nep-reg New Economics Papers
on Regulation
Issue of 2019‒12‒09
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Locational Marginal Network Tariffs for Intermittent Renewable Generation By Tangerås, Thomas; Wolak, Frank A.
  2. The Elusive Effects of Residential Energy Efficiency Improvements: Evidence from Ukraine By Anna Alberini; Olha Khymych; Milan Scasny
  3. Estimating Energy Price Elasticities When Salience is High: Residential Natural Gas Demand in Ukraine By Anna Alberini; Olha Khymych; Milan Scasny
  4. Which Access to Which Assets for an Effective Liberalization of the Railway Sector? By Patrice Bougette; Axel Gautier; Frédéric Marty
  5. Crowdsourced Quantification and Visualization of Urban Mobility Space Inequality By Szell, Michael
  6. Theoretical Framework for Industrial Electricity Consumption Revisited By Fakhri Hasanov
  7. Gasoline Savings From Clean Vehicle Adoption By Tamara Sheldon; Rubal Dua
  8. Mobility and Energy Impacts of Shared Automated Vehicles: a Review of Recent Literature By Shaheen, Susan PhD; Bouzaghrane, Mohamed Amine
  9. Pathways to Carbon Pollution: The Interactive Effects of Global, Political, and Organizational Factors on Power Plants’ CO2 Emissions By Grant, Don; Jorgenson, Andrew; Longhofer, Wesley
  10. Air Quality Warnings and Temporary Driving Bans: Evidence from Air Pollution, Car Trips, and Mass-Transit Ridership in Santiago By Nathaly Rivera
  11. Oil subsidies and the risk exposure of oil-user stocks: Evidence from net oil producers By Abdulrahman, Alhassan; Syed Abul, Basher; M. Kabir, Hassan
  12. Information revelation in procurement auctions: an equivalence result By Domenico Colucci; Nicola Doni; Vincenzo Valori
  13. Enhanced Oil Recovery and CO2 Storage Potential Outside North America: An Economic Assessment By Colin Ward; Wolfgang Heidug
  14. The simple economics of white elephants By Juan José Ganuza; Gerard Llobet

  1. By: Tangerås, Thomas (Research Institute of Industrial Economics (IFN)); Wolak, Frank A. (Program on Energy and Sustainable Development and Department of Economics)
    Abstract: The variability of solar and wind generation increases transmission network operating costs associated with maintaining system stability. These ancillary services costs are likely to increase as a share of total energy costs in regions with ambitious renewable energy targets. We examine how efficient deployment of intermittent renewable generation capacity across locations depends on the costs of balancing real-time system demand and supply. We then show how locational marginal network tariffs can be designed to implement the efficient outcome for intermittent renewable generation unit location decisions. We demonstrate the practical applicability of this approach by applying our theory to obtain quantitative results for the California electricity market.​
    Keywords: Ancillary services costs; Efficiency; Locational marginal network tariffs; Renewable electricity generation; System stability
    JEL: L94 Q20 Q42
    Date: 2019–11–29
  2. By: Anna Alberini (AREC, University of Maryland, College Park, MD 20742, United States); Olha Khymych (nstitute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Milan Scasny (Charles University Environment Centre, José Martího 407/2, 162 00, Prague, Czech Republic)
    Abstract: Untapped improvements in energy efficiency in the residential sector may deliver large savings in energy use and the CO2 associated emissions. Yet empirical assessments have been difficult and controversial. We collect monthly natural gas meter readings from a sample of homes in Transcarpathia, in Western Ukraine, an early adopter of the country’s trend away from district heating, from January 2013 to April 2017, a period over which the residential natural gas tariffs rose by over 700%. We combine the monthly meter readings with documentation about each household’s heating-related energy efficiency upgrades to the home (wall, attic or basement insulation; new windows; boiler replacement, and insulation around pipes) to form a panel dataset. We estimate the effect of the energy efficiency renovations on natural gas consumption, controlling for weather, income and government energy assistance. The decision to do the renovations and natural gas consumption are likely endogenous (people do the renovations because they hope to consume less), so we instrument for the renovations by creating a cross-validation instrument based on a supply-side argument. Even for a given type of energy efficiency upgrades, the estimated effect of the renovations varies dramatically in magnitude, depending on whether the renovations are instrumented for and on how detailed the fixed effects are. The coefficients on the renovations are almost always negative in our regressions, but practically and statistically significant only when we instrument for the renovations. This is in agreement with our respondents’ difficulty assessing whether the renovations had saved them gas or money. The IV estimates indicate that insulation delivers 13-24% reductions in natural gas usage, and up to a 5% internal rate of return (IRR) to the investment over 20 years. Judicious use of an existing government program can yield positive IRRs and make energy efficiency upgrades a good investment in a generally poor-performing housing market.
