nep-reg New Economics Papers
on Regulation
Issue of 2020‒06‒22
seventeen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Energy efficiency and heating technology investments: Manipulating financial information in a discrete choice experiment By Ghislaine Lang; Mehdi Farsi; Bruno Lanz; Sylvain Weber
  2. Beyond Monetary Barriers to Electric Vehicle Adption: Evidence from Observed Usage of Private and Shared Cars By Wolfgang Habla; Vera Huwe; Martin Kesternich
  3. Market Power and Price Discrimination: Learning from Changes in Renewables Regulation By ., Imelda; Fabra, Natalia
  4. Electricity market integration, decarbonisation and security of supply: Dynamic volatility connectedness in the Irish and Great Britain markets By Hung Do; Rabindra Nepal; Tooraj Jamasb
  5. Oil Price Shocks and Renewable Energy Transition: Empirical evidence from net oil-importing South Asian economies By Murshed, Muntasir; Tanha, Muntaha Masud
  6. Fat Tails due to Variable Renewables and Insufficient Flexibility By Huisman, Ronald; Kyritsis, Evangelos; Stet, Cristian
  7. Environmental and economic costs, benefits and uncertainties of vehicle electrification: a life cycle approach By Ambrose, Hanjiro
  8. EU agencies in banking and energy between institutional and policy centralisation By Eckert, Sandra
  9. Environmental co-benefits and adverse side-effects of alternative power sector decarbonization strategies By Gunnar Luderer; Michaja Pehl; Anders Arvesen; Thomas Gibon; Benjamin Bodirsky; Harmen Sytze de Boer; Oliver Fricko; Mohamad Hejazi; Florian Humpenöder; Gokul Iyer; Silvana Mima; Ioanna Mouratiadou; Robert Pietzcker; Alexander Popp; Maarten van den Berg; Detlef van Vuuren; Edgar Hertwich
  10. Modeling electricity price and quantity uncertainty: An application for hedging with forward contracts By Alfredo Trespalacios; Lina M. Cortés; Javier Perote
  11. Shared Mobility Simulations for Lyon By ITF
  12. Price Parity Clauses for Hotel Room Booking: Empirical Evidence from Regulatory Change By Ennis, Sean; Ivaldi, Marc; Lagos, Vicente
  13. Explaining the distribution of energy consumption at slow charging infrastructure for electric vehicles from socio-economic data By Milan Straka; Rui Carvalho; Gijs van der Poel; \v{L}ubo\v{s} Buzna
  14. Green Public Procurement v.s. Environmental Taxation: implications for the EU-MENA environmental policy By Vera Danilina; Federico Trionfetti
  15. Revenue Decoupling for Electric Utilities: Impacts on Prices and Welfare By Arlan Brucal; Nori Tarui
  16. New Challenges and Opportunities for Sustainable Ports: The Deep Demonstration in Maritime Hubs project By Vera Alexandropoulou; Phoebe Koundouri; Lydia Papadaki; Klimanthia Kontaxaki
  17. Carbon Tax in a Production Network: Propagation and Sectoral Incidence By Antoine Devulder; Noëmie Lisack

  1. By: Ghislaine Lang; Mehdi Farsi; Bruno Lanz; Sylvain Weber
    Abstract: We elicit homeowners' marginal willingness to pay (MWTP) for energy efficiency and low-carbon technologies in the context of replacement heating appliances. We exploit a novel within-between subject design that involves manipulating information in a two-stage discrete choice experiment (DCE) and using WTP space estimation to identify the role of financial information in reducing fossil fuel use. We find that homeowners' average valuation of energy efficiency exceeds associated heating cost savings, suggesting that they also consider non-monetary benefits when evaluating this type of investment. By contrast, we identify large heterogeneity in preferences for different heating technologies (i.e., oil, gas, wood, heat pump), and that on average, oil users' MWTP for switching to low-carbon technologies does not cover respective investment cost differentials. Finally, our difference-in-difference results show that the provision of information about private and pro-social benefits of investments fails to increase MWTP for energy efficient and low-carbon technologies.
    Keywords: Energy efficiency; Low-carbon technologies; Informational interventions; Product familiarity; Discrete choice experiments; WTP space estimation.
