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on Regulation |
| By: | Chi Kong Chyong (University of Cambridge); Michael Pollitt (EPRG, CJBS, University of Cambridge); Reuben Cruise (University of Cambridge) |
| Keywords: | electricity market design, electricity regulation, wind energy, solar energy, electricity generation investment, ancillary services, capacity renumeration mechanisms, energy-only prices |
| JEL: | D47 L94 L98 L51 Q48 Q41 C61 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1919&r=all |
| By: | Mathias Mier |
| Abstract: | We consider an economy in which competitive firms use three technologies for electricity production: pollutive fossils, intermittent renewables whose availability varies continuously over time, and storage. A Pigouvian tax implements the first-best solution. This is also the case for an electricity consumption tax that is supplemented by subsidies for renewables and a tax on storage, but not for high shares of renewables in the energy mix. We then analyze second-best subsidies for renewables and storage capacities when carbon pricing is imperfect. The subsidy rate for renewables decreases as electricity production becomes less reliant on fossils. The storage subsidy is usually negative as long as fossils contribute to filling the storage, but turns positive (and remains constant for linear demand) thereafter. This is because more storage capacity reduces the price during times of destorage, but raises it when electricity is taken from the market to fill the storage. This has countervailing effects on firms’ incentives to invest in fossil capacities, which are more pronounced for higher round-trip efficiency losses during a storage cycle. A numerical simulation illustrates that substantial subsidy payments are required even after fossils have been completely driven out of the market. |
| Keywords: | intermittent renewable energies, electricity storage, carbon externality, subsidies, peak-load pricing, optimal control |
| JEL: | H23 Q42 Q58 O33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_330&r=all |
| By: | Lade, Gabriel; Rudik, Ivan (Cornell University) |
| Abstract: | Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. We attribute most of the observed flaring reductions at new wells in the state since late 2014 to the regulation. We construct firm-specific marginal abatement cost curves and find that the same quantity of flaring reductions could have been achieved at 44% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the existing public lands royalty rate would achieve 99% of the flaring reductions at 46% lower cost. |
| Date: | 2020–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:3e9xk&r=all |
| By: | Lovcha, Yuliya; Pérez Laborda, Àlex; Sikora, Iryna |
| Abstract: | European Union has launched its Emissions Trading Scheme (ETS) in 2005, creating the first and one of the biggest international carbon markets, with the aim of reducing CO2 emissions of the Member States. Forming a part of the EU Climate Action plan, composed by a broad set of policies, as well as belonging to a complex interrelated energy system, the assessment of the ETS system effectiveness is not straight forward. Policy-makers tend to use emission levels or CO2 prices as indicators, even though both measures are affected by other policies, energy market fundamentals, and speculative shocks. This paper develops an empirical VAR model that connects the energy sector (oil, natural gas, coal and electricity prices, as well as a share of fossil fuels in electricity production), economic activity and CO2 permit prices. We use frequency domain analysis to study how the parts of this system impact each other and how these impacts evolve over time. The model can be used as a monitoring tool for CO2 price dynamics and for the effectiveness of the ETS system. Our empirical results indicate that up to 90% (65% on average) of the variation in CO2 prices, adjusted by supply effects, is explained by the variations in fundamental market variables; however, the individual contributions of them have changed over time. For example, the importance of the economic activity, used to be a major source of CO2 price variations in the past, is vanishing recently, while the opposite occurs to the coal prices, which have gained in importance in recent periods. The impact of CO2 prices on a share of fossil fuels in electricity production is limited, pointing towards the still low contribution of the ETS system for renewable energy penetration. |
| Keywords: | Anhídrid carbònic--Aspectes econòmics, 33 - Economia, 504 - Ciències del medi ambient, |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/376031&r=all |
| By: | Jacques Despres (European Commission - JRC); Marko Adamovic (European Commission - JRC) |
