nep-reg New Economics Papers
on Regulation
Issue of 2019‒10‒28
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Electric Gini: Income Redistribution through Energy Prices By Arik Levinson; Emilson Silva
  2. Additionality, Mistakes, and Energy Efficiency Investment By Ben Gilbert; Jacob LaRiviere; Kevin Novan
  3. Electricity market competition when forward contracts are pairwise efficient By Van Moer, Geert
  4. Squaring the energy efficiency circle: evaluating industry energy efficiency policy in a hybrid model setting By Andersen, Kristoffer Steen; Dockweiler, Steffen; Klinge Jacobsen, Henrik
  5. The Conditional Relationship between Renewable Energy and Environmental Quality in Sub-Saharan Africa By Simplice A. Asongu; Chimere O. Iheonu; Kingsley O. Odo
  6. Be Cautious with the Precautionary Principle: Evidence from Fukushima Daiichi Nuclear Accident By Neidell, Matthew; Uchida, Shinsuke; Veronesi, Marcella
  7. Demand response within the energy-for-water-nexus: A review By Kirchem, Dana; Lynch, Muireann Á; Casey, Eoin; Bertsch, Valentin
  8. The Economics of Energy Efficiency, a Historical Perspective By Louis-Gaëtan Giraudet; Antoine Missemer
  9. Consumer preferences for end-use specific curtailable electricity contracts on household appliances during peak load hours By Bertsch, Valentin; Harold, Jason; Fell, Harrison
  10. Understanding preference heterogeneity in electricity services: the case of domestic appliance curtailment contracts By Curtis, John; Brazil, William; Harold, Jason
  11. Health and Pollution in a Vertically Differentiated Duopoly By Stefano Quarta; Skerdilajda Zanaj
  12. Why firms invest (or not) in energy efficiency? A review of the econometric evidence By Jose García-Quevedo; Xavier Massa-Camps
  13. Optimal Quality Certification By Andriy Zapechelnyuk

  1. By: Arik Levinson; Emilson Silva
    Abstract: Efficient electricity pricing involves two-part tariffs: a volumetric price equal to the marginal cost of producing an additional kilowatt hour (kWh) and a fixed fee to cover any remaining fixed costs. In this paper we explore how US electricity regulators depart from this simple two-part tariff to address concerns about income inequality. We first show that in theory, price setters concerned about inequality will charge lower fixed monthly fees and higher per-kWh prices, and increasing block prices to target higher users with even higher prices. Then we use a new dataset of 1,300 utilities across the US to show that these theoretical predictions are borne out in practice. Utilities whose ratepayers have more unequal incomes levy more redistributive tariffs, charging less to low users and more to high users. To quantify these comparisons, we develop a new measure of the redistributive extent of utility tariffs that we call the “electric Gini.” Utilities with higher electric Ginis (more redistributive tariffs) shift costs from households that use relatively little electricity to households that use more. But because electricity use is only loosely correlated with income, that redistribution does not meaningfully shift costs from households with low incomes to those with high incomes.
    JEL: Q41 Q48
    Date: 2019–10
  2. By: Ben Gilbert (Division of Economics and Business, Colorado School of Mines); Jacob LaRiviere (Microsoft, University of Tennessee and University of Washington); Kevin Novan (Department of Agricultural and Resource Economics, University of California, Davis)
    Abstract: Investment subsidies, like those for energy efficiency upgrades, often suffer from poor additionality. Using a novel theoretical model, we show when benefits from investments are uncertain, subsidy policies can also lead to inefficient investment decisions that don't pass the full information benefit cost test. We use a unique household-level dataset of energy efficiency audits and investments to test model predictions. We find that households are significantly more likely to schedule audits and installs when first moving into an existing home when, ironically, information uncertainty is greatest. We then build on the theoretical model to inform better policy design.
    Keywords: Durable Goods, Learning, Electricity, Second Best
    JEL: Q D
    Date: 2019–06
  3. By: Van Moer, Geert
    Abstract: This paper investigates competition in electricity markets when each pair of strategic firms exchanges forward obligations pairwise-efficiently. The gains from pairwise trade are specific to the counterparty, which can be horizontally- or vertically-related depending on whether it has access to flexibility in the spot market. The analysis shows that pairwise efficient forward trade rules out a bilateral oligopoly spot market where net buyers and net sellers strategically interact. Firms without flexibility close their position entirely in the forward market. Forward markets serve to absorb renewable energy shocks, even if forward contracts are unobservable and firms are risk-neutral.
    Keywords: Nash-in-Nash bargaining; bilateral oligopoly; renewables
    JEL: D43 L13 L94
    Date: 2019–10–22
  4. By: Andersen, Kristoffer Steen; Dockweiler, Steffen; Klinge Jacobsen, Henrik
    Abstract: Improving energy efficiency within the industry will play a central role in mitigating greenhouse gas emissions by reducing the use of fossil fuels. Nevertheless, the ex-ante evaluation of energy-efficiency policies largely remains an unresolved challenge. Understood within a theoretical economic framework, the root of the challenge is the simultaneity and interaction between three primary effects: an activity, a price, and a technical effect. This paper demonstrates how the IntERACT model, a Danish hybrid model, captures each effect and their interactions endogenously. The paper finds that a specific energy efficiency policy leads to an additional reduction in industrial energy use of around 5% in the year 2030, of which a policy-induced reduction in the energy efficiency gap accounts for half. The results reflect a total rebound effect of 12.5% and an implied elasticity of energy service demand of 16 around 15% across industrial sectors.