    JEL: D1 D8 H23 Q4 Q5 R31
    Date: 2020–07
  2. By: Wolfgang Habla (ZEW – Leibniz Centre for European Economic Research); Vera Huwe (ZEW – Leibniz Centre for European Economic Research); Martin Kesternich (University of Kassel)
    Abstract: We use car-level micro data to provide empirical evidence on the usage of conventional and electric vehicles (EVs) in private and car sharing fleets in Germany. We shed light on both monetary and non-monetary barriers to EV adoption and usage by exploiting the feature that variable costs are identical for shared vehicles but different for private car owners across engine types. While drivers respond to monetary incentives when using conventional cars, this does not hold for EVs. We find that EVs are, on average, driven shorter distances than conventional vehicles, both in terms of annual and single-day mileage, even if costs are identical. We also document that car sharing intensifies the usage of conventional cars but not that of EVs.
    Keywords: Electric vehicles, internal combustion engine vehicles, barriers to adoption, cruising range, driving patterns, car sharing, range limitations, range anxiety
    JEL: R41 D12 Q50
    Date: 2020
  3. By: ., Imelda; Fabra, Natalia
    Abstract: In many settings, market power gives rise to price differences across markets. While arbitrage reduces market power and price discrimination, it need not be welfare-enhancing. Instead, as shown in this paper, addressing market power directly (e.g., through forward contracts) also reduces price discrimination while improving consumers' and social welfare. Empirical evidence from the Spanish electricity market confirms our theoretical predictions. Using detailed bid data, we exploit two regulatory changes that switched from paying renewables according to variable or fixed prices, and vice-versa. Overall, we find that fixed prices (which act as forward contracts) were more effective in weakening firms' market power, even though variable prices led to less price discrimination through arbitrage. This shows that it is in general not correct to equate increased price convergence and stronger competition or enhanced effciency.
    Keywords: arbitrage; Forward contracts; market power; price discrimination; renewables
    Date: 2020–05
  4. By: Hung Do; Rabindra Nepal; Tooraj Jamasb
    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 re-designs 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: D4 L94 Q2 Q4
    Date: 2020–04
  5. By: Murshed, Muntasir; Tanha, Muntaha Masud
    Abstract: This paper makes a novel attempt to model the non-linear association between renewable energy consumption and crude oil prices across four net oil-importing South Asian economies namely Bangladesh, India, Pakistan and Sri Lanka. Using annual data from 1990 to 2018, the results from the panel data regression analyses confirm the non-linear nexus and show that although rising crude oil prices do not facilitate renewable energy consumption initially, in the latter phases higher crude oil prices are associated with higher levels of renewable energy consumption. The similar non-linearity is also confirmed in the context of the renewable energy share in total final energy consumption and crude oil prices. Moreover, the nexus between renewable electricity share in aggregate electricity output and crude oil prices is also found to be non-linear in nature. However, rising crude oil prices were not found to enhance the share of renewable electricity. The causality results, overall, implicates that movements crude oil prices do influence the renewable energy transition within the concerned South Asian economies. Thus, these results impose critically important policy implications with respect to attainment of energy security and environmental sustainability across South Asia, particularly via reducing the imported crude oil-dependencies of these nations.
    Keywords: renewable energy; crude oil price; renewable energy transition; South Asia; cross-sectional dependency; net oil-importing economies
    JEL: P28 Q4 Q42 Q43 Q47
    Date: 2020
  6. By: Huisman, Ronald; Kyritsis, Evangelos; Stet, Cristian
    Abstract: The large-scale integration of renewable energy sources requires flexibility from power markets in the sense that the latter should quickly counterbalance the renewable supply variation driven by weather conditions. Most power markets cannot (yet) provide this flexibility effectively as they suffer from inelastic demand and insufficient flexible storage capacity. Research accordingly shows that the volume of renewable energy in the supply system affects the mean and volatility of power prices. We extend this view and show that the level of wind and solar energy supply affects the tails of the electricity price distributions as well, and that it does so asymmetrically. The higher the supply from wind and solar energy sources, the fatter the left tail of the price distribution and the thinner the right tail. This implies that one cannot rely on symmetric price distributions for risk management and for valuation of (flexible) power assets. The evidence in this paper suggests that we have to rethink the methods of subsidizing variable renewable supply such that they take also into consideration the flexibility needs of power markets.
