nep-reg New Economics Papers
on Regulation
Issue of 2020‒05‒25
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Reviewing the Market Stability Reserve in light of more ambitious EU ETS emission targets By Osorio, Sebastian; Tietjen, Oliver; Pahle, Michael; Pietzcker, Robert; Edenhofer, Ottmar
  2. The Welfare Effects of Persuasion and Taxation: Theory and Evidence from the Field By Matthias Rodemeier; Andreas Löschel
  3. (Mis)allocation of Renewable Energy Sources By Lamp, Stefan; Samano, Mario
  4. Steering Incentives of Platforms: Evidence from the Telecommunications Industry By Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
  5. Fiber vs. vectoring: Limiting technology choices in broadband expansion By Fourberg, Niklas; Korff, Alex
  6. Compliance with the EU Waste Hierarchy: It is a matter of stringency, enforcement … and time! By Egüez, Alejandro
  7. From Subsidy to Sustainability By World Bank
  8. The redistributive effects of carbon taxation in France By Thomas Douenne
  9. The 2018 Reform of EU ETS: Consequences for Project Appraisal By Johansson, Per-Olov
  10. Environmental fiscal reform and the possibility of triple dividend in European and non-European countries: evidence from a meta-regression analysis By Maxim, Maruf Rahman
  11. Price and network dynamics in the European carbon market By Andreas Karpf; Antoine Mandel; Stefano Battiston
  12. Dynamic effects of enforcement on cooperation By Roberto Galbiati; Emeric Henry; Nicolas Jacquemet
  13. Dynamic competition with network externalities: how history matters By Hanna Halaburda; Bruno Jullien; Yaron Yehezkel
  14. Limits of the platform economy: Digitalization and marketization in live music By Azzellini, Dario; Greer, Ian; Umney, Charles
  15. How Renewable Energy Consumption Contribute to Environmental Quality? The Role of Education in OECD Countries By Zafar, Muhammad Wasif; Shahbaz, Muhammad; Sinha, Avik; Sengupta, Tuhin; Qin, Quande

  1. By: Osorio, Sebastian; Tietjen, Oliver; Pahle, Michael; Pietzcker, Robert; Edenhofer, Ottmar
    Abstract: The stringency of the EU’s Emission Trading System (ETS) is bound to be ratcheted-up to deliver on more ambitious goals as put forth in the EU’s Green Deal. Tightening the cap needs to consider the interactions with the Market Stability Reserve (MSR), which will be reviewed in 2021. Against that background, we employ the detailed model LIMES-EU to analyse options for the upcoming reforms. First, we examine how revising MSR parameters impacts allowance cancellations through the MSR. We find that under current regulation, the MSR cancels 5.1 Gt of allowances. Varying MSR parameters leads to cancellations in the range of 2.6 and 7.9 Gt, with the intake/outtake thresholds having the highest impact. Intake rates above 12% only have a limited effect but cause oscillatory intake behaviour. Second, we analyse how the 2030 targets can be achieved by adjusting the linear reduction factor (LRF). We find that the LRF increases MSR cancellations substantially (up to 10.0 Gt). This implies that increasing the LRF from currently 2.2% to 2.6% could already be consistent with the 55% EU-wide emission reduction target in 2030. However, we highlight that the number of MSR cancellations is subject to large uncertainty. Overall, the MSR increases the complexity of the market. In face of that, we suggest to develop the MSR into a Price Stability Reserve.
    Keywords: EU climate policy,EU ETS reform,linear reduction factor (LRF),Market Stability Reserve (MSR),EU ETS Phase IV
    JEL: L94 Q58
    Date: 2020
  2. By: Matthias Rodemeier; Andreas Löschel
    Abstract: How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes.
