nep-reg New Economics Papers
on Regulation
Issue of 2020‒11‒30
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. One price fits all? Wind power expansion under uniform and nodal pricing in Germany By Schmidt, Lukas; Zinke, Jonas
  2. Estimating Long-Term Global Supply Costs for Low-Carbon Hydrogen By Brändle, Gregor; Schönfisch, Max; Schulte, Simon
  3. "Pay-later" vs. "pay-as-you-go": Experimental evidence on present-biased overconsumption and the importance of timing By Werthschulte, Madeline
  4. What Factors Drive Commuters’ Demand for Electric Vehicle Charging Infrastructure? By Chakraborty, Debapriya; Bunch, David S.; Lee, Jae Hyun; Tal, Gil
  5. Do energy efficiency standards hurt consumers?: evidence from household appliance sales By Brucal, Arlan; Roberts, Michael
  6. Electric Vehicle Subsidies Appear to Have Modest Pollution Reduction Benefits By Muehlegger, Erich PhD; Rapson, David PhD
  7. The Impacts of Load-Following Forward Contracts By Brown, David P.; Sappington, David E.M.
  8. Revenue Cost Comparisons for Alberta Rail Traffic By Bassett, Ray; Rosko, Garry
  9. Assessing Short‑Term and Long‑Term Economic and Environmental Effects of the COVID‑19 Crisis in France By Paul Malliet; Frédéric Reynés; Gissela Landa; Meriem Hamdi‑cherif; Aurélien Saussay
  10. National pricing with local quality competition By Tommy Staahl Gabrielsen; Bjørn Olav Johansen; Odd Rune Straume
  11. Job Creation in the Wind Power Sector Through Marshallian and Jacobian Knowledge Spillovers By Aldieri, Luigi; Grafström, Jonas; Paolo Vinci, Concetto
  12. Limited tax capacity and the optimal taxation of firms By Arbex, Marcelo Aarestru; Mattos, Enlinson

  1. By: Schmidt, Lukas (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Zinke, Jonas (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: This paper evaluates investment incentives for wind power under uniform and nodal pricing. An electricity system model is developed, which allows for investments into wind power while considering transmission grid constraints in detail. Targeting equally high wind capacities under nodal and uniform pricing until 2030, locations of new wind power plants shift towards sites with lower wind yield under nodal prices. The wind energy fed into the grid, though, is higher under nodal pricing since curtailment is cut to a third. Grid-optimal wind locations require higher subsidy payments but decrease yearly variable supply costs by 1.5% in 2030. However, distributional effects are an obstacle to implementing nodal pricing, where about 75% of German demand faces electricity costs increase of about 5%. For mitigating distorted investment signals of uniform pricing, implementing investment restrictions within grid expansion areas prove to be more promising than a latitude-dependent generator-component in the grid tariff design.
    Keywords: Nodal Pricing; Market Design; Energy System Modeling; Renewable Energies; Market Values
    JEL: C61 D47 Q42 Q48
    Date: 2020–11–13
  2. By: Brändle, Gregor (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Schönfisch, Max (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Schulte, Simon (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: As part of the decarbonisation of the global economy, low-carbon hydrogen is expected to play a central role in future energy systems. This article presents a comprehensive approach for estimating the development of global production and supply costs of low-carbon hydrogen from renewable energy sources (RES) and natural gas until 2050. For hydrogen from RES, globally distributed wind and solar photovoltaics (PV) potentials are taken as inputs for low or high temperature electrolysers. A linear optimisation model minimises hydrogen production costs by determining optimal capacity ratios for each RES and electrolyser combination, based on hourly RES electricity generation profiles. For low-carbon hydrogen from natural gas, natural gas reforming with carbon capture and storage (CCS) and pyrolysis are considered. In addition to production costs, this analysis assesses the costs associated with the transportation of hydrogen by ship or pipeline. The combination of production and transportation costs yields a ranking of cost-optimal supply sources for individual countries. Estimation results suggest that natural gas reforming with CCS will be the most cost-efficient low-carbon hydrogen production pathway in the medium term (2020-2030). Production of hydrogen from RES could become competitive in the long run (2030-2050) if capital costs decrease significantly. Optimal long-term hydrogen supply routes depend on regional characteristics, such as RES conditions and gas prices. Imports are cost-effective where domestic production potential is small and/or cost-intensive. Additionally, good import conditions exist for countries which are connected to prospective low-cost exporters via existing natural gas pipelines that can be retrofitted to transport hydrogen. Due to high costs for seaborne transport, hydrogen trade will most likely be concentrated regionally, and markets with different provision schemes could emerge. The results are highly sensitive to capital cost assumptions and natural gas prices.