    Keywords: intermittent renewable supply, flexibility, power prices, fat tails, asymmetric probability distribution, Environment, energy and climate policy, C10, Q41, Q42,
    Date: 2020
  7. By: Ambrose, Hanjiro
    Abstract: Battery electric vehicles (BEVs) have been proposed as a pathway for reducing the environmental impacts of transportation systems. While BEVs are often referred to as zero-emission vehicles, production and operation consume resources and emit pollutants through the vehicle supply chain and generation of electricity for vehicle charging. Life cycle assessment is a standardized methodology for assessing the environmental impacts of product systems from a system-wide perspective; considering the total supply chain and the product life cycle from cradle-to-grave. However, conventional LCAs are often limited; based off static supply chain analysis, omitting system interactions or indirect effects, and insufficiently reflecting the underlying variability and uncertainty to support robust public policy decisions. The objective of this dissertation is to develop and refine methods of assessing the life cycle environmental impacts and economic costs of electric vehicle technologies and policies. The chapters of this dissertation make contributions in advancing spatial and temporal dynamics in LCA modelling, integrating vehicle operations with evolutions in technology, background systems, and product development, and offers novel estimates of the costs and emissions abatement potential of light and heavy duty electric vehicles. As shown herein, a systems perspective is required to estimate the environmental benefits and costs of vehicle electrification strategies. Efforts to achieve pollution abatement through technology change must address risks of leakage, substitution, and unintended environmental consequences.
    Keywords: Engineering, critical materials, electric vehicles, heavy duty vehicles, life cycle assessment, lithium batteries, system modelling
    Date: 2019–01–01
  8. By: Eckert, Sandra
    Abstract: This working paper suggests to analyse agencification as a double process of institutional and policy centralisation. To that end, it develops a categorisation of agencies that incorporates these two dimensions. More specifically, it is argued that mixed outcomes where the levels of institutional and policy centralisation diverge can be expected to be the rule rather than the exception, in line with the hybrid nature of EU agencies as inbetweeners. Moreover, the fiduciary setting hits important legal constraints given the limits to delegation in the EU context. Against this backdrop a process whereby institutional centralisation develops incrementally and remains limited, yet is accompanied by a process of substantial policy centralisation, appears as the most promising path for EU agencification. A fiduciary setting, where a strong agency enjoys a high degree of independence and operates in a centralised policy space, by contrast, should be the exception. The comparative study of the process of agencification in the energy and banking sector is insightful in the light of these expectations. The incremental nature of institutional change in energy exemplifies the usual path of agencification, which is conducive to a weak agency operating in a relatively centralised policy space. Agencification in banking, by contrast, has led to a rather unusual outcome where the strong agency model combines with a fragmented policy context.
    Keywords: agency,banking,centralisation,energy,fiduciary,electricity,policy
    Date: 2020
  9. By: Gunnar Luderer (PIK - Potsdam Institute for Climate Impact Research); Michaja Pehl; Anders Arvesen; Thomas Gibon (LIST - Luxembourg Institute of Science and Technology); Benjamin Bodirsky (PIK - Potsdam Institute for Climate Impact Research); Harmen Sytze de Boer (PBL Netherlands Environmental Assessment Agency); Oliver Fricko; Mohamad Hejazi; Florian Humpenöder (PIK - Potsdam Institute for Climate Impact Research); Gokul Iyer; Silvana Mima (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique); Ioanna Mouratiadou (Scottish Agricultural College - University of Edinburgh); Robert Pietzcker (PIK - Potsdam Institute for Climate Impact Research); Alexander Popp (PIK - Potsdam Institute for Climate Impact Research); Maarten van den Berg; Detlef van Vuuren (Utrecht University [Utrecht]); Edgar Hertwich
    Abstract: A rapid and deep decarbonization of power supply worldwide is required to limit global warming to well below 2?°C. Beyond greenhouse gas emissions, the power sector is also responsible for numerous other environmental impacts. Here we combine scenarios from integrated assessment models with a forward-looking life-cycle assessment to explore how alternative technology choices in power sector decarbonization pathways compare in terms of non-climate environmental impacts at the system level. While all decarbonization pathways yield major environmental co-benefits, we find that the scale of co-benefits as well as profiles of adverse side-effects depend strongly on technology choice. Mitigation scenarios focusing on wind and solar power are more effective in reducing human health impacts compared to those with low renewable energy, while inducing a more pronounced shift away from fossil and toward mineral resource depletion. Conversely, non-climate ecosystem damages are highly uncertain but tend to increase, chiefly due to land requirements for bioenergy.