    Keywords: Residential gas demand, long-run effects, tariff reforms, energy efficiency
    JEL: D12 Q41 Q48
    Date: 2019–04
  3. By: Anna Alberini (AREC, University of Maryland, College Park, MD 20742, United States); Olha Khymych (nstitute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Milan Scasny (Charles University Environment Centre, José Martího 407/2, 162 00, Prague, Czech Republic)
    Abstract: Despite its importance for policy purposes (including climate policy and the energy transition), evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices. We focus on a locale and time when price changes were extreme and presumably salient to consumers, namely Ukraine between 2013 and 2017. We exploit the tariff reforms and detailed micro-level household consumption records to estimate the price elasticity of the demand for natural gas. To isolate behavior, attention is restricted to those households that made no structural energy-efficiency upgrades to their homes, and thus kept the stock of gas-using capital fixed. We further examine the short-run elasticity by restricting the sample to a few months before and after the tariff changes. Our results suggest that under extreme price changes, households are capable of reducing consumption, even without installing insulation or making any other structural modifications to their homes. The price elasticity is about -0.16. Wealthier households, people living in multifamily buildings, and heavy users have more inelastic demands. Households reduced consumption even when they received “subsidies,†namely lump-sum government assistance, suggesting that when the price signal is sufficiently strong, lump-sum transfers have only a minimal effect on consumption. We also find some evidence that the stronger the salience, the stronger the responsiveness to price, although this effect is modest and may partly overlap with that of income or baseline consumption. Our data also suggest that the consumers with the lowest uptake of energy efficiency improvements might be those who—by necessity or through skills—are the most productive at reducing energy use through behaviors.
    Keywords: Residential gas demand, energy transition, short-run price elasticity, tariff reforms, salience, fuel poverty
    JEL: D12 Q41 Q48 H31
    Date: 2019–03
  4. By: Patrice Bougette (Université Côte d'Azur; GREDEG CNRS); Axel Gautier (HEC Liège, University of Liège, LCII; CORE (UCLouvain; CESifo (Munich)); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: In the European rail industry, the market liberalization limited to the opening of the essential facilities (the train path) to new entrants is not enough to enable competition. For an efficient and effective entry, temporary access to quasi-essential complementary assets like rolling stock, mechanical maintenance workshops, data, schedules, etc. is also required. Like in all network industries, the deregulation process faces anticompetitive practices undertaken by the incumbents or may be thwarted by their market power. Several observed anticompetitive practices involve distorted access to these quasi-essential facilities. Therefore, competition agencies must deal with litigation between the incumbent and new entrants. Most cases have been settled, resulting in commitments from the incumbent. We argue that such transitory and case-by-case remedies fail to produce favorable conditions for a secure and efficient entry. Thus, we propose to systematize such remedies through asymmetric and enduring ex-ante regulation.
    Keywords: rail, liberalization, essential facility, anticompetitive practices, asymmetric regulation
    JEL: K21 L51 L92 L98
    Date: 2019–11
  5. By: Szell, Michael
    Abstract: Most cities are car-centric, allocating a privileged amount of urban space to cars at the expense of sustainable mobility like cycling. Simultaneously, privately owned vehicles are vastly underused, wasting valuable opportunities for accommodating more people in a livable urban environment by occupying spacious parking areas. Since a data-driven quantification and visualization of such urban mobility space inequality is lacking, here we explore how crowdsourced data can help to advance its understanding. In particular, we describe how the open-source online platform What the Street!? uses massive user-generated data from OpenStreetMap for the interactive exploration of city-wide mobility spaces. Using polygon packing and graph algorithms, the platform rearranges all parking and mobility spaces of cars, rails, and bicycles of a city to be directly comparable, making mobility space inequality accessible to a broad public. This crowdsourced method confirms a prevalent imbalance between modal share and space allocation in 23 cities worldwide, typically discriminating bicycles. Analyzing the guesses of the platform’s visitors about mobility space distributions, we find that this discrimination is consistently underestimated in the public opinion. Finally, we discuss a visualized scenario in which extensive parking areas are regained through fleets of shared, autonomous vehicles. We outline how such accessible visualization platforms can facilitate urban planners and policy makers to reclaim road and parking space for pushing forward sustainable transport solutions.
