nep-reg New Economics Papers
on Regulation
Issue of 2020‒01‒20
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Challenges for electricity network governance in Energy transitions: Insights from Norway By Dierk Bauknecht; Allan Dahl Andersen; Karoline Dunne
  2. Politics of low-carbon transitions: The European Emissions Trading System as a Trojan Horse for climate policy? By Jochen Markard; Daniel Rosenbloom
  3. The Role of Aggregators in Facilitating Industrial Demand Response: Evidence from Germany By Jan Stede; Karin Arnold; Christa Dufter; Georg Holtz; Serafin von Roon; Jörn C. Richstein
  4. Consumer savings, price, and emissions impacts of increasing demand response in the Midcontinent electricity market By Dahlke, Steven; Prorok, Matt
  5. Market Functioning & Market Integration in EU Network Industries – Telecommunications, Energy & Transport By Martijn Brons; Fotios Kalantzis; Lucia Vergano
  6. Local Effects of Franchise Contract Regulations By Charles Murry; Peter Newberry
  7. Regulatory risk, vertical integration, and upstream investment By Fiocco, Raffaele; Guo, Dongyu
  8. Pricing of Complements in the U.S. Freight Railroads: Cournot Versus Coase By Alexei Alexandrov; Russell Pittman; Olga Ukhaneva
  9. Who's winning the low-carbon innovation race? An assessment of countries' leadership in renewable energy technologies By Clément Bonnet; Emmanuel Hache; Gondia Sokhna Seck; Marine Simoen; Samuel Carcanague
  10. Public-Private Partnerships Investment in Energy as New Determinant of CO2 Emissions: The Role of Technological Innovations in China By Shahbaz, Muhammad; Raghutla, Chandrashekar; Song, Malin; Zameer, Hashim; Jiao, Zhilun
  11. Does ICT-Trade Openness ensure Energy and Environmental Sustainability? Empirical Evidence from selected South Asian Economies By Murshed, Muntasir
  12. Determinants of solar photovoltaic deployment in the electricity mix: Do oil prices really matter? By Margaux ESCOFFIER; Emmanuel HACHE; Valérie MIGNON; Anthony PARIS
  13. Policy and market drivers for advancing clean energy By Dahlke, Steven
  14. Environmental Innovation in European Transition Countries By Raul Caruso; Antonella Biscione; Annunziata de Felice

  1. By: Dierk Bauknecht (Institute for Applied Ecology, Germany); Allan Dahl Andersen (Center for Technology, Innovation and Culture (TIK), Oslo University, Norway); Karoline Dunne (Center for Technology, Innovation and Culture (TIK), Oslo University, Norway)
    Abstract: Once transitions progress beyond the startup phase, niche technologies diffuse more widely to generate important knock-on effects in the focal sector. With this comes a need for moving beyond nurturing niches to embracing a 'whole system perspective'. In the case of the power sector, a whole systems view puts the role of electricity networks more central. This paper analyses how the governance of power networks is challenged by the pending renewable energy transitions. We integrate insights from network regulation studies and transition studies to propose a framework for understanding how energy transition challenges current regulatory thinking and practice. We use the framework for assessing recent attempts at regulatory innovation by the Norwegian network regulator. The paper shows how the established toolbox of network regulation can be amended to tackle innovation and transition. The Norwegian case shows that the network regulator does take up the challenges resulting from the energy transition. Yet it also shows the difficulties of making these new instruments effective. A key issue is the tension between a strong focus on cost-efficiency in the existing regulatory framework, on the one hand, and transformative change on the other.
    Date: 2020–01
  2. By: Jochen Markard (Department of Management, Technology and Economics, Swiss Federal Institute of Technology Zurich); Daniel Rosenbloom (Department of Political Science, University of Toronto)
    Abstract: Many view carbon pricing as the single best policy approach to address climate change. Such optimism, however, tends to neglect the politics and struggles that surround climate policy and the necessity to accelerate the ongoing low-carbon energy transition. To unveil the multiple facets of political struggles around climate and energy policy, we analyze the responses of key actors to climate-energy consultations in 2015-16 surrounding the EU emissions trading system (ETS) and the EU renewable energy directive. Among other positions, we identify a prominent policy position that contends that climate policy should focus on the ETS given its purported efficiency. Some actors who share this position use the ETS like a Trojan Horse to fend off strict climate action as well as complementary renewable energy policies. Such political strategies do not just undermine carbon pricing but confront the energy transition at large. However, we also find energy industry incumbents that want a much stronger ETS and more effective climate policy. Therefore, it seems that the ‘Trojan Horse strategy’ may fail and the low-carbon transition might gain increasing support from a broad range of constituents. Even so, we argue that any singular climate policy approach risks political capture and that a broad range of policies will be necessary to accelerate the ongoing transition.
