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on Regulation |
| By: | Suzi Kerr (Motu Economic and Public Policy Research); Catherine Leining (Motu Economic and Public Policy Research) |
| Abstract: | New Zealand is facing a challenging low-emission transition, and effective emission pricing needs to be part of the solution. In its pure form, an emissions trading system (ETS) fixes the quantity of emissions in regulated sectors and the market sets the emission price. In New Zealand’s current policy and market context, there is value in managing both unit supply and emission prices under the NZ ETS. While emission price changes in response to policy and market conditions are desirable to drive efficient abatement, excessive price instability can deter low-emission investment. This working paper, which evolved under Motu’s ETS Dialogue process from 2016 to 2018, explores key considerations for emission price management in the context of a specific working model for unit supply in the NZ ETS. Emission price instability can be reduced at its source by reinforcing policy commitment and improving market regulation and development. Emission price instability can be mitigated by incorporating a price ceiling (cost containment reserve backed by a fixed-price option) and a price floor (auction reserve price) into the auction mechanism. Decisions on price management should be coordinated with other decisions affecting unit supply, guided by an indicative ten-year trajectory for both unit supply and emission prices, and informed by independent advice. Two companion working papers address interactions between ETS price management and the choice of cap and linking to overseas markets. The three working papers elaborate on an integrated proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al. (2017). |
| Keywords: | Emissions trading, New Zealand Emissions Trading Scheme, greenhouse gas, climate change mitigation, price ceiling, price floor |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:19_08&r=all |
| By: | Lassi Ahlvik; Matti Liski |
| Abstract: | It is tricky to design local regulations on global externalities, especially so if firms are mobile. We show that when costs and outside options are firms’ private information, the threat of firm relocation leads to local regulations that are stricter, not looser. This result is general and follows because policy-driven information rents act as targeted compensations to firms that can efficiently limit the externality. The optimal mechanism supplements this strict local regulation with a looser opt-in scheme, creating a global cap for externalities for a subset of firms. We illustrate the magnitude of these effects by providing a quantification of the optimal mechanism for the key sectors in the EU emissions trading system. |
| Keywords: | externalities, mechanism design, private information, climate change, emissions trading, carbon leakage |
| JEL: | D82 L51 Q54 Q58 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7597&r=all |
| By: | Grant Bishop (C.D. Howe Institute) |
| Keywords: | Energy and Natural Resources; Electricity;Environmental Policies and Norms;Role and Efficiency of Government; Fiscal and Tax Policy; Federalism and Constitution |
| JEL: | Q58 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:289&r=all |
| By: | Marc Ringel; Roufaida Laidi; Djamel Djenouri |
| Abstract: | From both global and local perspectives, there are strong reasons to promote energy efficiency. These reasons have prompted leaders in the European Union (EU) and countries of the Middle East and North Africa (MENA) to adopt policies to move their citizenry toward more efficient energy consumption. Energy efficiency policy is typically framed at the national, or transnational level. Policy makers then aim to incentivize microeconomic actors to align their decisions with macroeconomic policy. We suggest another path towards greater energy efficiency: Highlighting individual benefits at microeconomic level. By simulating lighting, heating and cooling operations in a model single-family home equipped with modest automation, we show that individual actors can be led to pursue energy efficiency out of enlightened self-interest. We apply simple-to-use, easily, scalable impact indicators that can be made available to homeowners and serve as intrinsic economic, environmental and social motivators for pursuing energy efficiency. The indicators reveal tangible homeowner benefits realizable under both the market-based pricing structure for energy in Germany and the state-subsidized pricing structure in Algeria. Benefits accrue under both the continental climate regime of Germany and the Mediterranean regime of Algeria, notably in the case that cooling energy needs are considered. Our findings show that smart home technology provides an attractive path for advancing energy efficiency goals. The indicators we assemble can help policy makers both to promote tangible benefits of energy efficiency to individual homeowners, and to identify those investments of public funds that best support individual pursuit of national and transnational energy goals. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.11496&r=all |
| By: | Jan Paul Baginski (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)) |