    Keywords: persuasion, optimal taxation, internality, taxes, field experiments, energy efficiency, behavioral public economics
    JEL: D61 D83 H21 Q41 Q48
    Date: 2020
  3. By: Lamp, Stefan; Samano, Mario
    Abstract: Policies to incentivize the adoption of renewable energy sources (RES) usually offer little flexibility to adapt to the varying benefits of those sources at different locations within the same jurisdiction. In this paper, we propose a general framework to evaluate the geographical misallocation of RES that is potentially caused by the uniform nature of feed-in-tariffs (FiT). After estimating the dispersion of the marginal benefits from solar production in Germany, we compute the social and private costs from the current configuration of residential solar photovoltaic (PV) plants relative to a reallocation scenario in which regions with a higher PV average productivity are given higher amounts of solar capacity, while keeping the system's total capacity fixed. We find that a 20% solar installation rate and with a conservative value for the social cost of carbon, the total value of solar PV would increase by about 5% relative to the current allocation. In addition, we estimate the size of the transmission capacity between the North and the South of Germany implied by the differences in marginal costs across those regions. Reallocating solar capacity with the possibility of exporting surpluses from the South to the North would yield gains that range from 14 to 22% depending on the rate of solar penetration. A benefit-cost analysis shows that additional transmission can be beneficial if there is sufficient RES capacity reallocated across regions.
    Keywords: Renewable energy sources; electricity markets; feed-in-tariffs; ancillary services; misallocation.
    JEL: H23 Q42 Q48 Q51
    Date: 2020–05
  4. By: Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
    Abstract: We study the trade-offs faced by Internet Service Providers (ISPs) that serve as platforms through which consumers access both television and internet services. As online streaming video improves, these providers may respond by attempting to steer consumers away from streaming video toward their own TV services, or by attempting to capture surplus from this improved internet content. We augment the standard mixed bundling model to demonstrate the trade-offs the ISP faces when dealing with streaming video, and we show how these trade-offs change with the pricing options available to the ISP. Next, we use unique household-level panel data and the introduction of usage-based pricing (UBP) in a subset of markets to measure consumers' responses and to evaluate quantitatively the ISP's trade-offs. We find that the introduction of UBP led consumers to upgrade their internet service plans and lower overall internet usage. Our findings suggest that while steering consumers towards TV services is possible, it is likely costly for the ISP and therefore unlikely to be profitable. This is especially true if the ISP can offer rich pricing menus that allow it to capture some of the surplus generated by a better internet service. The results suggest that policies like UBP can increase ISPs' incentive to maintain open access to new internet content.
    JEL: L11 L13 L96
    Date: 2020–05
  5. By: Fourberg, Niklas; Korff, Alex
    Abstract: The upgrade of legacy infrastructure is a challenging undertaking in general. The underlying issues are especially prominent for telecommunications networks outside of urban areas. Using German micro-level data, we identify the structural determinants for fiber optics deployment and its extent. We also measure the role of technology competition from the existing infrastructures, VDSL-Vectoring and TV-Cable. In this setting and exploiting a natural experiment, a technologically restrictive policy as proposed by the European Commission is found to be ineffective in promoting fiber deployment. Policy interventions in the form of subsidies targeted at specific local infrastructure projects, however, raise the likelihood of fiber deployment by a substantial margin. A targeted, proactive policy approach is therefore needed to overcome structural and geographical disadvantages.
    Keywords: Fiber expansion,Technology competition,Technology regulation,Subsidies,Regional Infrastructure
    JEL: D22 L52 L86 L96
    Date: 2020
  6. By: Egüez, Alejandro (CERE - the Center for Environmental and Resource Economics)
    Abstract: This paper assesses whether and to what extent income and the stringency and enforcement (S&E) of environmental regulation influence compliance with the EU Waste Hierarchy (EWH), i.e., how EU member states treat waste. The EWH prioritizes waste prevention and re-use over recycling, which is ranked above waste to energy (WtE), while incineration and landfilling are the least preferred options. Biennial panel data for the period 2010–2016 is used to create a compliance index based on the waste treatment alternatives in the EWH. Waste (excluding major mineral waste) of 26 European Union countries is examined. This study is the first of its kind to regress an EWH compliance index on income, stringency and enforcement of environmental regulation, and other variables that are also expected to affect the relative benefits and costs of waste treatment like population density, heating demand, and electricity prices. In conjunction, the shares of landfilling, incineration, WtE, and recycling are also modeled to capture the effect of these variables in the waste treatment mix. Stringency and enforcement of environmental regulation have a positive effect on compliance with the EWH, which has increased over time.