| Abstract: | PESETA IV assesses the impacts of climate change on electricity production by hydro, wind, solar, nuclear and other thermal power plants, including biomass, coal, gas and oil. We assess these impacts in the present power system and in 2050 for a dynamic scenario in line with 2°C mitigation efforts. Both scenarios show that, at EU-level, the production of hydropower plants increases with global warming thanks to higher water availability (although this does not imply substantial development of new hydro plants), while nuclear power decreases. However, there are regional differences in the impacts, such as increased hydro production in the North, and a decline in hydro- and nuclear power production in southern Europe due to lower water availability for direct production or for cooling river-based plants. In northern Europe, the increasing availability of cheaper hydro results in substitution effects and lower production costs, while in southern Europe production costs could increase. Based on the modelling methodology used and the latest available climate simulations, the direct impacts of climate change on wind and solar production are not significant at EU-level. However, in the 2050 power system their capacity would increase in southern regions to compensate for the lost hydro and nuclear production. Climate change impacts on energy in the rest of the world show a negligible spill-over effect on Europe. Improved cooling technologies have the potential to reduce strongly the negative effects of water scarcity, particularly for nuclear plants in southern Europe. |
| Keywords: | Climate change impacts, Water scarcity, Hydropower, Thermal plants, Wind, Solar, Climate change, Electricity production, Electricity supply |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc118155&r=all |
| By: | Xavier Leflaive (OECD); Marit Hjort (OECD) |
| Abstract: | Where they exist, tariffs for water supply and sanitation services face a tension between different policy objectives, such as ensuring the financial sustainability of service provision and ensuring access to all, including vulnerable and poor social groups. Governments (local and national) resort to a range of measures to reconcile these objectives and address social consequences of tariffs: tariff levels and structures, nudging, budgetary transfers, targeted social measures. The paper revisits most common practices and discusses their pros and cons, and requisites to make them work. It provides up-to-date analyses on a series of related issues, such as definitions of affordability, principle for cost recovery, benefits and costs of metering, elasticity of domestic water use to prices, fiscal transfers to water services. The paper is informed by recent academic research, data on selected countries, and interactions with OECD bodies. |
| JEL: | D12 D63 H4 H23 H53 H54 L95 L98 Q53 Q58 |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:166-en&r=all |
| By: | Paul Simshauser (Griffith University, Australia) |
| Keywords: | Microeconomic reform, energy-only markets, network regulation |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1927&r=all |
| By: | Mahmud I Imam (Nigerian Defence Academy Kaduna, Nigeria); Tooraj Jamasb (Durham University Business School); Manuel Llorca (Durham University Business School) |
| Keywords: | Independent regulation, electricity sector reform, government ideology, dynamic GMM, Sub-Saharan Africa |
| JEL: | D73 Q48 L51 L94 O55 P16 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1917&r=all |
| By: | Karsten Neuhoff (DIW Berlin); Robert A. Ritz (EPRG, University of Cambridge) |
| Keywords: | Carbon pricing, cost pass-through, free allocation, full carbon price internalization, international trade, market structure |
| JEL: | L11 L70 Q54 Q58 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1935&r=all |
| By: | Hintermann, Beat (University of Basel); Zarkovic, Maja (University of Basel) |
| Abstract: | Swiss climate policy consists of three regulatory instruments for greenhouse gas emissions reduction: A CO 2 levy, the Swiss Emissions Trading System (CH EHS), and an additional nonEHS" program for medium-sized plants that consists of command-and-control elements plus a sizeable abatement subsidy. Our paper informs about this tripartite climate policy, which is unique in the international context. Second, we estimate the dierential impact of the CH EHS and the nonEHS program on plants' emissions. Our empirical strategy exploits a policy change in 2013 that instituted a mandatory emissions trading system for a subset of previously regulated rms. We nd that the nonEHS outperforms the CH EHS for a minority of plants, but that on average, the two programs result in similar abatement eorts despite very dierent nancial incentives. Firms that previously engaged in abatement eorts continue to do so even after the nancial incentives were reduced by an order of magnitude. Our results suggest the presence of preferences for abatement per se, above and beyond nancial incentives. They further imply that expanding the nonEHS system at the expense of the CO 2 levy may be associated with signifcant costs but no additional emission reductions. |
