nep-reg New Economics Papers
on Regulation
Issue of 2020‒11‒16
seventeen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Does Pricing Carbon Mitigate Climate Change? Firm-Level Evidence From the European Union Emissions Trading Scheme By Jonathan Colmer; Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner
  2. Quantifying the effect of regulated volumetric electriciy tariffs on residential PV adoption under net metering scheme By Bruno Moreno Rodrigo de Freitas
  3. Energy Conversion Rate Improvements, Pollution Abatement Efforts and Energy Mix: The Transition toward the Green Economy under a Pollution Stock Constraint By Moreaux, Michel; Amigues, Jean-Pierre
  4. Going green by putting a price on pollution : Firm-level evidence from the EU By Olivier De Jonghe; Klaas Mulier; Glenn Schepens
  5. The Landlord-Tenant Problem and Energy Efficiency in the Residential Rental Market By Ivan Petrov; L. (Lisa B.) Ryan
  6. Boosting Renewable Energy Technology Uptake in Ireland: A Machine Learning Approach By Sanghamitra Mukherjee
  7. Emissions Trading Schemes and Directed Technological Change: Evidence from China By Tian, Ruijie
  8. A systematic review of energy efficiency home retrofit evaluation studies By Lauren Giandomenico; Maya Papineau; Nicholas Rivers
  9. Attitudes to Renewable Energy Technologies: Driving Change in Early Adopter Markets By Sanghamitra Mukherjee; Tensay Meles; L. (Lisa B.) Ryan; Séin Healy; Robert Mooney; Lindsay Sharpe; Paul Hayes
  10. Incorporating quality in economic regulatory benchmarking By Emil Heesche; Mette Asmild
  11. Carbon Pricing in the Private Sector By Fawson, Chris; Cottle, Christopher; Hubbard, Hayden; Marshall, McKlayne
  12. Pricing, competition and content for internet service providers By Key, Peter; Steinberg, Richard
  13. The political economic of fi nancing climate policy : evidence from the solar PV subsidy programs By Olivier De Groote; Axel Gautier; Frank Verboven
  14. Reimagining a just transition By Eloi Laurent
  15. Evaluating the impact of next generation broadband on local business creation By Philip Chen; Edward J Oughton; Pete Tyler; Mo Jia; Jakub Zagdanski
  16. Is Industrial Energy Inefficiency Transient or Persistent? Evidence from Swedish Manufacturing By Amjadi, Golnaz
  17. Regulation of Local and Regional Railroads: A National Survey of Perspectives and Practice By Jessup, Eric; Casavant, Ken; Tolliver, Denver

  1. By: Jonathan Colmer; Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner
    Abstract: Market-based regulatory instruments hold the promise of correcting market failures at least cost. However, evidence on their efficacy remains scarce. We evaluate the European Union Emissions Trading Scheme (EU ETS) - the world's first and largest market-based climate policy. Using administrative data on almost 4,000 French manufacturing firms, we estimate that the EU ETS induced regulated firms to reduce carbon dioxide emissions by 8-12% compared to unregulated firms after the Pilot phase, a necessary condition for climate change mitigation. These reductions account for 26% of the concurrent decline in aggregate industrial emission in France. We do not estimate any negative effects on the scale of production; instead we find that firms reduced the emissions intensity of value added by making targeted investments. We find no evidence that firms outsourced production to unregulated firms or markets. Collectively, these findings suggest that the EU ETS induced global emissions reductions, a necessary and sufficient condition for mitigating climate change.
    Keywords: Emissions Trading System, carbon leakage, investment, climate policy
    JEL: Q54 Q58 H23 L50 F18
    Date: 2020–11
  2. By: Bruno Moreno Rodrigo de Freitas (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: Among the major challenges for the power systems of the future, one mayfind the arise of a new approach of electricity production - the Distributed Generation (DG) systems - and photovoltaics (PV) is the main technology for this new approach. In this scenario, a new electricity market agent appeared - the prosumer - consumers that can also produce their own energy. The retail price is one of the main factors that encourages PV systems adoption under a net metering scheme. The present work shows an investigation on the influence of regulated electricity tariffs as volumetric charges structure on the residential DG PV systems adoption in a developing country context. I use a panel data from 2013-2017 with 5570 municipalities in Brazil, having as response variable the number of new PV installations and as explanatory variable the electricity tariffs among 105 different distribution companies. The results imply that for each one BRL cent of tariff increase, there will be an expansion of about 5.3% in new residential PV projects in the following year.
