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on Regulation |
| By: | Imam, Mahmud I. (Durham University Business School, Durham University, UK); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School) |
| Abstract: | As part of electricity sector reforms, Sub-Saharan African countries have established independent regulatory agencies to signal legal and political commitment to end selfregulation and provision of service by the state. The reforms aimed to encourage private investments, improve efficiency, and extend the service to the millions who lacked the service. However, after nearly two and half decades of reforms, these expectations have not been met and the electricity sectors of these countries remain undeveloped. There are anecdotes that these outcomes are due to poor design, non-credible, unpredictable regulations, and political interference. This paper studies the performance of the reforms in the context of government political ideology. We use a dynamic panel estimator and data from 45 Sub-Saharan African countries to investigate ideological differences in the effect of independent sector regulation on access to electricity and installed capacity. We find negative impact from independent regulation on installed capacity in countries with leftwing governments while we find a positive effect in countries with right-wing governments. Moreover, we find negative impact on electricity access in countries with left-wing governments. These results have interesting policy implications for attracting private sector participation to increase generation capacity and access rates especially in countries with left-wing governments. |
| Keywords: | independent regulation; electricity sector reform; government ideology; dynamic GMM; Sub-Saharan Africa |
| JEL: | D73 L51 L94 O55 P16 Q48 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2020_005&r=all |
| By: | Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | The regulatory and operating context of energy networks is dynamic and constantly evolving. Achieving a multitude of economic, environmental, social and policy objectives is a challenging task for the sector regulators. In 2010, the UK energy regulator Ofgem replaced its approach to energy network price control and incentive regulation with a Revenue-Incentive-Innovation-Output (RIIO-1) model. This paper reviews the incentive areas that influence the performance of the next version of the model (RIIO-2). Guided by the principals of regulatory economics and evidence in the literature, we discuss key aspects of the regulation model that be revised by the regulator. The lessons of experience from the RIIO models are also relevant for regulators in other countries and can inform their design of incentive regulation of energy networks. |
| Keywords: | energy network; incentive regulation; rate of return; cost of capital; benefit sharing; menu of options |
| JEL: | K23 L51 L52 |
| Date: | 2020–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2020_001&r=all |
| By: | Soroush, Golnoush (Department of Management, Politecnico di Torino, Italy); Cambini, Carlo (Department of Management, Politecnico di Torino, Italy); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School) |
| Abstract: | It is generally accepted that institutions are important for economic development. However, whether the performance of regulated utilities within a country is affected by the quality of institutions is yet to be investigated thoroughly. We analyse how the quality of regional institutions impact performance of Italian electricity distribution utilities. We use a stochastic frontier analysis approach to estimate cost functions and examine the performance of 108 electricity distribution utilities from 2011 to 2015. This unique dataset was constructed with the help of the Italian Regulator for Energy, Networks, and Environment. In addition, we use a recent dataset on regional institutional quality in Italy. We present evidence that utilities in regions with better government effectiveness, responsiveness towards citizens, control of corruption, and rule of law, also tend to be more cost efficient. The results suggest that national regulators should take regional institutional diversity into account in incentive regulation and efficiency benchmarking of utilities. |
| Keywords: | institutional quality; stochastic frontier analysis; electricity distribution in Italy; cost efficiency; inefficiency determinants |
| JEL: | D22 L51 L94 O43 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2020_004&r=all |
| By: | Tong Koecklin, Manuel; Fitiwi, Desta; de Carolis, Joseph F.; Curtis, John |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp653&r=all |
| By: | Foster,Vivien; Witte,Samantha Helen |
| Abstract: | This paper provides a comprehensive overview of electricity pricing practices and tariff structure design in more than 60 developed and developing countries worldwide as of 2015-16. It evaluates the performance of electricity tariff designs according to a variety of important dimensions, notably cost recovery, vertical equity (affordability), and horizontal equity (or price differentiation). It also reflects on the extent to which current electricity tariff designs are well-suited to incentivize efficient adoption of emerging technologies, such as distributed generation and storage, electric vehicles, and demand-side participation. The results of the survey indicate that electricity tariffs stand at $0.13 per kilowatt-hour (when fully averaged across countries and customer groupings); but differ hugely across jurisdictions by a factor of 40:1. Electricity tariffs are far from recovering limited capital costs and have not kept up with inflation over time. Substantial price differentiation is the norm, and affordability remains a significant concern. Most countries'tariff structures are ill-adapted to emerging technological disruption in the sector, due to the scant use of load-related charges to cover the fixed costs of the network, the continued preponderance of increasing block tariffs for residential customers, and the limited application of time-of-use pricing. |
