nep-reg New Economics Papers
on Regulation
Issue of 2019‒02‒04
eighteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Renewable energy price-control policy in the presence of innovation: is government pre-commitment preferable? By Madlener, Reinhard; Neustadt, Ilja
  2. Incentivizing smart charging: Modeling charging tariffs for electric vehicles in German and French electricity markets By Ensslen, Axel; Ringler, Philipp; Dörr, Lasse; Jochem, Patrick; Zimmermann, Florian; Fichtner, Wolf
  3. The impact of a Carbon Tax on the CO2 emissions reduction of wind By Chyong, C-K.; Guo, B.; Newbery, D.
  4. Autonomous, Connected, Electric Shared vehicles (ACES) and public finance: an explorative analysis By Martin Adler; Stefanie Peer; Tanja Sinozic
  5. Managing Competition on a Two-Sided Platform By Paul Belleflamme; Martin Peitz
  6. Ownership Unbundling of Electricity Distribution Networks By Nillesen, P.; Pollitt, M.
  7. Energy Transition with Variable and Intermittent Renewable Electricity Generation By Aude Pommeret; Katheline Schubert
  8. Tradable permits to manage urban mobility: market design and experimental implementation By Devi Brands; Erik (E.T.) Verhoef; Jasper Knockaert; Paul (P.R.) Koster
  9. Platform Competition: Who Benefits from Multihoming? By Paul Belleflamme; Martin Peitz
  10. Transitional restricted linkage between emissions trading schemes By Quemin, Simon; de Perthius, Christian
  11. Central- versus Self-Dispatch in Electricity Markets By Ahlqvist, V.; Holmberg, P; Tangeras, T.
  12. Do digital information technologies help unemployed job seekers find a job? Evidence from the broadband internet expansion in Germany By Gürtzgen, Nicole; Diegmann (né Nolte), André; Pohlan, Laura; van den Berg, Gerard J.
  13. Public Spending on Transportation and Water Infrastructure, 1956 to 2017 By Congressional Budget Office
  14. Consumer- and society-oriented cost of ownership of electric and conventional cars in Italy By Danielis, Romeo; Giansoldati, Marco; Scorrano, Mariangela
  15. Timing of R&D Decisions and Output Subsidies in a Mixed Duopoly with Spillovers By Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
  16. Energy Systems Integration: Economics of a New Paradigm By Jamasb, T.; Llorca, M.
  17. Auctions with selective entry By Gentry, Matthew; Li, Tong; Lu, Jingfeng

  1. By: Madlener, Reinhard; Neustadt, Ilja
    Abstract: In a perfectly competitive market with a possibility of technological innovation we analyze guaranteed feed-in tariffs for electricity from renewables from a dynamic efficiency and social welfare point of view. Specifically, we model decisions about the technological innovation with convex costs within the framework of a game-theoretic model, and discuss implications for optimal policy design under different assumptions regarding regulatory pre-commitment. We find that in terms of dynamic efficiency no pre-commitment policies are shown to be at least as good as the pre-commitment ones. Thus, a government with a preference for innovation being performed if the achievable cost reduction is high should be in favor of the no pre-commitment regime.
    Keywords: Renewable electricity; Feed-in tariffs; Regulatory pre-commitment; Innovation; Energy policy
    JEL: Q42 Q48
    Date: 2018–10–01
  2. By: Ensslen, Axel; Ringler, Philipp; Dörr, Lasse; Jochem, Patrick; Zimmermann, Florian; Fichtner, Wolf
    Abstract: Over the past few years, registration figures of plug-in electric vehicles have increased rapidly in industrialized countries. This could cause considerable mid- to long-term effects on electricity markets. To tackle potential challenges specific to electric power systems, we develop a load-shift-incentivizing electricity tariff that is suitable for electric vehicle users and analyze the tariff scheme in three parts. First, acceptance is analyzed based on surveys conducted among fleet managers and electric vehicle users. Corresponding results are used to calibrate the tariff. Secondly, load flexibilities of electric vehicle charging are used in an agent-based electricity market simulation model of the French and German wholesale electricity markets to simulate corresponding market impacts. Thirdly, the charging manager’s (‘aggregator’) business model is analyzed. Our results reveal that the tariff is highly suitable for incentivizing vehicle users to provide load flexibilities, which consequently increase the contribution margins of the charging managers. The main drawback is the potential for ‘avalanche effects’ on wholesale electricity markets increasing charging mangers’ expenditures, especially in France.