    Keywords: distributed generation,prosumer,residential PV adoption,net me-tering,volumetric electricity tariffs,panel data
    Date: 2020–10
  3. By: Moreaux, Michel; Amigues, Jean-Pierre
    Keywords: energy efficiency;carbon pollution; non-renewable resources;; renewable resources; abatement
    JEL: Q32 Q43 Q54
    Date: 2020–11–02
  4. By: Olivier De Jonghe (National Bank of Belgium & Tilburg University); Klaas Mulier (Ghent University); Glenn Schepens (European Central Bank)
    Abstract: This paper shows that, when the price of emission allowances is sufficiently high, emission trading schemes improve the emission efficiency of highly polluting firms. The efficiency gain comes from a relative decrease in emissions rather than a relative increase in operating revenue. Part of the improvement is realized via the acquisition of green firms. The size of the improvement depends on the initial allocation of free emission allowances: highly polluting firms receiving more emission allowances for free, such as firms on the carbon leakage list, have a weaker incentive to become more efficient. For identification, we exploit the tightening in EU ETS regulation in 2017, which led to a steep price increase of emission allowances and made the ETS regulation more binding for polluting firms.
    Keywords: climate change; climate regulation;emission trading; firm behaviour
    JEL: D22 G34 G38 Q53 Q54
    Date: 2020–10
  5. By: Ivan Petrov; L. (Lisa B.) Ryan
    Abstract: The aim of this paper is to test for the persistence of the landlord-tenant energy e fficiency problem in the residential rental property market in the presence of information on property energy performance. To do this, we compare the efficiency of rental and non-rental properties using a combination of Coarsened Exact Matching (CEM) and parametric regression. We use a sample of 585,578 residential properties in the Republic of Ireland - a region that legally requires rental properties to display energy performance certificates when advertised. The findings suggest that the landlord-tenant problem is present in the Irish rental market but that it is not uniform across locations, indicating the influence of other factors. To explore this further, we exploit the regional variation in rental property prices. We find a larger difference between rental and non-rental properties' energy efficiency in markets with scarcity in rental property supply.
    Keywords: Energy efficiency; Market failures; Energy performance certificate (EPC); Coarsened exact matching (CEM); Residential properties; Information asymmetry; Split incentives
    JEL: Q40 R20 D12
    Date: 2020–10
  6. By: Sanghamitra Mukherjee
    Abstract: This study explores the impact of socio-demographic, behavioural, and built-environment characteristics on residential renewable energy technology adoption. It provides new insights on factors influencing uptake using nearest neighbour and random forest machine learning models at a granular spatial scale. Being computationally inexpensive and having good classification performance, these models serve as useful baseline prediction tools. Data is sourced from an Irish survey of consumer perceptions of three key technologies – electric vehicles, solar photovoltaic panels, and heat pumps – and general attitudes towards sustainability, innovation, risk, and time. We demonstrate that utility bills, residence period, attitudes to sustainability, satisfaction with household heating, and perceptions of hassle have the biggest influence on current uptake. Urban areas, typically having better access to information and resources, are likely to see the biggest uptake first. Additionally, compatibility of household infrastructure, technical interest, and social approval are the most important predictors of potential uptake. These results may inform policy in other early adopter markets as well. Overall, policy makers must be cognisant of the stage of adoption their country is currently at. Accordingly, a holistic approach to tackling low adoption must include measures that not only enhance adoption capabilities via rebates and financial measures, but also support the opportunity and intent to purchase such technologies.