| Date: | 2020–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9174&r=all |
| By: | Cambini, Carlo (Department of Management, Politecnico di Torino, Italy); Congiu, Raffaele (Department of Management, Politecnico di Torino, Italy); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Llorca, Manuel (Department of Economics, Copenhagen Business School); Soroush, Golnoush (Department of Management, Politecnico di Torino, Italy) |
| Abstract: | Energy Systems Integration (ESI) is an emerging paradigm and at the centre of the EU energy debate. ESI takes a holistic view of the electricity, gas and heat sectors to deliver a clean, reliable and affordable energy system. By identifying and exploiting the synergies within and between the sectors, ESI aims to increase flexibility in the energy system, maximize the integration of renewable energy and distributed generation, and reduce environmental impact. While ESI-enabling technologies have been studied from a technical perspective, the economic, regulatory and policy dimensions of ESI are yet to be analysed. This paper discusses ESI in a multi-step approach. We first focus on the economics of ESI-enabling technologies. We briefly discuss how the EU national regulators incentivise their adoption. We identify major economic and policy barriers to ESI and propose policy solutions to overcome these barriers. We conclude that current regulatory frameworks in the EU do not stimulate sufficient ESI investments and only through proper design of incentives the ESI paradigm could be achieved. |
| Keywords: | energy systems integration; sector coupling; regulation; innovation; research and development; economic and policy barriers |
| JEL: | L51 L94 Q40 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2020_002&r=all |
| By: | Do, Hung (School of Economics and Finance, Massey University, New Zealand); Nepal, Rabindra (School of Accounting, Economics and Finance & Centre for Contemporary Australasian Business and Economics Studies (CCABES), University of Wollongong); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | This study investigates the volatility connectedness between the Irish and Great Britain electricity markets and how it is driven by changes in energy policy, institutional structures and political ideologies. We assess various aspects of this volatility connectedness including static (unconditional) vs dynamic (conditional), symmetric vs asymmetric characteristics between 2009 and 2018. We find that volatility connectedness is time varying and is significantly affected by important events, policy reforms or market redesigns such as Brexit, oil price slump, increasing share of renewables, and fluctuations in the exchange rates. Our asymmetric analysis shows that the magnitude of the good volatility connectedness is marginally larger than that of the bad volatility connectedness. Our result suggests that good volatility levels would be even higher once the Irish market adopts the carbon price floor. Therefore, supporting renewable generation by setting an appropriate carbon price in interconnected wholesale electricity markets will improve market integration. |
| Keywords: | market integration; electricity; renewable; energy policy; volatility |
| JEL: | D40 L94 Q20 Q40 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2020_003&r=all |
| By: | Bernadeta Gołębiowska (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | This review of choice experiment (CE) studies deals with the valuation of electricity supply attributes in the residential sector. We consider the willingness to pay and the willingness to accept changes in the electricity supply. The results could be used to determine consumers’ preferences for demand-side management (DSM) programs and could serve as a reference for formulating policies. DSM is an option for constructing a low-carbon electricity system, improving energy efficiency, and achieving the sustainable development of an economy. The results from CEs justify investment in new solutions. The research shows that consumers are open to DSM, but they prefer simple programs to complex ones. Decision-makers could introduce DSM programs that enable power outages and provide compensation for households. The societal advantages of DSM are not obvious to consumers, so the implementation of DSM requires communication and more research on peoples’ preferences. |
| Keywords: | choice experiments, demand-side management, energy, households, review |
| JEL: | C25 D19 Q41 Q48 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2020-05&r=all |
| By: | Perez Sebastian,Fidel; Steinbuks,Jevgenijs; Feres,Jose Gustavo; Trotter,Ian Michael |
| Abstract: | This study proposes a novel supply-side mechanism driving economic structural transformation: grid electrification. Increasing electricity availability affects the reallocation of inputs to more productive activities through generating higher returns and lowering entry costs in sectors with greater infrastructure intensity. The results of modeling and econometric analysis based on Brazil's historical data over the period 1970-2006 confirm that the manufacturing sector benefits the most in these two dimensions, followed by services and agriculture. The expansion of electricity infrastructure explains about 17 percent of this process and 32 percent of the observed increase in GDP per capita. Simulations of a multisector neoclassical growth model with heterogeneous firms help assessing the effectiveness of different electrification policies. |
| Keywords: | Energy Policies&Economics,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing,Plastics&Rubber Industry,Food Security,Electric Power,Economic Theory&Research,Industrial Economics,Economic Growth |
| Date: | 2020–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9182&r=all |
| By: | Capitán, Tabaré; Alpízar, Francisco; Madrigal-Ballestero, Róger; Pattanayak, Subhrendu |