    Keywords: E-Mobility Electric vehicles Controlled charging Electricity markets
    JEL: O33 R42
    Date: 2018–02–20
  3. By: Chyong, C-K.; Guo, B.; Newbery, D.
    Abstract: Energy policy aims to reduce emissions at least long-run cost while ensuring reliability. Their effectiveness depends on the cost of emissions reduced. Britain introduced an additional carbon tax (the Carbon Price Support, CPS) for fuels used to generate electricity that by 2015 added £18/t CO2, dramatically reducing the coal share from 41% in 2013 to 8% in 2018. This paper shows how to estimate CO2 reductions, arguing that policies have both short and long-run impacts. Both need to be estimated and combined to measure carbon savings. The paper shows how to measure the Marginal Displacement Factor (MDF, tonnes CO2 /MWh) for wind. The short-run MDF is estimated econometrically while the long-run MDF is calculated from a unit commitment model of the GB system in 2015. We examine counter-factual fuel and carbon price scenarios. The CPS lowered the short-run MDF by 7% in 2015 but raised the long-run MDF (for a 25% increase in wind capacity) by 33%. The CPS raised the 2016 wholesale price by £6.22/MWh with impacts on interconnector trade.
    Keywords: Wind, marginal displacement factors, carbon pricing, fuel mix, unit commitment model, econometrics
    JEL: H23 L94 Q48 Q54
    Date: 2019–01–09
  4. By: Martin Adler (VU University; AtAdlerAdvisory, The Netherlands); Stefanie Peer (Vienna University of Economics and Business); Tanja Sinozic (Institute of Technology Assessment (ITA), Austrian Academy of Sciences (OEAW))
    Abstract: This paper discusses the implications of autonomous-connected-electric-shared vehicles (ACES) for public finance, which have so far been widely ignored. In OECD countries, 5-12% of federal and up to 30% of local tax revenue are currently from fuel and vehicle taxation. The diffusion of ACES will likely reduce these important sources of government revenues, while also affecting transport-related government expenditures. We argue that the realization of socioeconomic benefits of ACES depends on the implementation of tailored public finance policies. In particular, the introduction of road tolls in line with ‘user pays’ and ‘polluter pays’ principles will become more attractive. Moreover, innovation in taxation schemes to fit the changing technological circumstances may alter the (relative) importance of levels of governance in transport policy making, likely shifting power towards local (in particular urban) governmental levels. We finally argue that due to path-dependencies, and the risk of lock-in effects in sub-optimal public finance regimes, further research and near-term policy action regarding ACES is required.
    Keywords: autonomous connected electric shared vehicles; public finance; taxation; fiscal revenues; fiscal expenditures,disruptive technologies; path-dependency; technological transition; political economy; multilevel-governance
    JEL: R40 R50 H21 H23 H54 H71 O18 O33
    Date: 2019–01–27
  5. By: Paul Belleflamme; Martin Peitz
    Abstract: On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.
    Keywords: Network effects, two-sided markets, platform competition, intermediation, pricing, imperfect competition
    JEL: D43 L13 L86
    Date: 2018–07
  6. By: Nillesen, P.; Pollitt, M.
    Abstract: Traditional restructuring of power markets has focused on legally separating monopolistic transmission and distribution infrastructure, with sufficient regulatory oversight to ensure non-discriminatory access to networks, and transparent and cost-reflective tariffs. There is consensus that ownership separation for transmission assets is beneficial for competition and transparency. However, at the distribution level the benefits are questionable. This paper reviews the theoretical arguments for ownership unbundling and summarises the findings from 23 academic papers and consulting reports. In addition, this paper empirically demonstrates that forced distribution ownership unbundling in New Zealand (from 1998) and the Netherlands (from 2009) did not increase retail competition (and reduced it in New Zealand), did not increase network quality, but did result in significant one-off and structural costs. The pros and cons of DSO ownership unbundling is topical given current policy discussions in Denmark and the more general changes to the operating environment of DSOs with increasingly active networks due to decentralised renewables production and bi-directional power flows. Policymakers should therefore consider alternative policy measures to increase retail competition and network quality.
