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on Regulation |
| By: | Jesse F. Buchsbaum; Catherine Hausman; Johanna L. Mathieu; Jing Peng |
| Abstract: | In electricity markets, generators are rewarded both for providing energy and for enabling grid reliability. The two functions are compensated in separate markets: energy markets and ancillary services markets. We provide evidence of changes in the fuel mix in the energy market that is driven by exogenous changes in an ancillary services market. We provide quasi-experimental evidence and a theoretical framework for understanding the mechanism, showing that it results from the multi-product nature of conventional power plants combined with discontinuities in costs. As a result, policy changes relating to grid operations, grid reliability, or climate change could have unintended effects. As an example, our results have particular relevance given the increased deployment of batteries for ancillary services -- we show that such deployment has the potential to increase carbon dioxide emissions in the short term. |
| JEL: | L21 L94 L98 Q42 Q48 Q53 Q58 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28027&r=all |
| By: | Taruttis, Lisa; Weber, Christoph |
| Abstract: | The German government aims at a climate-neutral building stock by 2050 to reach the goals defined in the Climate Action Plan 2050. Increasing the energy efficiency of existing buildings is therefore a high priority. For this purpose, investments of private homeowners will play a major role since about 46.5% of the German dwellings are owner-occupied. To identify potential monetary benefits of investing in energetic retrofits, we investigate whether energy efficiency is reflected in property values of single-family houses in Germany. Thereby we examine possible heterogeneous effects among regions. With 455,413 individual observations on a 1km²-grid level for 2014 to 2018, this study adds to the literature 1) by examining the effect of energy efficiency on housing values for Germany on a more small-scale level and specifically investigating regional disparities in this context and 2) by estimating an energy efficiency value-to-cost ratio. Applying a hedonic analysis, we find a positive relationship between energy efficiency and asking prices. We also find evidence for regional disparities. Effects are significantly weaker in large cities compared to other urban areas, whereas the impact in rural areas is much stronger. Since property values are expected to decline in rural regions, homeowners could alleviate this development by increasing the energy efficiency of their dwellings. |
| Keywords: | Energy efficiency,residential buildings,regional disparities,German housing market,hedonic analysis,housing value |
| JEL: | C31 Q40 R21 R31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc20:224582&r=all |
| By: | Hintermayer, Martin |
| Abstract: | Despite the reform of the European Emissions Trading System (EU ETS), discussions about complementing it with a carbon price floor (CPF) are ongoing. This paper analyzes the effect of a European CPF in the reformed EU ETS using a Hotelling model of the EU ETS, amended by the market stability reserve (MSR), and the cancellation mechanism. Two CPF designs are compared: (1) a buyback program and (2) a top-up tax. The buyback program sets a minimum price for the allowances from the implementation year onwards. After the announcement, firms anticipate the CPF, which immediately increases the carbon price to the discounted CPF level. Therefore, firms emit less and bank more allowances, leading to more intake into the MSR, and more cancellation of allowances. The top-up tax imposes a tax on emissions, which enhances the market price of allowances to the CPF level from the implementation year onwards. Firms increase their short-run emissions in anticipation of the upcoming tax. Only after the implementation year firms start to lower their emissions. Thus, the effect on aggregate cancellation is ambiguous. Despite being equivalent in a static setting, the design choice for the CPF matters in a dynamic context, such as the EU ETS. |
| Keywords: | Intertemporal Emission Trading,Carbon Price Floor,EU ETS |
| JEL: | H23 H32 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc20:224576&r=all |
| By: | Frédéric CHERBONNIER; Ulrich HEGE |
| Abstract: | We analyze optimal climate financial regulation to address the question when capital requirements should be differentiated in order to encourage climate related investments. We distinguish between two key dimensions of climate policies: carbon emissions (mitigation) and investment in climate resilience (adaptation), and consider two scenarios according to the efficient and inefficient carbon policies. We show that for financial regulators, the prospect of extreme climate shocks creates a rationale for differential capital requirements even when carbon prices are efficient. When extreme climate-related events occur, monetary and fiscal policies and financial regulators will optimally react with accommodating policies. The anticipation of such regulatory accommodation leads to distortions in private investment incentives. The optimal ex ante policy of regulators will attempt to correct for such biases. We also show that regulators should differentiate capital requirements when private agents insufficiently internalize the effects of investments in resilience. Finally, regulators should differentiate capital requirements that encourage both abatement and resilience investments when carbon policies are inefficient.This Research Paper is published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development. It is part of the pilot research program “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. This program was launched, along with the International Research Initiative on Public Development Banks (PDBs), by the Institute of New Structural Economics (INSE) at Peking University, and sponsored by the Agence française de développement (AFD), Ford Foundation and International Development Finance Club (IDFC).Have a look on the key findings for a quick overview of the research resultsSee the video pitch |