| Abstract: | We study the implementation of a time-varying pricing (TVP) program by a major electric utility in Costa Rica. Similar to previous research, we find that the program reduces consumption during peak-hours. However, in contrast with previous research, we find that the program increases total consumption. To explain the differences between our results and the typical finding of reduced total consumption, we note that previous research used data from rich countries in which the use of heating and cooling devices drives electricity consumption. In our context – common to many non-rich tropical countries – very few households have heating or cooling devices. In the near absence of room for technological changes – since there is no heating or air conditioner in most households – behavioral changes to reduce consumption hours are not enough to offset the increased consumption during peak hours. Our results serve as a cautionary piece of evidence for policy makers interested in reducing consumption during peak hours – the goal can potentially be achieved with TVP, but the cost is increased total consumption. |
| Date: | 2020–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:wcz8s&r=all |
| By: | Nathan Dahlin; Rahul Jain |
| Abstract: | Over the last few decades, electricity markets around the world have adopted multi-settlement structures, allowing for balancing of supply and demand as more accurate forecast information becomes available. Given increasing uncertainty due to adoption of renewables, more recent market design work has focused on optimization of expectation of some quantity, e.g. social welfare. However, social planners and policy makers are often risk averse, so that such risk neutral formulations do not adequately reflect prevailing attitudes towards risk, nor explain the decisions that follow. Hence we incorporate the commonly used risk measure conditional value at risk (CVaR) into the central planning objective, and study how a two-stage market operates when the individual generators are risk neutral. Our primary result is to show existence (by construction) of a sequential competitive equilibrium (SCEq) in this risk-aware two-stage market. Given equilibrium prices, we design a market mechanism which achieves social cost minimization assuming that agents are non strategic. |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2003.06119&r=all |
| By: | Fabian Herweg |
| Abstract: | According to the Phase IV (2021-2030) rules of the EU ETS, the total amount of emissions permits allocated to firms is not fixed but endogenous. This implies that a national climate policy that overlaps with the emission trading system can have an impact on total aggregate emissions. Roughly speaking, if firms increase their holdings of emission permits, the total amount of emissions allocated is reduced. This paper investigates analytically how an overlapping national policy affects the decision of an individual firm and the whole industry to bank emission permits. If marginal abatement costs are not too convex, national climate policies increase banking and thus tend to reduce overall emissions. This effect, however, is reduced in times of low interest rates. |
| Keywords: | banking of permits, cap-and-trade, EU ETS, national measures |
| JEL: | D45 Q48 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8128&r=all |
| By: | Roland Ismer; Karsten Neuhoff; Alice Pirlot |
| Abstract: | As part of its Green Deal, the European Commission is considering the introduction of border carbon adjustments and alternative measures. The measures, which would primarily apply to basic materials like steel and cement, pursue a double objective: they are aimed at enhancing the effectiveness of carbon pricing for the transition to climate neutrality but also at avoiding carbon leakage risks. When implementing carbon adjustment mechanisms and alternative measures, various design options might be considered to reform the EU Emissions Trading Scheme (EU ETS). In this paper, we have decided to focus on three main models, which help to highlight the main differences between the available options. Under the first model, importers of basic materials would be required to surrender carbon allowances at the level of a product benchmark or, where lower, at the verified level of foreign carbon intensity. In parallel, allocation of free allowances would be phased out. Under the second model, a symmetric adjustment mechanism for exports and imports would be adopted, including refund to exporters for the carbon costs incurred on basic materials embodied in products. Finally, under the third model, the EU ETS would be complemented with a climate contribution charged for materials sold in the European Union (EU) at the product benchmark level related to the carbon intensity of each material. The free allowance allocation regime would then be modified to be directly linked to the volume of material production at the product benchmark level. In order to contribute to the current policy debate, we evaluate for each of these three models, their legality, coherence with EU climate objectives, effectiveness in carbon leakage prevention, potential international implications, as well as their administrative complexity and compliance costs |
| Keywords: | Carbon pricing, Climate policy, International trade, WTO |
| JEL: | F18 K33 L61 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1855&r=all |
| By: | Thomas Douenne (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics); Adrien Fabre (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics) |
| Abstract: | This paper helps to understand how beliefs form and determine attitudes towards policies. Using a new survey and official households' survey data, we investigate the case of carbon taxation in France in the context of the Yellow Vests movement that started against it. We find that French people would largely reject a Tax & Dividend policy, i.e. a carbon tax whose revenues are redistributed uniformly to each adult. However, they also overestimate the negative impact of the scheme on their purchasing power, wrongly think it is regressive, and do not perceive it as environmentally effective. Using information about the scheme as instruments to robustly identify causal effects, our econometric analysis shows that if we could rectify these three biased beliefs, it would suffice to generate majority approval. Yet, only a small minority can be convinced by new information and revisions are biased towards pessimism. Finally, if overly pessimistic beliefs cause tax rejection, they also result from it through motivated reasoning, which manifests what we define as "tax aversion". |