    Keywords: life-cycle assessment,climate-change mitigation,land-use,integrated assessment,water demand,transformation pathways,electricity-generation,severe accidents,air-pollution,impact assessment
    Date: 2019–12
  10. By: Alfredo Trespalacios; Lina M. Cortés; Javier Perote
    JEL: C14 C22 C53 L94 L98 Q2
    Date: 2020–06–08
  11. By: ITF
    Abstract: This report examines how new shared services could change mobility in Lyon, France. It presents simulations for five different scenarios in which different shared transport options replace privately owned cars in the Lyon metropolitan area. The simulations offer insights on how shared mobility can reduce congestion, lower CO2 emissions and free public space. The analysis also looks at quality of service, cost and citizens’ access to opportunities. The interaction of shared mobility services with mass public transport and optimal operational conditions for the transition are also examined. The findings provide decision makers with evidence to weigh opportunities and challenges created by new shared transport services. The report is part of a series of studies on shared mobility in different urban and metropolitan contexts.
    Date: 2020–04–07
  12. By: Ennis, Sean; Ivaldi, Marc; Lagos, Vicente
    Abstract: This paper examines the impact of most favored nation (MFN) clauses on retail prices, taking advantage of two natural experiments that changed vertical contracting between hotels and major digital platforms. The broad E.U. intervention narrowed the breadth of "price parity" obligations between hotels and major Online Travel Agencies (OTAs). Direct sales by hotels to customers subsequently became relatively cheaper. Comparisons with hotel pricing outside the E.U. confirm the reduction in prices for mid-level and luxury hotels. France and Germany went further and eliminated all price-parity agreements. This stronger intervention was associated solely with a significant additional price-reducing effect for mid-level hotels in Germany. Overall, wide MFNs are associated with higher retail prices. Regulating MFNs reduced prices with primary effects coming either from the narrow price-parity intervention or, perhaps, from direct sales becoming cheaper than OTAs in both E.U. and non-E.U. countries, and, interestingly, not from complete elimination of MFNs.
    Keywords: Digital Platforms; Hotel Industry; Impact Evaluation; Most favored customer; Most favored nation; Online Travel Agency; Price Parity Clause
    JEL: K21 L14 L42 L81
    Date: 2020–05
  13. By: Milan Straka; Rui Carvalho; Gijs van der Poel; \v{L}ubo\v{s} Buzna
    Abstract: Here, we develop a data-centric approach enabling to analyse which activities, function, and characteristics of the environment surrounding the slow charging infrastructure impact the distribution of the electricity consumed at slow charging infrastructure. To gain a basic insight, we analysed the probabilistic distribution of energy consumption and its relation to indicators characterizing charging events. We collected geospatial datasets and utilizing statistical methods for data pre-processing, we prepared features modelling the spatial context in which the charging infrastructure operates. To enhance the statistical reliability of results, we applied the bootstrap method together with the Lasso method that combines regression with variable selection ability. We evaluate the statistical distributions of the selected regression coefficients. We identified the most influential features correlated with energy consumption, indicating that the spatial context of the charging infrastructure affects its utilization pattern. Many of these features are related to the economic prosperity of residents. Application of the methodology to a specific class of charging infrastructure enables the differentiation of selected features, e.g. by the used rollout strategy. Overall, the paper demonstrates the application of statistical methodologies to energy data and provides insights on factors potentially shaping the energy consumption that could be utilized when developing models to inform charging infrastructure deployment and planning of power grids.