    Keywords: EU waste hierarchy; waste treatment ladders; income; policy stringency; policy enforcement
    JEL: O44 Q53 R11
    Date: 2020–05–04
  7. By: World Bank
    Keywords: Energy - Electric Power Energy - Energy Conservation & Efficiency Energy - Energy Consumption Energy - Energy Demand Energy - Energy Policies & Economics Energy - Energy Sector Regulation Energy - Energy Technology & Transmission Energy - Energy and Environment
    Date: 2019–06
  8. By: Thomas Douenne (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Although widely endorsed by economists, carbon tax is struggling to establish itself on the agendas of public decision-makers. One of the reasons for its slow development is the fear that it might generate major redistributive effects, and in particular discriminate against the lowest-income households. This policy brief presents the findings of an ex ante assessment of the redistributive effects on households of the environmental taxation reforms in France in 2018. Carbon tax is intrinsically regressive, but it generates additional revenue. By transferring this revenue neutrally to all households, a progressive reform would be obtained. However, even in such a situation, the reform would generate considerable redistributive effects within the income groups. Such horizontal transfers, which are more difficult to correct, suggest that other tools are necessary for reducing the impact of the reform on the most vulnerable. Looking to the long term, it appears essential to invest in improving the energy performance of housing and of transport. Such policies meet not only environmental requirements, but also the need to reduce the vulnerability of the lowest-income households to future energy price rises.
    Date: 2018–07
  9. By: Johansson, Per-Olov (CERE - the Center for Environmental and Resource Economics)
    Abstract: The European Union's Emissions Trading System is the largest system in the world for trade in greenhouse gases. It used to be a cap-and-trade scheme with a fixed supply of permits. However, a recent reform of the system "punctures the waterbed" by making the supply of permits endogenous. The current paper discusses how to handle permits in economic evaluations. It considers both schemes with a fixed cap and schemes with an endogenous cap. The paper also derives a rule when the project causes an induced intertemporal change in the supply of permits under an endogenous cap. An induced reduction in emissions, what we term a "permit multiplier", is associated with benefits but comes at a cost as production is displaced when the number of available permits decreases. The permit multiplier implies that emissions within the EU ETS are valued differently from emissions occurring elsewhere even under an endogenous cap. A further novel result is that an endogenous cap could increase the social profitability of abatement efforts. By replacing purchases of permits, abatement could cause a reduction in the endogenous supply of permits and hence emissions.
    Keywords: Cost-benefit analysis; permits; waterbed puncture; endogenous cap; ETS; climate gases; social cost of carbon
    JEL: H23 H43 Q51 Q54
    Date: 2020–05–11
  10. By: Maxim, Maruf Rahman
    Abstract: We present a synthesis of simulation studies concerning green tax reform (GTR) in European and non-European countries. The GTR performance is analysed in a triple dividend (TD) context including the reduction of carbon dioxide (CO2) emissions (first dividend), increased GDP (second dividend), and higher employment (third dividend). Our findings are fourfold: (1) there is high TD potential, with stronger evidence for second and third dividends in European countries; (2) a reduction in labour tax is the most potent GTR policy measure to entail TD; (3) TD evidence is stronger when mixed tax and tax recycle policies are employed; (4) taxes based on CO2 emissions exhibit the highest TD potential.
    Keywords: Green tax reform, Triple dividend, Meta-analysis
    JEL: H23 O44 Q58
    Date: 2019–08–04
  11. By: Andreas Karpf (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne); Antoine Mandel (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics); Stefano Battiston (CAMS - Centre d'Analyse et de Mathématique sociales - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper presents an analysis of the European Emission Trading System as a transaction network. It is shown that, given the lack of well-identified trading institutions, industrial actors had to resort to local connections and financial intermediaries to participate in the market. This gave rise to a hierarchical structure in the transaction network. It is then shown that the asymmetries in the network induced market inefficiencies (e.g., increased bid-ask spread) and informational asymmetries, that have been exploited by central agents at the expense of less central ones. Albeit the efficiency of the market has improved from the beginning of Phase II, the asymmetry persists, imposing unnecessary additional costs on agents and reducing the effectiveness of the market as a mitigation instrument.