    Keywords: electricity distribution, ownership unbundling
    JEL: L94
    Date: 2019–01–19
  7. By: Aude Pommeret; Katheline Schubert
    Abstract: We propose one of the first dynamic models of the optimal transition from fossil fuels to renewables in electricity generation that takes into account the variability and intermittency of renewable energy as well as storage. This work sheds light on the extent to which variability and intermittency constitute a serious obstacle to energy transition and, given these constraints, the value of storage. The results of this model provide useful insight into the complexity of transitioning to a clean energy mix, as well as the role climate policy can play in facilitating both the growth of renewables and storage.
    JEL: Q42 Q54
    Date: 2019
  8. By: Devi Brands (VU Amsterdam); Erik (E.T.) Verhoef (VU Amsterdam); Jasper Knockaert (VU Amsterdam); Paul (P.R.) Koster (VU Amsterdam)
    Abstract: Congestion levels have grown substantially in recent years, while the traditional economic response to congestion – road pricing – remains politically infeasible in most locations. Tradable permits are likely to be a more viable alternative, because they do not require a net financial flow from road users to the government. It is therefore the right moment to design and empirically test tradable permit schemes for managing urban mobility. This paper presents and empirically tests a complete design of a market for tradable permits, both in terms of the conceptual set-up of the market as well as its technical implementation. The design is evaluated against a number of criteria, including: transparency and containment of transaction costs, stability of permit prices in relation to the dynamic equilibrium on the mobility market and the prevention of undesirable speculation and fraud. We present evidence of the empirical functioning of this market, using the results of a conducted lab-in-the-field experiment with virtual mobility behaviour and real financial incentives.
    Keywords: Mobility credits; Tradable credits scheme; Permit experiment; Permit market
    JEL: R41 R48 H23 Q58
    Date: 2019–01–27
  9. By: Paul Belleflamme; Martin Peitz
    Abstract: Competition between two-sided platforms is shaped by the possibility of multihoming. If initially both sides of platform singlehome, each platform provides users on one side exclusive access to its users on the other side. If then one side multihomes, platforms compete on the singlehoming side and exert monopoly power on the multihoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This in not always true, as the opposite may happen or both sides may benefit.
    Keywords: Network effects, two-sided markets, platform competition, competitive bottleneck, multihoming
    JEL: D43 L13 L86
    Date: 2018–01
  10. By: Quemin, Simon; de Perthius, Christian
    Abstract: Linkages between Emissions Trading Systems are deemed an important element of the future climate policy landscape. They are, however, difficult to agree and remain few and far between. Temporary restrictions on permit trading have potential to facilitate and gradually approach unrestricted, full linkage. We compare the relative merits of several link restrictions in this respect, namely quantitative transfer limits, border taxes on transfers, exchange and discount rates, and unilateral linkage. To this end, we develop a simple model to have a unifying framework which, in conjunction with lessons we draw from realworld experiences, serves as a basis for a broader, policy-oriented discussion. While quantitative restrictions seem to be the natural route to full linkage, they can lead to uncertain distributional effects and weaken price signals. These aspects are mitigated under a border permit tax, but this policy seems harder to implement. Exchange rates have potential to adjust for programmes’ stringencies and raise ambition over time, but can be challenging to select. As experience corroborates, unilateral linkage can be a convenient approach.