| JEL: | Q |
| Date: | 2020–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:avg:wpaper:en11709&r=all |
| By: | Rodolfo Sejas-Portillo; David Comerford; Mirko Moro; Till Stowasser |
| Abstract: | We study the effects of limited attention on property prices and energy efficiency (EE) investments in the housing market. Using a novel dataset, we analyse over 5 million residential property sale transactions in England and Wales, each containing information about sale price, property and location characteristics, and a mandatory energy performance certificate (EPC). The EPC includes a continuous energy cost rating (SAP rating) which is mapped into seven colour-coded rating bands (ranging from green A to red G). Applying a Regression Discontinuity Design (RDD), we document significant price discontinuities at the rating band thresholds. We estimate that - holding the underlying SAP score equal - being in a higher rating band increases the final sale price of a property between 0.8% and 2.5% ($2,000 and $6,625 based on average sale prices) depending on the threshold crossed. The presence of price discontinuities suggests that individuals are attentive to the simpler colour-coded rating band and partially inattentive to the more precise SAP rating. We present a simple model for estimating the degree of inattention and show that, for a given level of attention, rating bands reduce attention to the SAP rating by 25% on average. Importantly, the detected price discontinuities appear to influence market behaviour: Sellers whose property receives an EPC rating just below a threshold to the next-higher rating band are between 0.4% and 11% more likely to make last-minute EE investments before placing their property on the market. We discuss a number of recommendations of how to best leverage these threshold effects to improve policy design, which can be extended to other settings where the provision of simplified information creates reference thresholds. |
| Keywords: | limited attention, heuristic decision-making, price discontinuities, housing market, anchoring and adjustment, energy policy, energy efficiency, energy performance certificates, EPC |
| JEL: | D12 D83 L15 R21 R31 Q48 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8669&r=all |
| By: | Tretheway, Michael W.; Waters II, W.G. |
| Keywords: | Public Economics |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cantrf:306016&r=all |
| By: | Groh, Elke D.; Ziegler, Andreas |
| Abstract: | As long as electricity is generated from fossil fuels, the reduction of its consumption is an important direction for climate protection and related policy measures. Based on data of more than 3700 respondents in Germany, we thus empirically examine the relevance of a large set of well-known determinants of electricity consumption such as household and dwelling char-acteristics, but also of individual values and norms. Since behavioral economics highlights the importance of economic preferences in such public good contexts, we additionally consider risk and time preferences, trust, altruism, and reciprocity in our econometric analysis. With respect to the latter group of factors, however, only time preferences have a strong significant effect on electricity consumption. Furthermore, norms also play only a minor role. In contrast, our estimation results suggest a high relevance of dwelling characteristics and socio-demographics. Interestingly, it seems that a low electricity consumption is no important cli-mate protection activity of German inhabitants with strong environmental values, which is in contrast to the demand of such citizens for green electricity. |
| Keywords: | electricity consumption,economic preferences,individual values,social norms,econometric analysis |
| JEL: | Q41 Q54 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc20:224587&r=all |
| By: | Rishabh Kirpalani; Thomas Philippon |
| Abstract: | We study an economy in which consumers and merchants (sellers) interact on a two-sided platform. Consumers can share data about their tastes for different varieties of a single good with the platform which in turn sells this data to merchants. Data sharing increases gains from trade by improving match quality but gives more market power to the platform relative to the merchants which can reduce entry and consequently consumer welfare. This leads to an externality not internalized by consumers thus leading to more data sharing than is efficient. We highlight two reasons why more precise information increases the market power of the platform. The first is a copycat (private label) externality that increases the outside option for the platform of selling the good directly to consumers. The second is a consumer access externality that reduces the outside option of the merchants when information gets more precise, as more buyers are able to find their desired variety on the platform. Our model explains the qualitative differences between traditional retail platforms (physical stores) and digital online platforms and why the latter are more likely to require regulatory interventions that the former. |