| Abstract: | Solar thermal roof-top installations offer the potential to meet an important share of residential water and space heating demand in Germany. These systems are subsidised with grants under the so-called market incentive program. The political goal is to encourage the adoption of renewable energy and to reduce CO2-emissions in the heating market in view of a low-carbon building stock. Solar thermal adoption levels are currently rather low after a high period in 2008 and 2009. Also, solar thermal adoption rates distinctly vary between regions. This paper tries to disentangle influences governing regional and temporal differences in residential solar thermal uptake. Spatial panel regression models are estimated to capture spatial interactions, while controlling for potential adoption determinants, including economic considerations, household characteristics and climatic suitability. The panel data contain observations for over 1 million solar thermal installations across 402 German regions covering the period from 2001 to 2015. Results indicate that differences in profitability influence the spatial and temporal patterns of solar thermal uptake. Regional diffusion is mainly driven by solar radiation. The development of fossil fuel prices is accountable for different adoption rates over time. New constructions do not seem to foster solar thermal use, indicating that solar heating is easily applied to existing houses. Larger households are more inclined to use solar heating, given that they use more efficiently solar generated heat. Results also show that spatial dependence drives the diffusion of solar thermal systems. These findings imply that there is potential for new policies and business models to increase the geographic and social diversification of solar thermal adoption. |
| Keywords: | solar energy, domestic solar thermal heating, spatial econometrics, panel data |
| JEL: | C23 D12 Q28 Q42 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1904&r=all |
| By: | Ait Ali, Abderrahman (Swedish National Road & Transport Research Institute (VTI)); Eliasson, Jonas (Linköping University) |
| Abstract: | In the last few decades, many railway markets (especially in Europe) have been restructured to allow competition between different operators. This survey studies how competition has been introduced and regulated in a number of different countries around the world. In particular, we focus on a central part of market regulation specific to railway markets, namely the capacity allocation process. Conflicting capacity requests from different train operators need to be regulated and resolved, and the efficiency and transparency of this process is crucial. Related to this issue is how access charges are constructed and applied. Several European countries have vertically separated their railway markets, separating infrastructure management from train services provisions, thus allowing several train operators to compete with different passengers and freight services. However, few countries have so far managed to create efficient and transparent processes for allocating capacity between competing train operators, and incumbent operators still have larger market-share in many markets. |
| Keywords: | Railway markets; Vertical separation; Competition; Capacity allocation; Access charges |
| JEL: | R40 |
| Date: | 2019–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2019_001&r=all |
| By: | Catherine Leining (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research) |
| Abstract: | The fundamental purpose of an emissions trading system (ETS) is to constrain emissions and enable the market to set an emissions price path that facilitates an effective transition to a low-emissions economy. In a conventional ETS, the emissions constraint is defined by a cap (a fixed limit) on tradable, government-issued emission units together with a quantity limit on any external units allowed in the system (e.g. via an offsets mechanism). Essentially, an ETS cap underpins the ambition, cost-effectiveness, distributional implications, and credibility of a jurisdiction’s approach to decarbonisation. From 2008 to mid-2015, the New Zealand Emissions Trading Scheme (NZ ETS) broke from convention by linking to the global Kyoto cap without its own limit on domestic emissions. NZ ETS participants met compliance obligations using unlimited overseas units at low prices and faced little incentive to reduce their own emissions. The NZ ETS delinked from the Kyoto market in mid-2015, creating uncertainty over the future of domestic unit supply and an efficient price path for domestic decarbonisation. This working paper, which evolved under Motu’s ETS Dialogue process from 2016 to 2018, explores key considerations for ETS cap setting and proposes the design for a cap on units auctioned and freely allocated in the NZ ETS. The recommendations focus on issues of cap architecture rather than ambition. The proposed cap is defined in tonnes of emissions per year, fixed for five years in advance, extended by one year each year, and guided by an indicative ten-year cap trajectory. The fixed cap and cap trajectory need to reflect consideration of New Zealand’s domestic decarbonisation objectives, international targets, mitigation potential and costs in both ETS and non-ETS sectors, and prospects for cost-effective investment in overseas emission reductions. Two companion working papers address how the choice of cap will interact with decisions on ETS price management mechanisms and linking to overseas markets. The three working papers elaborate on an integrated proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al. (2017). |
| Keywords: | Emissions trading, New Zealand Emissions Trading Scheme, cap, greenhouse gas, climate change mitigation |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:19_07&r=all |
| By: | Ahlfeldt, Gabriel M.; Feddersen, Arne |
| Abstract: | We analyze the economic impact of the German high-speed rail (HSR) connecting Cologne and Frankfurt, which provides plausibly exogenous variation in access to surrounding economic mass. We find a causal effect of about 8.5% on average of the HSR on the GDP of three counties with intermediate stops. We make further use of the variation in bilateral transport costs between all counties in our study area induced by the HSR to identify the strength and spatial scope of agglomeration forces. Our most careful estimate points to an elasticity of output with respect to market potential of 12.5%. The strength of the spillover declines by 50% every 30 minutes of travel time, diminishing to 1% after about 200 minutes. Our results further imply an elasticity of per-worker output with respect to economic density of 3.8%, although the effects seem driven by worker and firm selection. |