    Date: 2018–03–28
  6. By: Fakhri Hasanov (King Abdullah Petroleum Studies and Research Center)
    Abstract: Policymakers should expect that the energy price reform in Saudi Arabia will reduce industrial electricity consumption. However, this reduction will be slight as the price effect is found to be very small. At the same time, policymakers should be aware that the increasing population aged 15-64, and all those over 15, will lead to an increase in industrial electricity consumption. Lastly, the estimations show that industrial electricity consumption will fully absorb shocks including policy interventions in less than a year.
    Keywords: Cointegration, Demography, Electricity consumption, Electricity demand, Equillibrium correction
    Date: 2019–11–24
  7. By: Tamara Sheldon; Rubal Dua (King Abdullah Petroleum Studies and Research Center)
    Abstract: Without the option to purchase plug-in electric and/or hybrid vehicles, conventional counterfactuals used in literature may underestimate the fuel savings from clean vehicle adoption, thus overestimating the costs of securing associated environmental benefits. Using a nationally representative sample of new car purchases in the U.S., a vehicle choice model-based counterfactual approach is proposed that allows for the prediction of what consumers would purchase if these clean vehicles were unavailable. The cost of demand-side policies in the form of financial incentives to encourage plug-in electric vehicle adoption is estimated.
    Keywords: Carbon Dioxide Emissions, Clean vehicle adoption, Economic modeling, Fuel efficiency incentives, Fuel savings, Gasoline consumption, Greenhouse Gas Emissions (GHG), Hybrid electric vehicles, Plug-in electric vehicles, Transportation
    Date: 2018–01
  8. By: Shaheen, Susan PhD; Bouzaghrane, Mohamed Amine
    Abstract: The purpose of this review is to present findings from recent research on Shared automated vehicles (SAV) impacts on mobility and energy. While the literature on potential SAV impacts on travel behavior and the environment is still developing, researchers have suggested that SAVs could reduce transportation costs and incur minimal increases in total trip time due to efficient routing to support pooling. Researchers also speculate that SAVs would result in a 55% reduction in energy use and ~ 90% reduction in greenhouse gas (GHG) emissions. SAV impacts on mobility and energy are uncertain. Researchers should carefully track SAV technology developments and adjust previous model assumptions based on real-world data to produce better impact estimates. SAVs could prove to be a next technological advancement that reshapes the transportation system by providing a safer, efficient, and less costly travel alternative.
    Keywords: Engineering, Shared automated vehicles, Travel behavior, Mobility Greenhouse gases, Energy consumption, Shared automated vehicle policy
    Date: 2019–11–26
  9. By: Grant, Don; Jorgenson, Andrew; Longhofer, Wesley
    Abstract: Climate change is arguably the greatest threat to society as power plants, the single largest human source of heat-trapping pollution, continue to emit massive amounts of carbon into the atmosphere. Sociologists have identified several possible structural determinants of electricity-based CO2 emissions, including international trade and global normative regimes, national political–legal systems, and organizational size and age. But because they treat these factors as competing predictors, scholars have yet to examine how they might work together to explain why some power plants emit vastly more pollutants than others. Using a worldwide data set of utility facilities and fuzzy-set methods, we analyze the conjoint effects of global, political, and organizational conditions on fossil-fueled plants’ CO2 emissions. Findings reveal that hyperpolluters’ emission rates are a function of four distinct causal recipes, which we label coercive, quiescent, expropriative, and inertial configurations, and these same sets of conditions also increase plants’ emission levels.