    Keywords: Renewable energy technology adoption; Consumer behaviour; Machine learning; Heat pumps; Solar PVs; Electric vehicles
    JEL: D1 D9 O3 Q4
    Date: 2020–09
  7. By: Tian, Ruijie (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper examines the impact of carbon emissions trading schemes (ETS) on technical change proxied by the number of green patents in the context of the pilot ETS in China. I find a small increase of 0.16 patents per firm and year. A 10 percent increase in carbon prices increases green patents by 2 percent. The strongest effects are for the two regions in the upper range of carbon prices and for more productive firms. However, there are contrasting patterns at the extensive and intensive margins of green innovation: the pilot ETS reduces entry into green innovative activities but increases levels of innovating for firms that were innovative before they were regulated by ETS, especially for the more productive firms. This indicates that an important policy challenge is to encourage the firms covered by ETS to start innovation in green technologies; this applies particularly to the larger and more productive firms.
    Keywords: Carbon Pricing; Directed Technological Change; Innovation; Heterogeneous Firms.
    JEL: O33 O44 Q54 Q55
    Date: 2020–11
  8. By: Lauren Giandomenico (Faculty of Social Sciences, University of Ottawa); Maya Papineau (Department of Economics, Carleton University); Nicholas Rivers (Faculty of Social Sciences, University of Ottawa)
    Abstract: This is the first systematic review of studies evaluating the energy savings and cost effectiveness of residential energy efficiency retrofit programs. We review 33 evaluations of 19 residential retrofit programs that were implemented in the United States and Europe between 1979 and 2014. Our sample is restricted to program evaluations that used actual household billing data from 159,935 retrofitted households. We report four primary findings. First, none of the studies in our sample reported deep savings (e.g., 50% or greater) from retrofit programs. The mean reduction in measured electricity and/or fuel consumption due to energy efficiency retrofits for all programs included in our sample was roughly 7.5%. However, because many households use both fuel and electricity, total household energy savings from the retrofit programs evaluated in our sample are probably smaller. Second, reported program savings decreased as the internal validity of study design increased. Third, as measured by realized savings and cost-effectiveness, the most promising retrofits were water heater insulation and programmable thermostats, whereas the least promising retrofits were storm windows and doors. Fourth, programs with high reported savings and low costs of conserved energy served low-income, fuel-heated households exclusively.
    Date: 2020–10
  9. By: Sanghamitra Mukherjee; Tensay Meles; L. (Lisa B.) Ryan; Séin Healy; Robert Mooney; Lindsay Sharpe; Paul Hayes
    Abstract: This paper explores the motivations behind the adoption of key renewable energy technologies in an early adopter market. Notwithstanding their social benefits, uptake of electric vehicles, heat pumps, and solar photovoltaic panels remains low, necessitating targeted measures to address this. We conducted a comprehensive survey of a nationally representative sample of Irish households and analysed this rich dataset using pairwise group comparisons and a factor analysis combined with a logit regression model. We found fundamental differences between adopters and non-adopters. Current adopters tend to be younger, more educated, of higher socio-economic status, and more likely to live in newer buildings of generous size than non-adopters. Environmental attitudes are an insufficient predictor of uptake - whilst non-adopters self-report as being more sustainable, adopters believe that their own decisions impact climate change. Importantly, social processes will be instrumental in future uptake. Word-of-mouth recommendation will matter greatly in communicating the use and benefits of technologies as evident from the significantly larger social networks that current adopters enjoy. Using these insights, policy incentives can be designed according to public preferences.
    Keywords: Household survey; Technology adoption; Heat pumps; Solar PVs; Electric vehicles; Consumer behaviour
    JEL: D1 D9 O3 Q4
    Date: 2020–09
  10. By: Emil Heesche (Department of Food and Resource Economics, University of Copenhagen); Mette Asmild (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: The Danish water regulator uses, among other things, Data Envelopment Analysis to create a pseudo-competitive environment for the water companies. The benchmarking results are used to set an individual revenue cap for each company. The benchmarking model is currently criticized for not including the companies’ supply quality and thereby has an omitted variable bias problem. The regulator has, therefore, initiated an extensive effort to try to incorporate supply quality in the regulation. One problem the regulator has encountered is that incorporating supply quality in the benchmarking model tends to increase the revenue caps more than desired. The regulator does, however, not have any prior information about the quality variables and their trade-offs to the remaining variables which make it challenging to reduce the supply quality’s impact on the revenue caps. In this paper, we analyze the facet structure when incorporating three quality variables into the existing model. The facet structure gives important insights into the trade-offs between the companies costs and their level of quality. We argue that it is generally sensible to investigate the facet structure and ensure that it is trustworthy before calculating efficiency scores, in order to increase the credibility of the results. By using an outlier detection model on the estimated trade-offs we use the insights for the facet structure to create weight restrictions between costs and quality, which gives the companies incentives to reveal private information about their true trade-offs. This can help the regulator incorporate quality in the model without allowing the efficiency scores to increase excessively due to the increase in dimensionality. In addition, we propose to set weight restrictions based on the consumer’s willingness to pay for quality to avoid the companies choosing a level of quality that is higher than what the consumers are willing to pay.