    Date: 2020–01
  3. By: Jan Stede; Karin Arnold; Christa Dufter; Georg Holtz; Serafin von Roon; Jörn C. Richstein
    Abstract: Industrial demand response can play an important part in balancing the intermittent production from a growing share of renewable energies in electricity markets. This paper analyses the role of aggregators – intermediaries between participants and the electricity market – in facilitating industrial demand response. Based on the results from semi-structured interviews with German demand response aggregators, as well as a wider stakeholder online survey, we examine the role of aggregators in overcoming barriers to industrial demand response. We find that a central role for aggregators is to raise awareness for the potentials of demand response, as well as to support implementation by engaging key actors in industrial companies. Moreover, we develop a taxonomy that helps analyse how the different functional roles of aggregators create economic value. We find that there is considerable heterogeneity in the kind of services that aggregators offer, many of which do create significant economic value. However, some of the functional roles that aggregators currently fill may become obsolete once market barriers to demand response are reduced or knowledge on demand response becomes more diffused.
    Keywords: Aggregator, demand response, barriers, function, roles, industry, interview
    JEL: D22 L23 Q40 Q41
    Date: 2020
  4. By: Dahlke, Steven; Prorok, Matt
    Abstract: This paper estimates consumer savings, CO2 emissions reductions, and price effects from increasing demand response (DR) dispatch in the Midcontinent Independent System Operator (MISO) electricity market. To quantify market effects, we develop a dynamic supply and demand model to explore a range of DR deployment scenarios. The study is motivated by the existence of regulatory and market rule barriers to market-based deployment of DR resources in the MISO region. We show annual consumer savings from increased market-based DR can vary from $1.3 million to $17.6 million under typical peak operating conditions, depending on the amount of DR resources available for market dispatch and the frequency of deployment. Consumer savings and other market effects increase exponentially during atypical periods with tight supply and high prices. Additionally, we find that DR deployment often reduces CO2 emissions, but the magnitude of emissions reductions varies depending on the emissions content of marginal generation at the time and location of deployment. The results of this study suggest regulators and other stakeholders should focus policy efforts to reducing regulatory barriers to DR deployment in wholesale markets, particularly in locations that experience high price spikes, to improve market efficiency and achieve cost savings for consumers.
    Date: 2018–11–30
  5. By: Martijn Brons; Fotios Kalantzis; Lucia Vergano
    Abstract: This paper provides a comparative assessment of market functioning and market integration in EU Member States in network industries, i.e. telecommunications, energy and transport sectors. The first section assesses Member States’ progress in market opening and competition and highlights potential market distortions that can hinder the proper functioning of these markets. The analysis shows that over the last years overall improvements in the regulatory and competitive environment was achieved, especially in the telecommunications sector. However, additional efforts are needed, especially in some Member States. The second section empirically investigates whether any relevant price convergence across Member States took place in the EU network industries. Econometric results show that prices converged to the mean in all analysed subsectors. However, in some Member States country-specific factors prevented prices in each of the sectors from fully converging to the same level. The speed of convergence was higher in the transport and energy subsectors and lower in the telecommunications sector.
    JEL: C13 D47 L90
    Date: 2019–09
  6. By: Charles Murry (Department of Economics, Boston College); Peter Newberry (Penn State University)
    Abstract: Many U.S. states restrict the ability of franchisors to terminate or restructure franchise contracts through regulation. We empirically examine the effect of these regulations on the franchising decisions of firms at the local level. Using data from the quick-service restaurant industry, we find that franchise regulations are associated with 12% fewer franchises in the average zip-code. We find evidence that the impact of the regulation varies based on the local characteristics of a zip-code and can be as high as 16%.