| Keywords: | accessibility; agglomeration; density; high-speed rail; market potential; transport policy; productivity |
| JEL: | R12 R38 R48 |
| Date: | 2018–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:69763&r=all |
| By: | Vitezslav Titl; Kristof De Witte; Benny Geys |
| Abstract: | Firms’ political donations can induce distortions in the allocation of public procurement contracts. In this article, we employ an advanced non-parametric efficiency model to study the public sector (cost) efficiency implications of such distortions. Using a unique dataset covering the Czech regions over the 2007-2014 period, we find that the efficiency of public good provision is lower when a larger share of public procurement contracts is awarded to firms donating to the party in power (‘party donors’). We link this efficiency difference to two underlying mechanisms: i.e. shifts in procurement contract allocations from firms with previous procurement experience to party donors, and the use of less restrictive allocation procedures that benefit party donors. |
| Keywords: | political connections, non-parametric efficiency analysis, benefit-of-the-doubt |
| JEL: | H57 D72 C23 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7591&r=all |
| By: | Mikel Berdud (Office of Health Economics); Kalipso Chalkidou (Center for Global Development); Emma Dean (University of Miami); Jimena Ferraro (Universidad de Buenos Aires); Lou Garrison (University of Washington); Cassandra Nemzoff (Center for Global Development); Adrian Towse (Office of Health Economics) |
| Abstract: | This paper focuses on the role that price transparency may play in the efficient and effective procurement of medicines by middle- and low-income countries. Will making prices publicly available make procurement more efficient and cost-effective medicines more accessible? We conclude that transparency of the procurement process significantly lowers costs by encouraging bidders. We do not recommend price transparency for on-patent medicines as the effect will be to slow the diffusion of innovative products to low-income countries. Differential pricing is important and can best be achieved in the current environment via confidential discounts. Developing country markets are, however, dominated by generic products. Price transparency for off-patent products could improve market efficiency if capacities are there to use the data to inform procurement decisions whilst protecting against supplier collusion. We recommend consideration of one-sided disclosure of multi-source prices, i.e., buyers should share price data for off-patent medicines amongst themselves. |
| Date: | 2019–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:507&r=all |
| By: | Zhang, Hanzhe (Michigan State University, Department of Economics) |
| Abstract: | A seller chooses to either post a price or run a reserve-price auction each period to sell a good before a deadline. Buyers with independent private values arrive over time. Assume that an auction costs more to the seller than a posted price. For a wide range of auction costs, the profit-maximizing mechanism sequence is to post prices first and then to run auctions. The optimality of the prices-then-auctions mechanism sequence provides a new justification for the use of the buy-it-now selling format on eBay. |
| Keywords: | buy-it-now; posted price; reserve price auction |
| JEL: | D44 |
| Date: | 2019–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:msuecw:2019_003&r=all |
| By: | Dominic White (Motu Economic and Public Policy Research); Niven Winchester (Motu Economic and Public Policy Research) |
| Abstract: | As New Zealand charts its course toward a low-emissions economy, the quality of energy-sector and multi-sector modelling is becoming increasingly important. This paper outlines why models are useful for answering complex questions, provides a stocktake of energy-sector and multi-sector models used for climate change mitigation modelling in New Zealand, and makes suggestions for improving future modelling work. While New Zealand is fortunate to have a range of different modelling tools, these have historically been used in a sporadic and ad hoc way, and underlying datasets are deficient in some areas. As the foundation for a more strategic development of New Zealand’s modelling capability, this paper profiles some of the energy-sector and multi-sector models and datasets currently applied in New Zealand. New Zealand’s modelling capability could be strengthened by collecting and sharing data more effectively; building understanding of underlying relationships informed by primary research; creating more collaborative and transparent processes for applying common datasets; increasing international collaboration; and conducting more integrated modelling across environmental issues. These improvements will require strategic policies and processes for refining model development; providing increased, predictable and sustained funding for modelling activities, underlying data collection and primary research; and strengthening networks across modellers inside and outside of government. Many of the suggested improvements could be realised by creating an integrated framework for climate change mitigation modelling in New Zealand. This framework would bring together a suite of models and a network of researchers to assess climate change mitigation policies regularly. Core elements of the framework would include a central repository of data, input assumptions and scenarios, and a “dashboard” that synthesises results from different models to allow decision-makers to understand and apply the insights from the models more easily. |
| Keywords: | Applied general equilibrium, Electricity, Greenhouse gases, Policy analysis, Transportation |
