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on Regulation |
| By: | Chyong, C.; Pollitt, M.; Cruise, R. |
| Abstract: | Using a Pan-European electricity dispatch model we find that with higher variable renewable energy (VRE) production wholesale power prices may no longer serve as a long-run signal for generation investment in 2025. If wind and solar are to be self-financing by 2025 under the current European market design, they would need to be operating in circumstances which combine lower capital cost with higher fossil fuel and/or carbon prices. In the absence of these conditions, long term subsidy mechanisms would need to continue in order to meet European renewable electricity targets. More VRE production will exacerbate the ‘missing money’ problem for conventional generation. Thus, closures of unprofitable fossil fuel generation would sharpen and increase energy-only prices but would put more pressure on ancillary services markets to support system stability. Thus, the question of the need for a market redesign to let the market guide investments in both renewables and conventional generation would seem to remain. |
| Keywords: | electricity market design, electricity regulation, wind energy, solar energy, electricity generation investment, ancillary services, capacity renumeration mechanisms, energy-only prices |
| JEL: | L94 L98 L51 Q48 Q41 C61 |
| Date: | 2019–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1955&r=all |
| By: | Ritter, Hendrik; Zimmermann, Karl |
| Abstract: | We assess a 2-period, non-cooperative equilibrium of an n country policy game where countries chose either (i) carbon taxes, (ii) cap-and-trade policy with local permit markets or (iii) cap-and-trade policy with internationally linked permit markets and potential central redistribution of permit revenues. Policy makers maximizes welfare, which depends on household consumption over time and environmental damage from period-1 resource use. We assume costless and complete extraction of this non-renewable resource, so damage only depends on speed of extraction. Tax policy is the least efficient option due to carbon leakage, which introduces a second externality adding to the environmental externality. Cap-and-trade policy does not show any leakage since all symmetric countries will employ caps. Its equilibrium thus only suffers from the environmental externality and welfare is higher than under carbon taxation. The policy scenario with linked permit markets and central redistribution yields an efficient outcome. The redistribution of revenues creates a negative externality which offsets the positive environmental externality. |
| Keywords: | Climate Policy,Carbon Tax,Cap-and-Trade Policy,Linked Permit Markets |
| JEL: | H23 Q38 Q54 Q58 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:197796&r=all |
| By: | Robert Stavins |
| Abstract: | There is widespread agreement among economists – and a diverse set of other policy analysts – that at least in the long run, an economy-wide carbon pricing system will be an essential element of any national policy that can achieve meaningful reductions of CO2 emissions cost-effectively in the United States. There is less agreement, however, among economists and others in the policy community regarding the choice of specific carbon-pricing policy instrument, with some supporting carbon taxes and others favoring cap and trade mechanisms. This prompts two important questions. How do the two major approaches to carbon pricing compare on relevant dimensions, including but not limited to efficiency, cost-effectiveness, and distributional equity? And which of the two approaches is more likely to be adopted in the future in the United States? This paper addresses these questions by drawing on both normative and positive theories of policy instrument choice as they apply to U.S. climate change policy, and draws extensively on relevant empirical evidence. The paper concludes with a look at the path ahead, including an assessment of how the two carbon-pricing instruments can be made more politically acceptable. |
| JEL: | Q40 Q48 Q54 Q58 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25912&r=all |
| By: | Étienne Latulippe; Kun Mo |
| Abstract: | The market for electric vehicles (EVs) is growing rapidly. Subsidies and technological improvements are expected to increase the market share of EVs over the coming decade. In its base-case scenario, the International Energy Agency (IEA) expects EV use to rise from 4 million vehicles in 2018 to 120 million by 2030, or from 0.3 per cent to over 7 per cent of the global car fleet. However, depending on environmental policy decisions, the number of EVs on the road by 2030 could reasonably range between 57 million and 300 million (4 to 19 per cent of the global fleet). The switch to EVs will have important implications for the global oil market. Our analysis shows that for every additional 100 million EVs on the road in 2030, gasoline consumption would fall by about one million barrels of oil per day and oil prices would be 4 per cent lower. Applying this rule-of-thumb to IEA’s base-case oil price projection of US$90 for 2030, we find that different assumptions on the size of the EV fleet can reasonably push oil prices within a range of US$85 to US$93. |
| Keywords: | International topics |
| JEL: | Q47 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:19-19&r=all |
| By: | Tsur, Yacov |
| Abstract: | The water prices that implement the optimal water policy are derived. These prices contain the supply cost components and two shadow price terms: one reflecting the in situ value of natural water and the other representing the scarcity of recycled water. The former accounts for the scarcity, extraction cost and instream value of natural water, and has a pronounced effect on the onset and extent of desalination along the optimal policy. The latter accounts for the scarcity of recycled water, stemming from the limit imposed on its supply by the sewage discharge, and acts as a tax on users of recycled water and as a subsidy for domestic and industrial users that contribute to the supply of recycled water (via the sewage they discharge). Special attention is given to implications of the public good role of environmental water allocation. An example based on Israel’s water economy is presented. |
| Keywords: | Demand and Price Analysis, Resource /Energy Economics and Policy |
| Date: | 2019–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huaedp:290060&r=all |