multidimensional approach By Patricia Renou-Maissant; Rafik Abdessalam; Jean Bonnet
  15. Constrained Connection for Distributed Generation by DSOs in European Countries By Ken Furusawa; Gert Brunekreeft; Toru Hattori

  1. By: Antoine Dechezleprêtre; Caterina Gennaioli; Ralf Martin; Mirabelle Muûls; Thomas Stoerk
    Abstract: Does unilateral climate change policy cause companies to shift the location of production, thereby creating carbon leakage? In this paper, we analyse the effect of the European Union Emissions Trading System (EU ETS) on the geographical distribution of carbon emissions of multinational companies. The empirical evidence is based on unique data for the period 2007-2014 from the Carbon Disclosure Project, which tracks emissions of multinational businesses by geographical region. Because they already operate from multiple locations, multinational firms should be the most prone to carbon leakage. Our data includes regional emissions of 1,122 companies, of which 261 are subject to EU ETS regulation. We find no evidence that the EU ETS has led to a displacement of carbon emissions from Europe towards the rest of the world, including in countries with no climate policy in place and within energy-intensive companies. A large number of robustness checks confirm this finding. Overall, the paper suggests that modest differences in carbon prices between countries do not induce carbon leakage.
    Keywords: Carbon leakage, EU-ETS, CO2 emissions, multinational companies.
    JEL: H23 Q53 Q54 Q58
    Date: 2019–01
  2. By: Ensslen, Axel; Gnann, Till; Jochem, Patrick; Plötz, Patrick; Dütschke, Elisabeth; Fichtner, Wolf
    Abstract: Plug-in electric vehicles are seen as a promising option to reduce oil dependency, greenhouse gas emissions, particulate matter pollution, nitrogen oxide emissions and noise caused by individual road transportation. But how is it possible to foster diffusion of plug-in electric vehicles? Our research focuses on the question whether e-mobility product service systems (i.e. plug-in electric vehicles, interconnected charging infrastructure as well as charging platform and additional services) are supportive to plug-in electric vehicle adoption in professional environments. Our user oriented techno-economic analysis of costs and benefits is based on empirical data originating from 109 organizational fleets participating in a field trial in south-west Germany with in total 327 plug-in electric vehicles and 181 charging points. The results show that organizations indicate a high willingness to pay for e-mobility product service systems. Organizations encounter non-monetary benefits, which on average overcompensate the current higher total cost of ownership of plug-in electric vehicles compared to internal combustion engine vehicles. However, the willingness to pay for e-mobility charging infrastructure and services alone is currently not sufficient to cover corresponding actual costs. The paper relates the interconnected charging infrastructure solutions under study to the development of the internet of things and smarter cities and draws implications on this development.
    Keywords: Electric mobility; electric vehicle; Smart city; Platform service; Business model; Product service system
    JEL: O33 R42
    Date: 2018–05–21
  3. By: Lukasz Grzybowski; Maude Hasbi; Julienne Liang
    Abstract: We estimated a mixed logit model using data on the broadband technologies chosen by 94,388 subscribers of a single European broadband operator on a monthly basis between January and December 2014. We found that consumers have similar valuation of DSL connection speeds in the range between 1 and 8 Mbps. Moreover, in January 2014, the valuation of FttH connections with a speed of 100 Mbps was not much higher than of DSL connections with a speed of 1 to 8 Mbps, but it has increased quickly over time. The small initial difference in the valuation of DSL and FttH connections may be because consumers' basic Internet requirements such as browsing, emailing, reading news, shopping, and even watching videos online could be satisfied with a connection speed below 8 Mbps. We also found that consumers face significant switching costs when changing broadband tariff plans, which are substantially higher when switching from DSL to FttH technology. According to counterfactual simulations based on our model, switching costs between technologies are the main factor which slows down consumer transition from DSL to FttH.
    Keywords: FttH, DSL, connection speed, switching costs
    JEL: L43 L50 L96
    Date: 2018
  4. By: Harim Kim
    Abstract: Industry-wide shocks can have heterogeneous impacts on firms’ costs due to different firm characteristics. The heterogeneity in these impacts is crucial for understanding the passthrough of the shock, because of its implications on strategic competition. In the context of the gas price shock in the electricity market, I develop a method to identify heterogeneous impacts of the shock and show with a structural analysis that the heterogeneous feature of the shock induces markup adjustments of firms. Pass-through that is estimated without incorporating heterogeneous impacts fails to reflect the change in competition arising from the shock, and is, on average, underestimated.
    Date: 2018–11
  5. By: Sebastian Osorio; Robert C. Pietzcker; Michael Pahle; Ottmar Edenhofer
    Abstract: Germany aims to phase out coal to achieve its 2030 climate target, for which a UK-style carbon price floor is considered. But this measure comes with risks related to the uncertainty about what price level is sufficient, and the waterbed effect arising from unilateral policy under the EU-ETS. Quantifying these risks we find that to be on the “safe side” target-wise, the price must be nearly twice as high as the reference scenario price (33 €/tCO2). Further, cancelling 1.1 GtCO2 of certificates and forming coalitions with other countries is essential to reduce the risk that EU climate policy will renationalize.