| JEL: | C31 D58 Q4 Q54 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:18_15&r=all |
| By: | Birge, John R. (Booth School of Business, University of Chicago); Candogan, Ozan (Booth School of Business, University of Chicago); Chen, Hongfan (Booth School of Business, University of Chicago); Saban, Daniela (Graduate School of Business, Stanford University) |
| Abstract: | Two salient features of most online platforms are that they do not dictate the transaction prices, and use commissions/subscriptions for extracting revenues. We consider a platform that charges commission rates and subscription fees to sellers and buyers for facilitating transactions, but does not directly control the transaction prices, which are determined by the traders. Buyers and sellers are divided into types, and we represent the compatibility between different types using a bipartite network. Traders are heterogeneous in terms of their valuations, and different types have possibly different value distributions. The platform chooses commissions-subscriptions to maximize its revenues. We provide a convex optimization formulation to calculate the revenue-maximizing commissions/subscriptions, and establish that, typically, different types should be charged different commissions/subscriptions depending on their network positions. We establish lower and upper bounds on the platform’s revenues in terms of the supply-demand imbalance across the network. Motivated by simpler schemes used in practice, we show that the revenue loss can be unbounded when all traders on the same side are charged the same commissions/subscriptions, and bound the revenue loss in terms of the supply-demand imbalance across the network. Charging only buyers or only sellers leads to a (bounded) revenue loss, even when different types on the same side can be charged differently. Under mild assumptions, we establish that a revenue-maximizing platform achieves at least 2/3 of the maximum achievable social welfare. Our results highlight the suboptimality of commonly used payment schemes, and showcase the importance of accounting for the compatibility between different user types. |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3742&r=all |
| By: | Scott Knowles; Mark Skidmore |
| Abstract: | There is limited public discourse and understanding about the history and science of weather and climate intervention, though scientists have researched, tested and implemented numerous methods of weather modification for six decades. Also, climate-related geoengineering is steadily gaining support as a means of combatting rising global temperatures. With climate change and associated increasing occurrence of extreme weather events, there has not been a more providential moment to consider the implications of anthropogenic, atmospheric intervention. This paper summarizes information about weather and climate intervention with the aim of answering the question: Why aren’t more economists interested in evaluating weather and climate intervention activities? |
| Keywords: | weather modification, cloud seeding, geoengineering, climate change, economic analysis |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7586&r=all |
| By: | Khan, Adnan Q.; Khwaja, Asim Ijaz; Olken, Benjamin A. |
| Abstract: | Bureaucracies often post staff to better or worse locations, ostensibly to provide incentives. Yet we know little about whether this works, with heterogeneity in preferences over postings impacting effectiveness. We propose a performance-ranked serial dictatorship mechanism, whereby bureaucrats sequentially choose desired locations in order of performance. We evaluate this using a two-year field experiment with 525 property tax inspectors in Pakistan. The mechanism increases annual tax revenue growth by 30–41 percent. Inspectors whom our model predicts face high equilibrium incentives under the scheme indeed increase performance more. Our results highlight the potential of periodic merit-based postings in enhancing bureaucratic performance. |
| Keywords: | SES-1124134 |
| JEL: | C93 D73 H71 H83 J45 M54 O17 |
| Date: | 2019–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100339&r=all |
| By: | Ait Ali, Abderrahman (Swedish National Road & Transport Research Institute (VTI)); Warg, Jennifer (KTH); Eliasson, Jonas (Linköping University) |
| Abstract: | On deregulated railway markets, efficient capacity allocation is important. We study the case where commercial trains and publicly controlled traffic (“commuter trains”) use the same railway infrastructure and hence compete for capacity. We develop a method that can be used by an infrastructure manager trying to allocate capacity in a socially efficient way. The method calculates the loss of social benefits incurred by changing the commuter train timetable to accommodate a commercial train path request and based on this calculates a reservation price for the train path request. If the commercial operator’s willingness-to-pay for the train path exceeds the loss of social benefits, its request is approved. The calculation of social benefits takes into account changes in commuter train passengers’ travel times, waiting times, transfers and crowding, and changes in operating costs for the commuter train operator(s). The method is implemented in a microscopic simulation program, which makes it possible to test the robustness and feasibility of timetable alternatives. We show that the method is possible to apply in practice by demonstrating it in a case study from Stockholm, illustrating the magnitudes of the resulting commercial train path prices. We conclude that marginal societal costs of railway capacity in Stockholm are considerably higher than the current track access charges. |
| Keywords: | Train timetables; Societal costs; Commuter trains; Commercial trains; Train path pricing |
| JEL: | R40 |
| Date: | 2019–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2019_002&r=all |