    Keywords: Data Envelopment Analysis; Regulation; Facet structure; Weight restrictions; Trade-off
    JEL: C02 C14 C51 C52 C61 C67 L51
    Date: 2020–11
  11. By: Fawson, Chris; Cottle, Christopher; Hubbard, Hayden; Marshall, McKlayne
    Abstract: A rapidly increasing number of large U.S. companies are reporting use of an internal carbon price, in spite of the struggle to enact environmental regulation or reduction standards on carbon emissions in the United States. Such trends have created a growing interest in both how and why the private sector is using internal carbon pricing and what the implications of these developments will be. This paper examines the precise motives, methods and prices used by the U.S. private sector for incorporating an internal cost of carbon into their organizational strategies for the purpose of reducing carbon emissions. Careful analysis of reports from the CDP (formerly the Carbon Disclosure Project) suggests that the primary motives driving internal carbon pricing initiatives in the United States are investor relations, cost savings opportunities provided by reducing emissions, perceived physical risks associated with climate change (e.g., as severe weather or supply chain interference), and regulatory risk. Furthermore, shadow pricing and carbon offsetting are the most common methods of private-sector carbon pricing, and the average internal carbon price in the private sector is $40.09 per ton as of 2017. These trends are evaluated in the broader context of U.S. political developments, economic policies, and mechanisms for pricing carbon. This research should be particularly pertinent to private-sector shareholders and stakeholders, business owners, and executives—in addition to policy makers—as it provides unique insights into how private initiatives are advancing a commitment to CO2-induced climate change mitigation in the face of an increasingly uncertain public policy landscape.
    Keywords: Environmental Economics and Policy, Risk and Uncertainty
    Date: 2019–03
  12. By: Key, Peter; Steinberg, Richard
    Abstract: We examine competition between two Internet Service Providers (ISPs), where the first ISP provides basic Internet service, while the second ISP provides Internet service plus content, i.e., enhanced service , where the first ISP can partner with a Content Provider to provide the same content as the second ISP. When such a partnering arrangement occurs, the Content Provider pays the first ISP a transfer price for delivering the content. Users have heterogeneous preferences, and each in general faces three options: (1) buy basic Internet service from the first ISP; (2) buy enhanced service from the second ISP; or (3) buy enhanced service jointly from the first ISP and the Content Provider. We derive results on the existence and uniqueness of a Nash equilibrium, and provide closed-form expressions for the prices, user masses, and profits of the two ISPs and the Content Provider. When the first ISP has the ability to choose the transfer price, then when congestion is linear in the load, it is never optimal for the first ISP to set a negative transfer price in the hope of attracting more revenue from additional customers desiring enhanced service. Conversely, when congestion is sufficiently super-linear, the optimal strategy for the first ISP is either to set a negative transfer price (subsidizing the Content Provider) or to set a high transfer price that shuts the Content Provider out of the market.
    Keywords: communication networks; competition; content provider; optimal pricing; Nash equilibrium; profit
    JEL: R14 J01
    Date: 2020–10–01
  13. By: Olivier De Groote (Toulouse School of Economics, University of Toulouse Capitole); Axel Gautier (IHEC Liège, University of Liège); Frank Verboven (Department of Economics, KU Leuven)
    Abstract: To combat climate change, governments are taking an increasing number of technologyspecific measures to support green technologies. In this paper, we look at the very generous subsidy policies to solar PVs in the three regions of Belgium to ask the question of how voters responded to these programs. We provide evidence that voters did not reward the incumbent government that was responsible for the program, as predicted by the ‘buying-votes’ hypothesis. Instead, we find that voters punish the incumbent government because of the increasing awareness of the high financing costs. These did not only affect the non-adopting electricity consumers who did not benefit from the programs, but also the adopting prosumers, who saw unannounced new costs such as the introduction of prosumer fees to get access to the grid.