    Keywords: climate change policy; emissions trading; linkage; restrictions on permit trading
    JEL: F15 H23 Q58
    Date: 2018–12–09
  11. By: Ahlqvist, V.; Holmberg, P; Tangeras, T.
    Abstract: In centralized markets, producers submit detailed cost data to the dayahead market, and the market operator decides how much should be produced in each plant. This differs from decentralized markets that rely on self-commitment and where producers send less detailed cost information to the operator of the day-ahead market. Ideally centralized electricity markets would be more effective, as they consider more detailed information, such as start-up costs and no-load costs. On the other hand, the bidding format is rather simplified and does not allow producers to express all details in their costs. Moreover, due to uplift payments, producers have incentives to exaggerate their costs. As of today, US has centralized wholesale electricity markets, while most of Europe has decentralized wholesale electricity markets. The main problem with centralized markets in US is that they do not provide intra-day prices which can be used to continuously up-date the dispatch when the forecast for renewable output changes. Intra-day markets are more flexible and better adapted to deal with renewable power in decentralized markets. Iterative intra-day trading in a decentralized market can also be used to sort out coordination problems related to non-convexities in the production. The downside of this is that increased possibilities to coordinate increase the risk of getting collusive outcomes. Decentralized day-ahead markets in Europe can mainly be improved by considering network constraints in more detail.
    Keywords: wholesale electricity markets, market clearing, centralization, decentralization, unit-commitment, self-dispatch
    JEL: D44 L13 L94
    Date: 2019–01–18
  12. By: Gürtzgen, Nicole (Institute for Employment Research); Diegmann (né Nolte), André (Centre for European Economic Research (ZEW) and Institute for Employment Research (IAB)); Pohlan, Laura (Centre for European Economic Research (ZEW) and Institute for Employment Research (IAB)); van den Berg, Gerard J. (University of Bristol, IFAU Uppsala, IZA, ZEW, CEPR and CESifo)
    Abstract: This paper studies effects of the introduction of a new digital mass medium on reemployment of unemployed job seekers. We combine data on high-speed (broadband) internet availability at the local level with German individual register data. We address endogeneity by exploiting technological peculiarities that affected the roll-out of high-speed internet. The results show that highspeed internet improves reemployment rates after the first months in unemployment. This is confirmed by complementary analyses with individual survey data suggesting that internet access increases online job search and the number of job interviews after a fewmonths in unemployment.
    Keywords: Unemployment; online job search; information frictions; matching technology; search channels
    JEL: C26 H40 J64 K42 L96
    Date: 2018–11–30
  13. By: Congressional Budget Office
    Abstract: The Congressional Budget Office regularly documents trends in public spending for transportation and water infrastructure. There are six types of infrastructure that are paid for largely by the public sector: highways, mass transit and rail, aviation, water transportation, water resources, and water utilities.
    JEL: H54 H76 R42 R53
    Date: 2018–10–15
  14. By: Danielis, Romeo; Giansoldati, Marco; Scorrano, Mariangela
    Abstract: The paper presents a total cost of ownership (TCO) model, implemented with data on Italian cars with different propulsion systems. The model is applied to three case studies: a) a comparison between the best-selling (battery electric vehicles (BEVs) and internal combustion engine vehicles (ICEVs); b) a pairwise comparison between comparable BEVs and ICEVs of the same brand; c) the impact of urban parking and access policies favoring the BEVs. We find that in Italy the purchasing cost of the BEVs is about 15,000 euro higher than the 10 best-selling ICEVs. Such a gap is not compensated by the lower variable costs unless a very high annual distance (20,579 km per year for 10 years) is driven, which is much above the current Italian average. Such a finding helps explaining the low BEVs’ market share in Italy. The difference between the consumer-oriented TCO and the society-oriented TCO, which represents the amount of the subsidy economically justifiable on the basis of the social costs, varies between €315 and €581. If the social costs are internalized, the overall (consumer-oriented and society-oriented) TCO would be still lower for the ICEVs than the BEVs. The pairwise comparison suggests that at least a 4,000- 6,000 euro subsidy would be needed to balance the BEVs’ unfavorable TCO. Finally, we find that parking and access fees favoring BEVs at the urban level could have a significant impact on reducing the distance driven needed to reach the consumer-oriented TCO break-even point.
