nep-reg New Economics Papers
on Regulation
Issue of 2019‒05‒20
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The hidden cost of real time electricity pricing By Ioana Bejan; Carsten Lynge Jensen; Laura M. Andersen; Lars Gårn Hansen
  2. Strategic environmental policy and the mobility of firms By Richter, Philipp M.; Runkel, Marco; Schmidt, Robert C.
  3. From fundamentals to financial assets: the evolution of understanding price formation in the EU ETS By Friedrich, Marina; Mauer, Eva-Maria; Pahle, Michael; Tietjen, Oliver
  5. EU ETS and the new green paradox By Rosendahl, Knut Einar
  6. Electricity supply reliability and households decision to connect to the grid By Arnaud Millien
  7. Spatial Competition and Price Discrimination with Capacity Constraints By Matthias Hunold; Johannes Muthers
  8. An Examination of the Impact That Electric Vehicle Incentives Have on Consumer Purchase Decisions Over Time By Jenn, Alan; Lee, Jae Hyun; Hardman, Scott; Tal, Gil
  9. Assessing the Techno-economic Effects of the Delayed Deployment of CCS Power Plants By Carrara, Samuel
  10. Electric Vehicle Incentives in 13 Leading Electric Vehicle Markets By Kong, Nathaniel; Hardman, Scott
  11. Population density and urban air quality By Rainald Borck; Philipp Schrauth

  1. By: Ioana Bejan (Department of Food and Resource Economics, University of Copenhagen); Carsten Lynge Jensen (Department of Food and Resource Economics, University of Copenhagen); Laura M. Andersen (Department of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: In theory real time pricing ensures more efficient electricity markets than time of use pricing. However, people are prone to habits and regularity, so real time pricing may impose a greater cost of reacting on consumers. In a randomized field experiment we compared the cost of reacting to incentives under these two pricing regimes. We utilized smart-metered hourly power consumption to unobtrusively measure treatment effects. We found that real time pricing reduces consumer surplus from reacting to incentives by half, compared to reacting under a corresponding time of use pricing regime. This suggests a substantial economic value to households of the regularity and predictability provided by time of use pricing.
    Keywords: real time electricity pricing, time of use electricity pricing, field experiment, household cost of reacting
    JEL: L51 L94 C93 Q41
    Date: 2019–05
  2. By: Richter, Philipp M.; Runkel, Marco; Schmidt, Robert C.
    Abstract: The loss of international competitiveness of domestic industries remains a key obstacle to the implementation of effective carbon prices in a world without harmonized climate policies. We analyze countries' non-cooperative choices of emissions taxes under imperfect competition and mobile polluting firms. In our general equilibrium setup with trade, wage effects prevent all firms from locating in the same country. While under local or no pollution countries achieve the first-best, under transboundary pollution taxes are inefficiently low and lower than under autarky where only the "standard" free riding incentive distorts emissions taxes. This effect is more pronounced when polluting firms are mobile.
    Keywords: FDI,Strategic Environmental Policy,Firm Location,Carbon Leakage,General Equilibrium
    JEL: F12 F18 H23
    Date: 2019
  3. By: Friedrich, Marina; Mauer, Eva-Maria; Pahle, Michael; Tietjen, Oliver
    Abstract: Now in its third compliance period, we can look back at more than 12 years of existence of the emissions trading system (ETS) in the European Union. The focus of this paper is to review the empirical literature on price formation in the EU ETS. As a reoccurring concept, we draw on a simple theoretical model of price formation that we subsequently extend to accommodate three different strands of literature. First, we gather evidence based on empirical papers which look at the role of fundamental price drivers. Second, we review the event study literature, where political and regulatory uncertainty is the main topic. Third, we devote a major part to finance literature in this market. In every section, we pay special attention to the challenges that arise when empirically modeling allowance prices in this complex market. We emphasize that there is a need for more evidence and possibly alternative approaches due to the complex interplay of compliance and finance trading motives. As a result, the findings of this review provide important lessons about price formation in the EU ETS, which can also inform the design of such programs in other countries.
    Keywords: Emission Trading,EU ETS,Carbon Pricing
    JEL: Q48 Q50
    Date: 2019
  4. By: Ambre Nicolle (Télécom ParisTech); Lukasz Grzybowski (Télécom ParisTech); Christine Zulehner (University of Vienna [Vienna])
    Abstract: In this paper, we assess the impact of competition, investment and regulation on prices of mobile services in France. We estimate hedonic price regressions using data on tariff plans offered by the main mobile telecommunications operator in France between May 2011 and December 2014. In this time period, the obtained quality-adjusted price index decreased by about 42.8% as compared to a decline in weighted average prices without quality-adjustment of 8.7%. In a second step, we relate the quality-adjusted prices to a set of competition, investment and regulation variables and find that the launch of 4G networks by mobile operators was the main driver of price reductions for classic tariffs with commitment. Low-cost tariffs without commitment which were introduced to preempt the entry of low-cost competitor declined at the time of entry. Moreover, we find that regulation, which is approximated by the level of mobile termination charges and international roaming price caps for voice and data, has a joint significant impact on quality-adjusted prices. In percentage terms, competition is responsible for about 23.4% of total price decline and investments in 4G for 56.1%.
    Date: 2018–04
  5. By: Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: With the new rules of the EU ETS, involving cancellation of allowances, cumulative emissions are no longer fixed but depending on the market outcome. Perino (2018) showed that additional abatement effort can reduce cumulative emissions if it occurs within a few years. This article shows that Perino’s result will be reversed, i.e., cumulative emissions increase, if the abatement effort is at a later year, or permanent. Thus, a new green paradox has emerged.