| Keywords: | Climate Policy,Carbon tax,Bias,Beliefs,Preferences,Tax aversion |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-02482639&r=all |
| By: | Jussila Hammes, Johanna (Swedish National Road & Transport Research Institute (VTI)) |
| Abstract: | This paper describes so-called city growth agreements and city environmental agreements in Norway and Sweden, respectively. We do case studies of two regions in Norway and two cities in Sweden. While the general aim of the agreements is similar in the two countries, namely for the central government to influence municipal infrastructure building in a more environmentally sustainable direction, the agreements differ in many respects. While the Norwegian agreements consist of several projects concerning the construction of roads and railroads, and infrastructure for public transport, pedestrians, and cycling, the Swedish agreements only concern one (type of) project at a time. Moreover, Norway emphasizes city planning more; even though the building of new housing is important also in Sweden, location and densification are less so. The Swedish projects are municipality driven, while the Norwegian system is based on reciprocal negotiations between the municipalities, the county, and the state. The Norwegian model fits better into a theoretical fiscal federalism-based framework than the Swedish one, with the state internalizing spatial spillovers arising from infrastructure projects. In Sweden, the agreements are better to be seen as means for institutionalized lobbying by municipalities |
| Keywords: | Co-financing; Cycling; Sustainable cities; Public transport; Infrastructure investment; State-local cooperation; City planning |
| JEL: | D70 H54 H71 Q54 R11 R42 |
| Date: | 2020–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2020_004&r=all |
| By: | Nico Pestel (Institute of Labor Economics (IZA), Germany); Florian Wozny (Institute of Labor Economics (IZA), Germany) |
| Abstract: | This paper studies health effects from restricting the access of high-emission vehicles to innercities by implementing Low Emission Zones. For identification, we exploit variation in the timing and the spatial distribution of the introduction of new Low Emission Zones across cities in Germany. We use detailed hospitalization data combined with geo-coded information on the coverage of Low Emission Zones. We find that Low Emission Zones significantly reduce levels of air pollution in urban areas and that these improvements in air quality translate into population health benefits. The number of diagnoses related to air pollution is significantly reduced for hospitals located within or in close proximity to a Low Emission Zone after it becomes effective. The results are mainly driven by reductions in chronic cardiovascular and respiratory diseases. |
| Keywords: | Low Emission Zone, air pollution, health, Germany |
| JEL: | I18 Q52 Q53 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:duh:wpaper:1908&r=all |
| By: | Francis Bloch (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Gabrielle Demange (PSE - Paris School of Economics) |
| Abstract: | We analyze the strategy of a monopolistic Internet platform serving users from two jurisdictions with different corporate tax rates. We show that the platform exploits positive externalities across users to shift profit, and study the effects of a change in the corporate tax rate of one of the two jurisdictions. When externalities flow symmetrically among users in both jurisdictions, the platform increases quantities in the high tax jurisdiction and reduces quantities in the low tax jurisdiction. When externalities only flow from one jurisdiction to another, the platform's response depends on the direction of externalities. If externalities originate in the high tax jurisdiction, the platform increases quantities in the high tax jurisdiction ; if they originate in the low tax jurisdiction, the platform reduces quantities in the low tax jurisdiction. We contrast the baseline regime of separate accounting (SA) with a regime of Formula Apportionment (FA), where the tax bill is apportioned in proportion to the number of users in the two jurisdictions. Under FA, the platform always increases quantities in the lower-tax jurisdiction and decreases quantities in the higher-tax jurisdiction. We use a numerical simulation to show that the higher-tax jurisdiction prefers SA to FA whereas the lower-tax jurisdiction prefers FA to SA. JEL Classification Numbers: H32, H25, L12, L14. |
| Keywords: | Digital platforms,multinational firms,corporate income taxation,Formula Apportionment,separate accounting * |
| Date: | 2020–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02502468&r=all |
| By: | Malte Schr\"oder; David-Maximilian Storch; Philip Marszal; Marc Timme |
| Abstract: | Dynamic pricing schemes are increasingly employed across industries to maintain a self-organized balance of demand and supply. However, throughout complex dynamical systems, unintended collective states exist that may compromise their function. Here we reveal how dynamic pricing may induce demand-supply imbalances instead of preventing them. Combining game theory and time series analysis of dynamic pricing data from on-demand ride-hailing services, we explain this apparent contradiction. We derive a phase diagram demonstrating how and under which conditions dynamic pricing incentivizes collective action of ride-hailing drivers to induce anomalous supply shortages. By disentangling different timescales in price time series of ride-hailing services at 137 locations across the globe, we identify characteristic patterns in the price dynamics reflecting these anomalous supply shortages. Our results provide systemic insights for the regulation of dynamic pricing, in particular in publicly accessible mobility systems, by unraveling under which conditions dynamic pricing schemes promote anomalous supply shortages. |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2003.07736&r=all |