    Keywords: EU-ETS, carbon price floor, coal phase-out, policy interaction, waterbed effect
    JEL: L94 Q58
    Date: 2018
  6. By: Xin Zhao (Economics Discipline Group, University of Technology Sydney)
    Abstract: This paper studies mechanism design by a seller privately informed of the quality of an indivisible object. The privacy of the seller’s information matters for mechanism design: selecting a mechanism that maximizes the seller’s profit when her information is public is not incentive compatible for the seller when her information is private, as a lower-quality seller has an incentive to mimic a higher-quality seller. I show that reserve prices are the least costly device to separate higher-quality sellers from lower-quality ones. In equilibria that maximize the expected profit of every type of the seller among all separating equilibria, the lowest-quality seller adopts her public-information optimal mechanism, and each higher-quality seller adopts a mechanism that differs from her public-information optimal mechanism only in that the reserve prices are higher.
    Keywords: Mechanism design; informed principal; reserve price; signaling
    JEL: D44 D82
    Date: 2018–10–06
  7. By: Florian Hoffmann; Roman Inderst; Sergey Turlo
    Abstract: Embedding consumer experimentation with a product or service into a market environment, we find that unregulated contracts induce too little returns or cancellations, as they do not internalize a pecuniary externality on other firms in the market. Forcing firms to let consumers learn longer by imposing a commonly observed statutory minimum cancellation or refund period is socially efficient only when firms appropriate much of the market surplus, while it backfires otherwise. Interestingly, cancellation rights are a poor predictor of competition, as in the unregulated outcome firms grant particularly generous rights when competition is neither too low nor too high. The overarching theme of our analysis is that both the individual benefits and the welfare consequences of (consumer) experimentation depend crucially on the consumer's reservation value, which is endogenous in a market environment.
    Keywords: Consumer experimentation, cancellation rights, market equilibrium, externality, regulation, consumer protection
    JEL: D82 D86 L51
    Date: 2018–10
  8. By: Lapointe, Simon; Morand, Pierre-Henri
    Abstract: Governments spend large amounts of money to attract firms to their territory, often resulting from bidding wars against other regions. Previous papers show that such bidding wars can improve social welfare by allocating the investment to the regions that value it the most. In this paper, we depart from the usual assumption of exogenous, single-plant investment. We show that in this context, bidding wars incite the firm to allocate its investment strategically, by investing more and differentiating the plants. In turn, the firm receives larger subsidies. Despite these distortions, bidding wars may remain socially optimal, as in simpler models.
    Keywords: subsidies, regional governments, bidding wars, multi-establishment firms, auctions, Local public finance and provision of public services, Business regulation and international economics, D44, H71, H25, D21, L23,
    Date: 2019
  9. By: Mengjia Ren; Lee G. Branstetter; Brian K. Kovak; Daniel E. Armanios; Jiahai Yuan
    Abstract: Since 2005, the Chinese government has engaged in an ambitious effort to move China’s energy system away from coal and towards more environmentally friendly sources of energy. However, China’s investment in coal power has accelerated sharply in recent years, raising concerns of massive overcapacity and undermining the central policy goal of promoting cleaner energy. In this paper, we ask why China engaged in such a pronounced investment boom in coal power in the mid-2010s. We find the protective rules under which China’s coal power industry has historically operated have made excessive investment extremely likely unless the central government serves as a “gatekeeper,” slowing and limiting investment in the face of incentives for socially excessive entry. When coal-power project approval authority was decentralized from the central government to local governments at the end of 2014, the gate was lifted and approval time considerably shortened, allowing investment to flood into the market. We construct a simple economic model that elucidates the effects of key policies on coal power investment, and examine the model’s predictions using coal-power project approval records from 2013 to 2016. We find the approval rate of coal power is about 3 times higher when the approval authority is decentralized, and provinces with larger coal industries tend to approve more coal power. We estimate that local coal production accounts for an additional 54GW of approved coal power in 2015 (other things equal), which is about 1/4 of total approved capacity in that year.
    JEL: Q40 Q48
    Date: 2019–01
  10. By: Heijmans, Roweno J.R.K. (Tilburg University, Center For Economic Research); Gerlagh, Reyer (Tilburg University, Center For Economic Research)
    Abstract: The question in which we are interested is how a market inhabited by multiple agents, about whom we are differentially uncertain, and who trade goods the use of which imposes a negative effect on others, is to be ideally regulated. We show that a priori asymmetric uncertainty, when combined with a posteriori observed outcomes, is a rich source of information that can be used to reduce aggregate uncertainty. The observation implies that whereas asymmetric information usually entails a cost on welfare, it can help achieve greater efficiency in regulation.