    Keywords: Franchising, Entry, Regulatory Capture, Retailing
    JEL: L22 L26 K20
    Date: 2020–01–08
  7. By: Fiocco, Raffaele; Guo, Dongyu
    Abstract: We investigate the impact of regulatory risk on vertical integration and upstream investment by a regulated firm that provides an essential input to downstream competitors. Regulatory risk reflects uncertainty about the regulator's commitment to a regulatory policy that promotes the regulated firm's unobservable investment effort. We show that, when the regulator sets the regulatory policy after the vertical industry structure has been established, some degree of regulatory risk is ex ante socially beneficial. Regulatory risk makes vertical integration profitable and stimulates upstream investment at a lower social cost. This occurs for moderate costs of investment effort and firm small risk aversion. Our analysis sheds new light on some relevant empirical patterns in vertically related markets.
    Keywords: commitment, moral hazard, regulatory risk, upstream investment, vertical integration, vertically related markets.
    JEL: D82 L43 L51
    Date: 2020–01
  8. By: Alexei Alexandrov; Russell Pittman (U.S. Department of Justice); Olga Ukhaneva (Georgetown University)
    Abstract: Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that price in case (2) is higher than price in case (1), suggesting that the complementary monopolist pricing ineficiency is absent in this market. For our main analysis, we use a specification consistent with the previous literature; however, our findings are robust to propensity score blocking and machine learning algorithms. Finally, we perform a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1), and these results are also consistent with our main findings. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, and royalty stacking and patent thickets.
    Keywords: vertical merger, double marginalization, mergers of complements, antitrust, tragedy of the anticommons, royalty stacking, patent thickets, intellectual property
    JEL: D23 D43 K21 L40 L92 O34
    Date: 2018–04
  9. By: Clément Bonnet (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Emmanuel Hache (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IRIS - Institut de Relations Internationales et Stratégiques, EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Gondia Sokhna Seck (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Marine Simoen (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Samuel Carcanague (IRIS - Institut de Relations Internationales et Stratégiques)
    Abstract: Intellectual property is a central issue in climate negotiations. On the one hand, it shapes and encourages innovation in low-carbon technologies. On the other hand, it can reduce access to these technologies by giving patent holders market power. We analyse the interactions between climate negotiations and the acquisition of renewable energy technology patents. First, we present the history of climate negotiations, emphasizing the role of technologies. Second, we conduct an empirical analysis aimed at determining which countries could be considered leaders in renewable energy technologies (RETs). Major changes were observed in the geographical distribution of low-carbon innovation during the 2000s, foreshadowing a reorganization of the geopolitical balances of innovation in renewable energies.
    Keywords: Patent data,International relations,energy transition,renewable energy technology,innovation,international relations JEL Classification: Q42,Q55,O31,O38
    Date: 2019–12
  10. By: Shahbaz, Muhammad; Raghutla, Chandrashekar; Song, Malin; Zameer, Hashim; Jiao, Zhilun
    Abstract: This paper explores the relationship between ‘public-private partnerships investment in energy sector and carbon emissions’ considering the vital role of technological innovations in carbon emissions function for China. In doing so, we apply bootstrapping autoregressive distributed lag modeling (BARDL) for examining the cointegration between carbon emissions and its determinants. The empirical results reveal that public-private partnerships investment in energy impedes environmental quality by increasing carbon emissions. On contrary, technological innovations have negative effect on carbon emissions. The relationship between economic growth and carbon emissions is inverted-U shaped i.e. environmental Kuznets curve hypothesis. Exports are positively linked with carbon emissions. Foreign direct investment impedes environmental quality by stimulating CO2 emissions. The empirical findings provide new insights for policy makers to direct public-private partnerships investment in energy for the betterment of environmental quality in China.