    Keywords: Emissions trading; Green Paradox; EU ETS; MSR
    JEL: H23 Q54 Q58
    Date: 2019–05–02
  6. By: Arnaud Millien (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)
    Abstract: The 7th Sustainable Development Goal aims to "ensure access to affordable, reliable, sustainable and modern energy for all". Because the cost to increase electrical capacity in Africa alone has been estimated at $800bn, this article investigates the extent to which electricity reliability could contribute to a reduction in the marginal cost of grid extension by attracting more customers. Using lightning as an instrument for outages severity, the article evaluates the assumption that less uncertainty about electricity availability would lead to a larger number of connected households. The article finds that a one percentage point increase in electricity reliability would yield a 0.67 percentage point increase in connections. Therefore, delivering fully reliable electrical power would allow an electricity company to achieve its targeted growth of customer base 15 months earlier than planned. The effect of reliability is highest for middle-rich households, which are the most reluctant to subscribe in the presence of total, severe or partial outages. A one-percentage-point upgrade in reliability increase the likelihood that these households will be connected by 1.28 percentage points. This article also finds that households are more sensitive to outages in areas where outages are less frequent. In addiction, the impact of reliability on households decision to connect could be at least 5% greater than the effect of poverty; if the frequency of outages is too high, the wealth or poverty effect might vanish and households would respond only to the excessively low reliability. These results confirm the uncertainty assumption, that is, regular and severe outages yield an uninsurable context that deters households from subscribing to the electric service.
    Keywords: outages,reliability,electrification,instrumental variable,Kenya
    Date: 2017–06
  7. By: Matthias Hunold; Johannes Muthers
    Abstract: We characterize mixed-strategy equilibria when capacity constrained suppliers can charge location-based prices to different customers. We establish an equilibrium with prices that weakly increase in the costs of supplying a customer. Despite prices above costs and excess capacities, each supplier exclusively serves its home market in equilibrium. Competition yields volatile market shares and an inefficient allocation of customers to firms. Even ex-post cross-supplies may restore efficiency only partly. We show that consumers may benefit from price discrimination whereas the the firms make the same profits as with uniform pricing. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis. JEL classification:
    Keywords: Bertrand-Edgeworth, capacity constraints, inefficient competition, spatial price discrimination, subcontracting, transport costs
    JEL: L11 L41 L61
    Date: 2019–05
  8. By: Jenn, Alan; Lee, Jae Hyun; Hardman, Scott; Tal, Gil
    Abstract: We investigate the impacts of a combination of incentives on the purchase decisions of electric vehicle (EV) buyers in California from 2010 through 2017. We employ a comprehensive survey on over 14,000 purchasers of EVs in California. The survey covers a range of purchase intentions, general demographics, and the importance of various incentives. Our results indicate that the most important incentives for plug-in electric vehicle (PEV) owners are the federal tax credit, the state rebate, and HOV lane access. In addition, the importance of the incentives and their associated effect on purchase behaviour has been changing over time: respondents are more likely to change their decisions and to not buy a vehicle at all as time passes and the technology moves away from early adopters.
    Keywords: Engineering, Electric vehicles, incentives, high occupancy vehicle lanes, consumer behavior, automobile ownership
    Date: 2019–05–01
  9. By: Carrara, Samuel
    Abstract: Meeting the targets of climate change mitigation set by the Paris Agreement entails a huge transformation of the energy sector, as low- or no-carbon technologies must gradually substitute traditional, fossil-based technologies. In this perspective, the vast majority of energy analyses and scenarios project a fundamental role of Carbon Capture & Storage (CCS). However, uncertainty remains on the actual techno-economic feasibility of this technology: despite the considerable investment over the recent past, commercial maturity is yet to come. The main aim of this work is to evaluate the impacts of a progressively delayed deployment of CCS plants from a climate, energy, and economic perspective, focusing in particular on the power sector. This is carried out with the Integrated Assessment Model WITCH, exploring a wide set of long-term scenarios over mitigation targets ranging from 1.5°C to 4°C in terms of global temperature increase in 2100 with respect to the pre-industrial levels. The analysis shows that CCS will be a key mitigation option at a global level for carbon mitigation, achieving about 30% of the electricity mix in 2100 (with a homogeneous distribution across coal, gas, and biomass) if its deployment is unconstrained. If CCS deployment is delayed or forbidden, penetration cannot reach the optimal unconstrained level, resulting in a mix rearrangement, with a strong increase in renewables and, to a lesser extent, nuclear. The mitigation targets can be met, but policy costs without the implementation of CCS are from 35% to 72% higher than in the corresponding unconstrained scenarios.
    Keywords: Research and Development/Tech Change/Emerging Technologies
    Date: 2019–05–15
  10. By: Kong, Nathaniel; Hardman, Scott
    Keywords: Social and Behavioral Sciences, plug-in electric vehicle, electric vehicle, incentive
    Date: 2019–05–01
  11. By: Rainald Borck (University of Potsdam, CESifo, DIW Berlin); Philipp Schrauth (University of Potsdam)
    Abstract: We use panel data from Germany to analyze the effect of population density on urban air pollution (nitrogen oxides, particulate matter and ozone). To address unobserved heterogeneity and omitted variables, we present long difference/fixed effects estimates and instrumental variables estimates, using historical population and soil quality as instruments. Our preferred estimates imply that a one-standard deviation increase in population density increases air pollution by 3-12%.
    Keywords: population density, air pollution
    JEL: Q53 R12
    Date: 2019–05

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.