    Date: 2019
  15. By: Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
    Abstract: This study considers a mixed duopoly with research spillovers and examines the interplay between firms’ R&D decisions and government’s output subsidies. We investigate and compare the timing of the game between ex-ante R&D and ex-post R&D decisions where the R&D decisions are chosen before the output subsidy is determined in the former case while the order is reversed in the latter case. We show that the equilibrium outcomes can be opposite between the two cases because both public and private firms have different objectives in choosing R&D investments, but the spillovers rate is a key factor that determines their incentives. In particular, we show that the output subsidy is smaller (larger) and the welfare is larger (smaller) under the ex-ante R&D decisions for a higher (lower) degree of spillovers rate. Finally, privatization increases the welfare in both cases only when spillovers rate is weak.
    Keywords: Mixed duopoly; Research spillovers, Ex-ante R&D; Ex-post R&D, Output subsidy
    JEL: H21 L13 L32
    Date: 2019–01–14
  16. By: Jamasb, T.; Llorca, M.
    Abstract: Energy Systems Integration (ESI) is an emerging paradigm emanating from a whole system perspective of the energy sector. It is based on a holistic view in which the main energy carriers are integrated to achieve horizontal synergies and efficiencies at all levels. The energy system may in turn integrate with other infrastructure sectors such as water, transport, and telecommunications to meet the demand for a broad range of energy and essential services. It also implies that energy security, sustainability, and equity objectives can be balanced more effectively. There is already progress in the technical aspects of ESI. However, such systems require not only physical solutions but they also need economic, regulatory, and policy frameworks to ensure efficient performance over time. Thus, it is important to better understand the economic features of integrated energy systems. To our knowledge this aspect is barely addressed in the literature on ESI. This paper does not attempt to survey the technical literature on the topic but to describe some of its relevant economic features. We discuss selected aspects that relate to industrial organisation, regulation, business economics, and technology. Finally, we offer some early considerations and policy recommendations.
    Keywords: energy systems integration; economic principles; regulation; busi-ness models
    JEL: D4 L1 L5 L9 M2 Q4
    Date: 2019–01–05
  17. By: Gentry, Matthew; Li, Tong; Lu, Jingfeng
    Abstract: We consider auctions with entry based on a general analytical framework we call the Arbitrarily Selective (AS) model. We characterize symmetric equilibrium in a broad class of standard auctions within this framework, in the process extending the classic revenue equivalence results of Myerson (1981), Riley and Samuelson (1981) and Levin and Smith (1994) to environments with endogenous and arbitrarily selective entry. We also explore the relationship between revenue maximization and efficiency, showing that a revenue maximizing seller will typically employ both higher-than-efficient reservation prices and higher-than-efficient entry fees.
    JEL: J1
    Date: 2017–09–01
  18. By: Olga N. Balaeva (National Research University Higher School of Economics); Andrei A. Yakovlev (National Research University Higher School of Economics); Yuliya D. Rodionova (National Research University Higher School of Economics); Daniil M. Esaulov (National Research University Higher School of Economics)
    Abstract: Public procurement cost evaluation is important both for procurement optimization at the company level and for evaluating the public procurement regulatory system. This paper presents a survey-based methodological approach to public procurement cost evaluation at the macro level. Our approach is based on a methodology for assessing the efficiency of public procurement developed by PwC for the European Union. The PwC methodology was adapted to developing and transitional economies and piloted on Russian data. Average costs of each type of procurement procedure implemented in 2016 were evaluated. A regression analysis of factors impacting public procurement cost evaluation revealed considerable differences between respondents who have and do not have experience with complex procurement procedures. Although the average overall costs of public procurements in Russia amounted to about 1% of the total value of concluded contracts, the figure stands at 6.6–8.1% for small purchases. This exceeds the economy from price decreases and calls for a need to simplify regulation of such procurements.
    Keywords: public procurement; public procurement costs; public customers; suppliers.
    JEL: H57 D23
    Date: 2018

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