| JEL: | D2 D4 D42 D43 L11 L12 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28023&r=all |
| By: | Alessandro De Chiara (Central European University); Ester Manna (Universitat de Barcelona) |
| Abstract: | We study the optimal design of regulation for innovative activities which can have negative social repercussions. We compare two alternative regimes which may provide firms with different incentives to innovate and produce: lenient authorization and strict authorization. We find that corruption plays a critical role in the choice of the authorization regime. Corruption exacerbates the costs of using lenient authorization, under which production of socially harmful goods is always authorized. In contrast, corruption can be socially beneficial under strict authorization, since it can mitigate an over-investment problem. In the second part of the paper, we explore the design of bonuses, taxes, and ex-post liability to improve the regulatory outcome. |
| Keywords: | Authorization, Collusion, Corruption, Extortion, Regulatory capture,Safety regulation |
| JEL: | D73 K42 L51 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:390web&r=all |
| By: | Sylwia Bialek; Burcin Unel |
| Abstract: | We evaluate the effects of homogeneous subsidies granted for emission-free electricity generation on market outcomes and social welfare. We use an analytical model to assess the conditions under which such subsidies increase efficiency of wholesale energy and capacity markets. While the subsidies, even when combined with energy consumption taxes, cannot achieve first-best outcomes when there are resources with heterogeneous emission intensities, there exists a range of subsidy rates that are welfare-enhancing when greenhouse gas externalities are taken into account. We also derive the conditions under which generation subsidies do not affect the equilibrium price in capacity markets. Finally, we evaluate the capacity market reforms that are being undertaken in the U.S. in response to these kinds of subsidies. |
| Keywords: | capacity markets, renewables, subsidies, welfare |
| JEL: | Q28 Q42 Q58 Q41 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8673&r=all |
| By: | Bigras, Yvon; Roy, Jacques |
| Keywords: | Public Economics |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ctrf29:306036&r=all |
| By: | Gavard, Claire; Kirat, Djamel |
| Abstract: | The Paris Agreement established a new mechanism by which a country can offset some of its emissions reductions in other countries. Its design is still under negotiation. While taking advantage of cheaper abatement opportunities enables efficiency gains, the impact on the price volatility in the emission trading schemes is unclear. We conduct an empirical analysis of the short-term impacts of these credits on the standard carbon markets, using the European Union experience with accepting credits for compliance in the second phase of its scheme. With vector-autoregressive models allowing regime changes at a priori unknown dates, we analyze the structural relationship between the prices of allowances and credits. Although one might expect that the allowance and credit markets influence one another, we find that, before November 2011, knowing the credit price variations helps to better predict the allowance price variations while, after November 2011, it is the opposite. We explain this by expectations and restrictions regarding credits. For the transmission of shocks and the impact on volatility, the influence is mainly from allowances to credits. The allowance price volatility explains between 56% and 72% of the credit volatility whereas the latter explains less than 2% of the former. |
| Keywords: | emissions trading,European allowances,international credits,causality analysis |
| JEL: | C32 C58 F18 Q54 Q58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20058&r=all |
| By: | Jessup, Eric; Casavant, Ken; Tolliver, Denver |
| Keywords: | Public Economics |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cantrf:306021&r=all |
| By: | Gillen, David W.; Oum, Tae H.; Tretheway, Michael W. |
| Keywords: | Public Economics |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cantrf:305967&r=all |
| By: | Vanessa Alviarez; Keith Head; Thierry Mayer |
| Abstract: | We assess the consequences for consumers in 76 countries of multinational acquisitions in beer and spirits. Outcomes depend on how changes in ownership affect markups versus efficiency. We find that owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would have been 4-7% higher without divestitures. Up to 30% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU. |
| Keywords: | mergers;markups;globalisation;competition |
| JEL: | F12 F23 L13 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2020-13&r=all |
| By: | Sparks, Gordon A.; Nix, Fred |
| Keywords: | Public Economics |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cantrf:305847&r=all |