    Date: 2018–02–05
  10. By: Nathaly Rivera (University of Alaska Anchorage)
    Abstract: Driving restrictions are a common governmental strategy to reduce airborne pollution and traffic congestion in many cities of the world. Using high-frequency data on air pollution, car trips, and mass-transit systems ridership, I evaluate the effectiveness of temporary driving bans triggered by air quality warnings in Santiago, Chile. I employ a fuzzy regression discontinuity design that uses the thresholds in the air quality index used to announce these warnings as instruments for their announcement. Results show that these temporary bans reduce car trips by 6-9% during peak hours, and by 7-8% during off-peak hours. This is consistent with air pollution reductions during peak hours, and with increases in the use of Santiago's mass-transit systems during hours the systems run with excess capacity. Increments in mass-transit ridership uncover the importance of alternatives modes of transportation in securing the effectiveness of temporary driving bans.
    Keywords: Air Pollution, Pollution Alerts, Environmental Episodes, Driving Restrictions, Latin America
    JEL: Q52 Q53 R41
    Date: 2019–11
  11. By: Abdulrahman, Alhassan; Syed Abul, Basher; M. Kabir, Hassan
    Abstract: Using a sample of 828 oil-user firms from 14 net oil-producing countries, spanning from Jan 2004 to Dec 2015, we show that stock returns of oil-user companies increase with lagged oil price returns and decrease with lagged oil price volatility. Furthermore, the evidence suggests that oil-user stocks operating in countries with larger fuel subsidies tend to be more exposed to oil returns but not oil volatility. Intuitively, when the oil price increases (decreases), oil-user stocks that operate in countries with larger oil subsidies gain (lose) more than oil-user stocks in countries with smaller fuel subsidies. However, both types of stocks experience losses when the oil market becomes more volatile, with no statistically significant difference between their losses. Our evidence implies a diversification benefit for international investors to reduce their exposure to oil risk. Our results are robust because of the use of alternative proxies, econometric methodologies, and model specifications.
    Keywords: Oil price risk, Oil-producing countries, Oil subsidies, Stock performance
    JEL: G1 G2 Q3 Q4
    Date: 2019–11–23
  12. By: Domenico Colucci; Nicola Doni; Vincenzo Valori
    Abstract: Procurement auctions often involve quality considerations as a determinant of the final outcome. When the procurer has private information about qualities, various information policies may be used to affect the expected outcome. For auctions with two cost heterogeneous suppliers, this work defines a notion of duality between pairs of policies, and shows that dual policies are revenue equivalent.
    Keywords: procurement, information revelation, discriminatory policy, asymmetric auctions
    JEL: D44 D82 H57
    Date: 2019–11–01
  13. By: Colin Ward; Wolfgang Heidug (King Abdullah Petroleum Studies and Research Center)
    Abstract: Storing carbon dioxide (CO2 ) in oil reservoirs as part of CO2 -based enhanced oil recovery (CO2 -EOR) can be a cost-effective solution to reduce emissions into the atmosphere. In this paper, we analyze the economics of this option in order to estimate the amount of CO2 that could be profitably stored in different regions of the world. We consider situations in which the CO2 -EOR operator either purchases the CO2 supplied or is paid for its storage. Building upon extensive data sets concerning the characteristics and location of oil reservoirs and emission sources, the paper focuses on opportunities outside North America. Using net present value (NPV) as an indicator for profitability, we conduct a break-even analysis to relate CO2 supply prices (positive or negative) to economically viable storage potential.
    Keywords: Carbon dioxide storage, Carbon pricing, Climate change, CO2 based enhanced oil recovery (CO2-EOR), Decarbonization, Enhanced oil recovery
    Date: 2018–01
  14. By: Juan José Ganuza; Gerard Llobet
    Abstract: This paper shows that the concession model discourages firms from acquiring information about the future profitability of a project. Uninformed contractors carry out good and bad projects because they are profitable in expected terms even though it would have been optimal to invest in screening them out according to their value. White elephants are identified as avoidable negative net present-value projects that are nevertheless undertaken. Institutional arrangements that limit the losses that firms can bear exacerbate this distortion. We characterize the optimal concession contract, which fosters the acquisition of information and achieves the first best by conditioning the duration of the concession to the realization of the demand and includes payments for not carrying out some projects.
    Keywords: Concession contracts, information acquisition, flexible-term concessions.
    JEL: D82 D86 H21 L51
    Date: 2019–11

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.
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