    Keywords: Energy systems analysis; sectoral energy efficiency modelling; energy efficiency policies; energy savings
    JEL: H20 O52 Q38 Q41 Q43 Q48
    Date: 2019–09
  5. By: Simplice A. Asongu (Yaoundé/Cameroon); Chimere O. Iheonu (University of Nigeria, Nsukka, Nigeria); Kingsley O. Odo (University of Nigeria, Nsukka, Nigeria)
    Abstract: This paper complements existing literature by assessing the conditional relationship between renewable energy and environmental quality in a sample of 40 African countries for the period 2002 to 2017. The empirical evidence is based on fixed effects regressions and quantile fixed effects regressions. The findings from both estimation techniques show that renewable energy consistently decreases carbon dioxide (CO2) emissions. Moreover, the negative effect is a decreasing function of CO2 emissions or the negative effect of renewable energy on CO2 emissions decreases with increasing levels of CO2 emissions. In other words, countries with higher levels of CO2 emissions consistently experience a less negative effect compared to their counterparts with lower levels of CO2 emissions. Policy implications are discussed.
    Keywords: Panel econometrics; Renewable energy; Carbon emissions; Africa
    JEL: Q32 Q40 O55
    Date: 2019–01
  6. By: Neidell, Matthew (Columbia University); Uchida, Shinsuke (Nagoya City University); Veronesi, Marcella (University of Verona)
    Abstract: This paper provides a large scale, empirical evaluation of unintended effects from invoking the precautionary principle after the Fukushima Daiichi nuclear accident. After the accident, all nuclear power stations ceased operation and nuclear power was replaced by fossil fuels, causing an exogenous increase in electricity prices. This increase led to a reduction in energy consumption, which caused an increase in mortality during very cold temperatures. We estimate that the increase in mortality from higher electricity prices outnumbers the mortality from the accident itself, suggesting the decision to cease nuclear production has contributed to more deaths than the accident itself.
    Keywords: precuationary principle, nuclear energy, electricity, mortality
    JEL: I12 K32 Q41
    Date: 2019–10
  7. By: Kirchem, Dana; Lynch, Muireann Á; Casey, Eoin; Bertsch, Valentin
    Date: 2019
  8. By: Louis-Gaëtan Giraudet (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech); Antoine Missemer (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Energy efficiency can be considered as a central pillar of global warming mitigation, with important co-benefits, including productivity gains, resource conservation or national security. It is also a subject of controversy between engineers and economists, who have divergent conceptions of the notion of optimality that delineates energy efficiency potentials. Modern surveys hardly go back beyond the 1970s and do not fully explore the reasons and conditions for the persistent differences between economists' and engineers' views. This paper provides such a historical account, investigating the positioning of economic analysis in contrast to the technical expertise on key energy efficiency topics – the rebound effect, the energy efficiency gap, and green nudges, from the 19th century to the present day. It highlights the permanence and evolution in the relationship that economists have had with technical expertise. An extension of the current conceptual framework is finally provided to connect our historical findings with avenues for future research.
    Keywords: engineering,nudge,history of economic thought,energy efficiency,market barriers and failures
    Date: 2019
  9. By: Bertsch, Valentin; Harold, Jason; Fell, Harrison
    Date: 2019
  10. By: Curtis, John; Brazil, William; Harold, Jason
    Date: 2019
  11. By: Stefano Quarta; Skerdilajda Zanaj
    Abstract: In this paper, we analyze a vertically differentiated mixed duopoly in medical care services. Pollution is the source of illness. The government has a dual role. It decides how much to invest to reduce the pollution level and it may participate in the health market running a public hospital. We find that the presence of the public provider increases the average quality of the service in the market and it reduces the rate of mortality. Furthermore, when the public hospital offers services with the highest quality, then this has positive spillovers on the quality offered by the private provider. Despite these positive welfare improving features, the mixed duopoly in medical care goes along with the highest level of pollution. In the presence of an increasing concern about the relationship between pollution and health, understanding the role of public intervention appears crucial.
    Keywords: Pollution, health, public provider, mixed duopoly.
    JEL: L13 H42 H44 I11
    Date: 2019–11–14
  12. By: Jose García-Quevedo (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB)); Xavier Massa-Camps (Universitat de Barcelona)
    Abstract: The motives that firms have for investing in energy efficiency have been widely analysed in the literature. Particularly, there is a huge literature on barriers to energy efficiency investment and adoption. This paper reviews the econometric analyses carried out in this field. The main objective is to provide a general overview of the state of the econometric literature on the barriers and drivers of energy efficiency. We examine the main features of these studies and particularly the results of the explanatory variables used. We have classified them into three groups, barriers, drivers and firm characteristics. The paper ends with some suggestions for further analysis in order to improve our knowledge of energy efficiency investment.
    Keywords: Energy efficiency, Literature review
    JEL: Q40 C01
    Date: 2019
  13. By: Andriy Zapechelnyuk (University of St Andrews)
    Abstract: Quality certification not only informs consumers, but also stimulates producers to supply better quality products. We study a problem of quality certification in a moral hazard setting. We show that, under standard assumptions, simple certification systems, such as quality assurance rule and pass-fail rule, are optimal. Our solution method involves interpreting the certification problem as a delegation problem.
    Keywords: Certification, Bayesian persuasion, information disclosure, information design, delegation, moral hazard, career concerns
    JEL: D82 D86 D45
    Date: 2019–10–21

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