    Keywords: Network,Carbon market,Climate change,Microstructure
    Date: 2018–09
  12. By: Roberto Galbiati (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)
    Abstract: In situations where social payoffs are not aligned with private incentives, enforcement with fines can be a way to sustain cooperation. In this paper we show, by the means of a lab experiment , that past fines can have an effect on current behavior even when no longer in force. We document two mechanisms: a) past fines affect directly individuals' future propensity to cooperate; b) when fines for non cooperation are in place in the past, individuals experience higher levels of cooperation from partners and, consistent with indirect reciprocity motives, are in turn nicer towards others once these fines have been removed. This second mechanism is empirically prevalent and, in contrast with the first, induces a snowball effect of past enforcement. Our results can inform the design of costly enforcement policies.
    Keywords: experiments,Laws,social values,cooperation,learning,spillovers,persistence of institutions,repeated games
    Date: 2018–12
  13. By: Hanna Halaburda (Unknown); Bruno Jullien (TSE - Toulouse School of Economics - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - UT1 - Université Toulouse 1 Capitole - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yaron Yehezkel (Tel Aviv University [Tel Aviv])
    Abstract: We consider dynamic competition among platforms in a market with network externalities. A platform that dominated the market in the previous period becomes "focal" in the current period, in that agents play the equilibrium in which they join the focal platform whenever such equilibrium exists. Yet when faced with higher‐quality competition, can a low‐quality platform remain focal? In the finite‐horizon case, the unique equilibrium is efficient for "patient" platforms; with an infinite time horizon, however, there are multiple equilibria where either the low‐ or high‐quality platform dominates. If qualities are stochastic, the platform with a better average quality wins with a higher probability, even when its realized quality is lower, and this probability increases as platforms become more patient. Hence, social welfare may decline as platforms become more forward looking.
    Date: 2020–03
  14. By: Azzellini, Dario; Greer, Ian; Umney, Charles
    Abstract: Online platforms have disrupted parts of the capitalist economy, with allegedly severe consequences in the world of work. This study examines live music in Germany and the UK, where online platforms do not dominate, despite considerable digitalization of market intermediaries. The analysis shows that, as the degree of digitalization increases, matching services tend to work less as a workers' representative – which is traditionally the case for live music agents – and more as a force of marketization that disciplines workers by orchestrating price-based competition
    Keywords: platform economy,creative work,digitalisation,marketization,live music,digitalisation
    Date: 2019
  15. By: Zafar, Muhammad Wasif; Shahbaz, Muhammad; Sinha, Avik; Sengupta, Tuhin; Qin, Quande
    Abstract: Designing a comprehensive policy framework for ascertaining sustainable development is a problem faced by most of the countries around the globe, and the developed nations are no exception to that. Environmental awareness-oriented policy design for achieving sustainable development goals is a challenge for the developed nations, and there lies the contribution of this study. This study analyzes the impact of renewable energy on carbon emissions, in presence of education, natural resource abundance, foreign direct investment, and economic growth for the Organization for Economic Co-operation and Development countries over the period of 1990-2015. Second generation methodologies are adapted for the empirical estimation. The results show the stimulating role of renewable energy consumption in shaping environmental quality. Education declines carbon emissions. Natural resource abundance and foreign direct investment deteriorate environmental quality. Moreover, the time series individual country analysis also confirms that renewable energy has a positive impact on economic growth. The heterogeneous causality analysis reveals the feedback effect, i.e., bidirectional causal associations among carbon emissions, education, and renewable energy consumption. This empirical evidence suggests that countries should increase investment in education and renewable energy sectors and plan for research and development in renewable energy for ensuring environmental sustainability.
    Keywords: Renewable Energy; Education; Economic Growth; OECD
    JEL: Q5
    Date: 2020–05–01

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