    Keywords: Low-Carbon Hydrogen; Hydrogen Production; Hydrogen Transportation; Levelised Cost
    JEL: Q40 Q42 Q49
    Date: 2020–11–11
  3. By: Werthschulte, Madeline
    Abstract: When consuming goods provided by public utilities, such as telecommunication, water, gas or electricity, the predominant payment scheme is pay-later billing. This paper identifies one potential consequence of pay-later schemes, present-biased overconsumption of the respective good, and tests the effectiveness of pay-as-you-go schemes in reducing consumption. Specifically, I run a lab experiment which mimics an energy consumption choice and randomizes the timing of when consumption costs are paid: Either immediately ('pay-as-you-go') or one-week after consumption ('pay-later'). Results show that pay-as-you-go billing significantly decreases consumption, and in particular wasteful consumption. As the design controls for contaminating effects, these results can be solely attributed to present-biased discounting under the pay-later scheme. These results imply that pay-as-you-go schemes will be welfare improving both from agent's own perspective and from a social perspective if externalities are involved. In contrast, classic price-based polices will need correctives to account for present bias arising under pay-later schemes.
    Keywords: payment schemes,present bias,discounting,lab experiment,energy
    JEL: C91 D15 D91 Q49
    Date: 2020
  4. By: Chakraborty, Debapriya; Bunch, David S.; Lee, Jae Hyun; Tal, Gil
    Abstract: Government agencies, utilities, automakers, and charging network companies are increasingly investing in charging infrastructure to encourage the adoption of plug-in electric vehicles (PEVs), which include both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). Public infrastructure is particularly important for those without access to home charging and for vehicles with driving range limitations. However, it is difficult to quantify the optimal number and location of public chargers needed for a growing number of PEVs. Finding the answer will depend on a mix of behavioral and economic factors that drive charging demand. Much is at stake. Too little infrastructure could cause congestion at the chargers and inhibit the adoption and use of PEVs, while developing more infrastructure than is needed would create unnecessary costs. For example, Level 2 public chargers can cost up to 15 times more than Level 2 at-home chargers. Researchers at UC Davis analyzed the choice of charging infrastructure of more than 3,000 PEV commuters who had access to home, work, and public locations to understand the importance of various factors driving demand for charging infrastructure at the three locations. Key factors include the cost of charging, driver characteristics, accessibility of charging infrastructure, and vehicle characteristics.
    Keywords: Engineering
    Date: 2020–11–01
  5. By: Brucal, Arlan; Roberts, Michael
    Abstract: We build novel welfare-based price indices for major household appliances that leverage changes in same-model prices and how consumers substitute between exiting, continuing and new models. We then evaluate how minimum energy efficiency requirements and changing criteria for Energy Star™ labels affected these indices in the U.S. between 2001 and 2011, a period of time when some appliances experienced standard changes while others did not. We find that prices declined while quality and consumer welfare increased, especially when standards become more stringent. We also find that much of the price index decline can be attributed to standards-induced innovation, or cannibalism, not to inter-manufacturer competition. Our results also add to a growing body of evidence that the Consumer Price Index exaggerates inflation due to inadequate account of quality and substitution to new goods.
    Keywords: energy efficiency; standards; imperfect competition; price indices; ES/R009708/1
    JEL: D12 H23 L68 Q48
    Date: 2019–07–01
  6. By: Muehlegger, Erich PhD; Rapson, David PhD
    Abstract: California has adopted aggressive vehicle electrification goals as a means of reducing urban air pollution, carbon emissions, and overall petroleum consumption. The state has several programs to encourage electric vehicle adoption, including the Enhanced Fleet Modernization Program, which was initially piloted in two California air districts and recently expanded to other regions. The program offers subsidies to low- and middle-income residents to scrap their old higher-polluting vehicle and purchase lower-polluting hybrid, plug-in hybrid, and battery electric vehicles, with more generous incentives for residents in disadvantaged zip codes. The extent to which this and other incentive programs help to achieve environmental policy goals depends on the emissions reduced by electric vehicles, and the emissions of the vehicle that would have been purchased had the consumer not chosen an electric vehicle. A household that purchases an electric vehicle will generate a larger environmental benefit if it would have otherwise purchased a gas guzzler rather than a gas sipper. The choice of replacement vehicle also has important implications for projecting future fuel tax revenues. If EVs replace gas sippers, fuel tax revenues will decline more slowly. If they replace gas guzzlers, fuel tax revenues will decline more quickly. To answer these questions, researchers at UC Davis compared the average fuel economy of vehicles purchased in disadvantaged zip codes inside and outside of air districts participating in the Enhanced Fleet Modernization Program, before and after the program began. This quasiexperimental design gives a reasonable estimate of what would have happened without the subsidy.