    Keywords: asymmetric information; regulatory instruments; policy updating; asymmetric uncerntainty; decison making under uncertainty
    JEL: D82 D83 H23
    Date: 2019
  11. By: Stéphane Goutte (LED - Université Paris 8); Philippe Vassilopoulos
    Abstract: The concept of flexibility is not one you find in standard microeconomics textbooks , yet it already plays a major role in the remuneration of the resources that generate and consume electricity every day and is likely to play an even larger role with the penetration of large intermittent renewable capacities. In this paper we attempt to quantify the net revenues that can be captured by a flexible resource able to react to the short term price variations on the day-ahead and intraday markets in Germany. We find that the difference between day-ahead and intraday revenues for a flexible resource has been increasing (although the profitability has been decreasing on both markets). This difference is more pronounced once 15mn price variations can be captured by a flexible resource. The net revenues from the local 15mn auction (which is held 3 hours after the hourly "coupled" day-ahead auction) are more than eight times higher than the day-ahead hourly auction but
    Date: 2019–01–02
  12. By: Lukasz Grzybowski; Ambre Nicolle
    Abstract: In this paper, we use a unique dataset on switching between mobile handsets in a sample of about 8,623 subscribers using tariffs without handset subsidies from a single mobile operator on a monthly basis between July 2011 and December 2014. We estimate a discrete choice model in which we account for disutility from switching to different operating systems and handset brands and for unobserved time-persistent preferences for operating systems and brands. Our estimation results indicate the presence of significant inertia 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 shares 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
  13. By: Salomé Bakaloglou; Dorothée Charlier (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UM3 - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The aim of this research is to understand the impact of preference heterogeneity in explaining energy consumption in French homes. Using a discrete-continuous model and the conditional mixed-process estimator (CMP) enable us to address two potential endogeneities in residential energy consumption: energy prices and the choice of home energy characteristics. As a key contribution, we provide evidence that a preference for comfort over saving energy does have significant direct and indirect impacts on energy consumption (through the choice of dwelling), particularly for high-income households. Preferring comfort over economy or one additional degree of heating implies an average energy overconsumption of 10% and 7.8% respectively, up to 18% for high-income households. Our results strengthen the belief that household heterogeneity is an important factor in explaining energy consumption and could have meaningful implications for the design of public policy tools aimed at reducing energy consumption in the residential sector.
    Keywords: Residential energy consumption,Household preferences,Discrete-continuous choice method,Conditional mixed-process
    Date: 2018
  14. By: Patricia Renou-Maissant (Normandie Univ, UNICAEN, CNRS, CREM, F-14000 Caen, France et EconomiX, UMR CNRS 7235, Université de Paris Nanterre, 92001 Nanterre, France); Rafik Abdessalam (Université de Lyon, Lumière Lyon 2, COACTIS, EA 4161, 69365 Lyon Cedex 07, France); Jean Bonnet (Normandie Univ, UNICAEN, CNRS, CREM, F-14000 Caen, France)
    Abstract: Transition towards low-carbon energy sources is a dominant paradigm of public energy policies today. This article conducts an inventory of energy transition in the European Union over the period 2000-2015. Multidimensional data analysis methods are employed in order to develop temporal and spatial typologies of the energy transition with respect to the three targets defined by the European Climate Energy Package. Results show evidence of a gradual transition over three sub-periods towards a more environmentally conscious economy: reducing greenhouse gas emissions, developing renewable energy sources and improving energy efficiency. Four profiles of energy transition are proposed. The evolutionary analyses of the 28 EU countries over the sub-periods shows strong stability in country trajectories, with a few exceptions. The interpretation of the energy transition classes is then enriched by reference to wide range of variables related to five themes, namely energy systems; environmental characteristics; economic performance; political characteristics; and demographic, climatic and geographic characteristics. These themes contribute to the identification of barriers as well as levers in the energy transition. Finally, our results highlight the backwardness of the great Western European countries in achieving the goals assigned to them.
    Date: 2018–12
  15. By: Ken Furusawa; Gert Brunekreeft; Toru Hattori
    Abstract: A high penetration of renewable energy sources (RES) connected to the distribution network due to Feed-in-Tariff (FIT) brought many challenges for DSOs. With the responsibility to connect, DSOs may be required to make investment in the network. In order to connect distributed generation (DG) while deferring the investment, European DSOs use “constrained connection” by which DG is connected conditional on the curtailment. Different approaches for constrained connection in Europe exist and case studies of the different approaches in Germany, France, and UK show that the relative acceptability of DG and ease of curtailment by DSOs are different, depending on the energy policy background and technology available in each country.
    Keywords: electric utilities, regulation
    JEL: L94 L51
    Date: 2019–01

This nep-reg issue is ©2019 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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