    Date: 2020–10
  14. By: Eloi Laurent (Observatoire français des conjonctures économiques)
    Abstract: Transitions have a bad name. Rob Hopkins, who arguably introduced the word ‘transition’ into the environmental lexicon, is said to have chosen the most neutral expression possible, so that reluctant consumers and businesses would not be frightened by the hard choices and sacrifices entailed by living in harmony with the biosphere (as opposed to blindly destroying it). Transitions are supposed to be painless. What is worse, the French historian Jean-Baptiste Fressoz has convinc- ingly argued that ‘energy transition’ is an expression coined by indus- trial lobbies in the mid-1970s to prevent the idea of ‘energy crisis’ from taking hold in western minds. Transitions are supposed to never really happen (and remain, forever, ideas for tomorrow). And yet, the concept of transition is actually a very powerful tool to think about what we should be doing in the face of worsening ecolog- ical crisis—and to act upon it. Imagining a transition means having to answer three fundamental questions: why is the world we live in not desirable anymore, what world do we want and how to get from here to there?
    Keywords: Transition juste; Economie de l'environnement; Economie écologique
    Date: 2020–05–28
  15. By: Philip Chen; Edward J Oughton; Pete Tyler; Mo Jia; Jakub Zagdanski
    Abstract: Basic broadband connectivity is regarded as generally having a positive macroeconomic effect. However, over the past decade there has been an emerging school of thought suggesting the impacts of upgrading to higher speed broadband have been overstated, potentially leading to the inefficient allocation of taxpayer-funded subsidies. In this analysis we model the impacts of Next Generation Access on new business creation using high-resolution panel data. After controlling for a range of factors, the results provide evidence of a small but significant negative impact of high-speed broadband on new business creation over the study period which we suggest could be due to two factors. Firstly, moving from basic to high-speed broadband provides few benefits to enable new businesses being formed. Secondly, strong price competition and market consolidation from online service providers (e.g. Amazon etc.) may be deterring new business start-ups. This analysis provides another piece of evidence to suggest that the economic impact of broadband is more nuanced than the debate has traditionally suggested. Our conjecture is that future policy decisions need to be more realistic about the potential economic impacts of broadband, including those effects that could be negative on the stock of local businesses and therefore the local tax base.
    Date: 2020–10
  16. By: Amjadi, Golnaz (STATEC Research (National Institute of Statistics and Economic Studies))
    Abstract: Energy inefficiency in production implies that the same level of goods and services could be produced using less energy. The potential energy inefficiency of a firm may be linked to long-term structural rigidities in the production process and/or systematic shortcomings in management (persistent inefficiency), or associated with temporary issues like misallocation of resources (transient inefficiency). Eliminating or mitigating different inefficiencies may require different policy measures. Studies measuring industrial energy inefficiency have mostly focused on overall inefficiencies and have paid little attention to distinctions between the types. The aim of this study was to assess whether energy inefficiency is transient and/or persistent in the Swedish manufacturing industry. I used a firm-level panel dataset covering fourteen industrial sectors from 1997–2008 and estimated a stochastic energy demand frontier model. The model included a four-component error term separating persistent and transient inefficiency from unobserved heterogeneity and random noise. I found that both transient and persistent energy inefficiencies exist in most sectors of the Swedish manufacturing industry. Overall, persistent energy inefficiency was larger than transient, but varied considerably in different manufacturing sectors. The results suggest that, generally, energy inefficiencies in the Swedish manufacturing industry were related to structural rigidities connected to technology and/or management practices.
    Keywords: Stochastic energy demand frontier model; persistent and transient energy inefficiency; energy inefficiency.
    JEL: D22 L60 Q40
    Date: 2020–11–04
  17. By: Jessup, Eric; Casavant, Ken; Tolliver, Denver
    Keywords: Public Economics
    Date: 2020–10–22

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