    Keywords: Social and Behavioral Sciences
    Date: 2020–11–01
  7. By: Brown, David P. (University of Alberta, Department of Economics); Sappington, David E.M. (University of Florida)
    Abstract: Load-following forward contracts (LFFCs) require a commodity supplier to deliver a specified fraction of the realized demand for the commodity at a fixed price. We show that in contrast to more standard forward contracts, LFFCs can promote higher commodity prices and reduced levels of consumer surplus and welfare. LFFCs are particularly likely to do so in the presence of limited demand uncertainty.
    Keywords: load-following forward contracts; swap contracts; electricity sector
    JEL: L51 L94 Q28 Q40
    Date: 2020–11–12
  8. By: Bassett, Ray; Rosko, Garry
    Keywords: Public Economics
    Date: 2020–10–22
  9. By: Paul Malliet (Observatoire français des conjonctures économiques); Frédéric Reynés (Observatoire français des conjonctures économiques); Gissela Landa (Observatoire français des conjonctures économiques); Meriem Hamdi‑cherif; Aurélien Saussay (Observatoire français des conjonctures économiques)
    Abstract: In response to the COVID-19 health crisis, the French government has imposed drastic lockdown measures for a period of 55 days. This paper provides a quantitative assessment of the economic and environmental impacts of these measures in the short and long term. We use a Computable General Equilibrium model designed to assess environmental and energy policies impacts at the macroeconomic and sectoral levels. We find that the lockdown has led to a significant decrease in economic output of 5% of GDP, but a positive environmental impact with a 6.6% reduction in CO2 emissions in 2020. Both decreases are temporary: economic and environmental indicators return to their baseline trajectory after a few years. CO2 emissions even end up significantly higher after the COVID-19 crisis when we account for persistently low oil prices. We then investigate whether implementing carbon pricing can still yield positive macroeconomic dividends in the post-COVID recovery. We find that implementing ambitious carbon pricing speeds up economic recovery while significantly reducing CO2 emissions. By maintaining high fossil fuel prices, carbon taxation reduces the imports of fossil energy and stimulates energy efficiency investments while the full redistribution of tax proceeds does not hamper the recovery.
    Keywords: Carbon tax; CO2 emissions; Macroeconomic modeling; Neo-Keynesian CGE model; Post-COVID economy
    JEL: E12 E17 E27 E37 E47 D57 D58
    Date: 2020
  10. By: Tommy Staahl Gabrielsen (University of Bergen); Bjørn Olav Johansen (University of Bergen); Odd Rune Straume (NIPE and Department of Economics, University of Minho and Department of Economics, University of Bergen)
    Abstract: We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing bene ts (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices.
    Keywords: National pricing, local pricing, retail chains, price and quality competition
    JEL: L11 L13 L21
    Date: 2020
  11. By: Aldieri, Luigi (University of Salerno); Grafström, Jonas (The Ratio Institute); Paolo Vinci, Concetto (University of Salerno)
    Abstract: The empirical evidence concerning the job-creation impact of wind power technology through knowledge spillovers is yet poor. Our objective is to contribute to the literature and bridge this gap. Specifically, our analysis explores to what extent investments in innovation activities of one firm affect the neighbouring firms’ generation of knowledge spillovers in the same sector (intra-industry) or to different sectors (inter-industry) and how this complex knowledge diffusion process impacts the employment dynamics. The econometric analysis relies on a sector-based panel dataset for the USA, Europe, and Japan between 2002 and 2017. The empirical findings suggest that there were negative employment spillovers from the same technology sector (Marshallian externalities) while the spillovers from more diversified activity (Jacobian externalities) have a positive impact on job-creation. The findings have relevant policy implications for governments who are developing an industrial strategy for wind power technology.
    Keywords: Employment; knowledge spillovers; patents; renewable energy; wind power
    JEL: J21 O33 Q20 Q40 Q42
    Date: 2020–11–11
  12. By: Arbex, Marcelo Aarestru; Mattos, Enlinson
    Abstract: Limited tax capacity creates evasion opportunities that weakens the production efficiency argument. Motivated by the SIMPLES tax reform in Brazil that led to heterogeneous responses on revenues and production costs of upstream versus downstream informal firms, we characterize the optimal taxation of firms in a limited tax capacity economy to compare with the optimal value-added and turnover taxes. We show that the elasticities of misreported sales and purchase gaps to policy instruments are behavioral statistics that complement the traditional Diamond and Mirrlees (1971a)’s mechanical effect of taxation. Numerical results suggest turnover taxes can be welfare enhancing vis-`a-vis a value-added system.
    Date: 2020–11

This nep-reg issue is ©2020 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.