| Keywords: | Climate policy, emissions tax, carbon tax, emissions trading, subsidies, command-and-control, Switzerland |
| JEL: | D22 D62 H23 H25 H32 Q52 Q54 Q58 |
| Date: | 2020–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2020/05&r=all |
| By: | Tensay Meles; L. (Lisa B.) Ryan; Joe Wheatley |
| Abstract: | The COVID-19 crisis comes at a complex moment for European climate policy as it pivots from a 40% 2030 emissions reduction target to a European Green Deal that is in better alignment with long-term Paris Agreement goals. Here, the implications of the dramatic fall in economic output associated with the crisis are examined using a representative range of growth scenarios. With lower economic activity resulting from the COVID-19 crisis, existing policy measures could achieve the 40% target sooner than 2030. However, we find that even in the most severe economic scenario examined, this falls well short of the 50-55% emissions reduction target under the Green Deal. Maintaining the existing 40% target in 2030 with reduced policy measures on the other hand would move European climate policy away from the required path. This analysis indicates the feasibility of increased climate ambition in the wake of the pandemic and supports the Green Deal 50-55% targets in 2030. |
| Keywords: | Climate change policy; Greenhouse gas emissions; Economic recovery; COVID-19 economic effects; Energy demand |
| JEL: | Q5 Q54 Q58 E6 Q43 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:wp202003&r=all |
| By: | Cecilia Bellora; Lionel Fontagné (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | The new European Commission has announced policies to reduce greenhouse gas emissions drastically. Reaching an ambitious target for a global good – the climate – would require a common price for carbon worldwide. This however clashes with the free-riding problem. Furthermore, unilateral policies are not efficient since they lead to carbon leakages and distort competitiveness. To tackle these issues, the European Union can rely on different policies. Firstly, a carbon pricing of imports can combined with an export rebate to constitute a ‘complete CBA' (Carbon Border Adjustment) solution. Alternatively, a simple tariff at the border can compensate for differences in carbon prices between domestic and imported products. A consumption-based carbon taxation can al so be contemplated. Last, a uniform tariff on imports from countries not imposing (equivalent) carbon policies may help solving the free-riding problem. |
| Keywords: | Carbon Border Adjustment,Climate Change,International Trade,Tariffs |
| Date: | 2020–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02880332&r=all |
| By: | Par Holmberg (IFN, Stockholm); Robert A. Ritz (EPRG, University of Cambridge) |
| Keywords: | Investment, wholesale electricity market, capacity mechanism, capacity auction, strategic reserve |
| JEL: | D41 L94 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1921&r=all |
| By: | Michael Pollitt (EPRG, CJBS, University of Cambridge) |
| Keywords: | ancillary services, balancing energy, frequency regulation, reactive power, constraint management, reserves |
| JEL: | L94 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1928&r=all |
| By: | L.G. Montoya (UCL); Bowei Guo (Faculty of Economics, University of Cambridge); David Newbery (Faculty of Economics, University of Cambridge); P.E. Dodds (UCL); G Lipman (UCL) |
| Keywords: | Electricity trading efficiency; cross-border allocation; interconnector; market coupling; metrics |
| JEL: | C81 F14 F15 Q41 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1932&r=all |
| By: | Francesco Rossetto (Department of Economics, University of Verona); Luigi Grossi (Department of Economics, University of Verona); Michael Pollitt (EPRG, CJBS, University of Cambridge) |
| Keywords: | Electricity Wholesale Market, Market Power, Bidding Strategy, Synthetic Supply |
| JEL: | L94 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1930&r=all |
| By: | David Woroniuk (Durham University Business School); Arzé Karam (Durham University Business School); Tooraj Jamasb (Durham University Business School) |
| Keywords: | Market Integration, Information Transmissions, Natural Gas, Network Theory |
| JEL: | C32 F18 Q43 Q47 Q48 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg1922&r=all |