    Date: 2020–06
  14. By: Vera Danilina (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); Federico Trionfetti (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)
    Abstract: Environmental policies are among the priorities of the UN agenda and figure highly in national and international policy agendas. This brief focuses on environmental taxes and green public procurement (GPP). These two environmental policy instruments differ in political viability and in the impact they have on consumers and producers. The brief provides a comparative analysis of their efficiency in closed and open economy and reveals the opportunities and threats of (un)harmo-nised environmental policy across countries. The results allow to consider particular implications for the collaboration of EU-MENA countries.
    Date: 2019–03
  15. By: Arlan Brucal (Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science); Nori Tarui (Department of Economics, University of Hawaii at Manoa and the University of Hawaii Economic Research Organization (UHERO))
    Abstract: Revenue decoupling (RD) is a regulatory mechanism that allows adjustments of retail electricity rates so that the regulated utility recovers its required revenue despite fluctuations in its sales volume. The U.S. utility data in 2000-2012 reveals that RD is associated with more than 10% higher electricity prices in two years after RD is implemented relative to similar non-decoupled utilities---an impact significantly higher than previously thought. Theoretically, unexpected sales declines would lead to higher electricity prices while unexpected sales increases would lead to lower prices. RD adjustments have yielded both refunds and surcharges, but the data indicates that electricity prices demonstrate downward rigidity and statistically significant upward adjustments for the utilities subject to RD. Together with the likely negative impacts of RD on low-income(as opposed to high-income) households, this analysis indicates the limitations of decoupling, and fixed-cost recovery practice in general, which involves adjustments in volumetric electricity rates.
    Keywords: utility regulation; revenue decoupling; electricity sector
    JEL: L94 Q41 Q48
    Date: 2020–04
  16. By: Vera Alexandropoulou; Phoebe Koundouri; Lydia Papadaki; Klimanthia Kontaxaki
    Abstract: Environmental challenges related to ports are twofold, namely the effects of maritime transport on the environment (e.g. pollution, CO2 emissions) and conversely the environmental impact on maritime transport e.g. Climatic Variability and Change. This chapter presents an overview of main challenges faced today, to engage port proactively take the responsibility of providing reward schemes or green certificates to complied ships, and to identify key indicators in measuring GHG emissions. European Union has put into force a number of Directives and Regulations aiming to incentivise port and shipping companies to commit to comply with environmental standards. The IMO 2020 regulation, bringing the sulphur cap in fuel oil for ships down from 3.50 per cent to 0.50 per cent, is expected to bring significant benefits for human health and the environment, while the European Green Deal, the most ambitious action plan of European Union, aims at increasing the EU�s greenhouse gas emission reductions target for 2030 to at least 50% compared with 1990 levels, creating the most ambitious package of measures, accompanied by an initial roadmap of key policies in cutting-edge research and innovation, in green technologies and sustainable solutions. Among them, Deep Demonstrations by EIT Climate-KIC using systems innovation approach aim at the decarbonisation of the European ports and the sustainable transformation of their key elements.
    Keywords: Sustainable ports, European Green Deal, Maritime transport, ports regulation, Deep Demonstration, Environmental policy
    Date: 2020–05–30
  17. By: Antoine Devulder; Noëmie Lisack
    Abstract: We analyse the propagation of carbon taxation through input-output production networks. To do so, we use a static multi-sector general equilibrium model including France, the rest of the European Union and the rest of the world to simulate the impact of carbon tax scenarios on economic activity. We find that a tax increase on sectors' and households' greenhouse gas emissions corresponding to a carbon price of 100 euros per ton of carbon dioxide equivalent entails a decrease in French aggregate real value added by 1.2% at a 5-to10-year horizon when implemented in France only, vs. 1.5% when implemented in the whole EU. Impacts on sectoral real value added range from -20% to negligible. The most affected sectors are generally the most polluting ones, but the tax also propagates across sectors via intermediate inputs. Specifically, the network structure tends to affect comparatively more upstream sectors than downstream ones, given their taxation levels. International financial markets also play an important role by neutralizing the positive response of final demand that would result from the redistribution of the tax proceeds to domestic households.
    Keywords: Carbon tax, multi-sector model, international production networks.
    JEL: D57 F11 H23
    Date: 2020

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