    Keywords: Public-Private Partnerships Investment, Energy, CO2 Emissions, Technological Innovation, China
    JEL: Q5
    Date: 2019–11–02
  11. By: Murshed, Muntasir
    Abstract: Consumption of fossil fuels has triggered worldwide awareness to attain sustainability with respect to ensuring adequate energy access and mitigating environmental adversities, globally. Against this background, this paper aimed at investigating the impacts of enhancing ICT-trade openness on the transition from non-renewable to renewable energy use and carbon dioxide emissions in the context of six South Asian economies. The overall results from the econometric analyses confirm that greater openness to ICT-trade leads to greater consumption of renewable energy, reduces the intensity of energy-use and enhances the access to clean fuel and technology for cooking. However, although ICT trade is found to foster renewable energy consumption across South Asia, it fails to ensure renewable energy transition completely since greater openness to ICT-trade curbs the share of renewables in the aggregate energy consumption figures. Moreover, trade of ICT goods is found to reduce the levels of carbon emissions as well. Thus, these results impose key policy implications for the governments with respect to ensuring energy security alongside environmental sustainability across South Asia.
    Keywords: ICT; renewable energy; non-renewable energy; carbon emissions; cross-sectional dependence
    JEL: Q20
    Date: 2019
  12. By: Margaux ESCOFFIER; Emmanuel HACHE; Valérie MIGNON; Anthony PARIS
    Keywords: , Solar photovoltaic, Renewables deployment, Oil prices, Panel smooth transition regression
    Date: 2019
  13. By: Dahlke, Steven
    Abstract: This chapter reviews important policies and market trends shaping the global development of clean energy technologies. Stimulus policies in the form of feed-in tariffs, tax relief, and renewable portfolio standards along with substantial research & development enabled clean energy projects to overcome early commercialization barriers. As a result, clean energy project costs are now competitive with or lower than conventional fossil fuels in most markets around the world. Policymakers and energy consumers are responding by increasing clean energy targets to high levels approaching 100% in a growing number of jurisdictions. Business models are adapting to this new environment and energy market structures are evolving to enable successful operations of high renewable energy systems. Markets structures, policies, and technologies that enhance system flexibility for efficient renewable energy integration represent the most promising future area of research in this field.
    Date: 2019–12–10
  14. By: Raul Caruso (European Center of Peace Science, Integration and Cooperation CESPIC; Catholic University 'Our Lady of Good Counsel'); Antonella Biscione (European Center of Peace Science, Integration and Cooperation CESPIC; Catholic University 'Our Lady of Good Counsel'); Annunziata de Felice (Department of Law, University of Bari Aldo Moro)
    Abstract: This paper explores the demand-pull, technology-push and regulation factors influencing the environmental innovation strategies. We focus on a subset of manufacturing firms of a group of European Transition Countries. The data available to investigate the driving factors that lead to eco-innovate are taken from the Community Innovation Survey data (CIS 2014). The data is a cross-section covering the three-year period between 2012 and 2014. We employ a multivariate probit model to observe the effect of several drivers on eco-innovation, captured by means of different measures. Empirical findings highlight that: (i) some drivers are common to some types of eco-innovation; (ii) regulation does have a positive impact on all drivers. The latter provides a clear-cut implication for policy-making. Broadly speaking, in transition economies public policies and invectives appear to trigger environmental innovation much more than demand-pull factors.
    Keywords: environmental innovation, European Transition countries, demand-pull, technology-push, regulation
    JEL: Q55 Q58 L6
    Date: 2020–01
  15. By: Rick Van der Ploeg; Armon Rezai
    Abstract: Assets in the fossil fuel industries are at risk of losing market value due to anticipated breakthroughs in renewable technology and governments stepping up climate policies in the light of the Paris commitments to limit global warming to 1.5 or 2 degrees Celsius. Stranded assets arise due to uncertainty about the future timing of these two types of events and substantial intertemporal and intersectoral investment adjustment costs. Stranding of assets mostly affects the 20 biggest oil, gas and coal companies who have been responsible for at least a third of global warming since 1965, but also carbon-intensive industries such as steel, aluminium, cement, plastics and greenhouse horticulture. A disorderly transition to the carbon-free economy will lead to stranded assets and legal claims. Institutional investors should be aware of these financial risks. A broader definition of stranded assets also includes countries reliant on fossil fuel exports and workers with technology-specific skills.
    Keywords: de-carbonisation, policy tipping, technology, stranded assets
    JEL: E62 F41 G11 O33 Q33 Q34 Q35 Q40 Q54
    Date: 2019–12–19

This nep-reg issue is ©2020 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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