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on Regulation |
| By: | Lucas W. Davis |
| Abstract: | The percentage of U.S. homes heated with electricity has increased steadily from 1% in 1950, to 8% in 1970, to 26% in 1990, to 39% in 2018. This paper investigates the key determinants of this increase in electrification using data on heating choices from millions of U.S. households over a 70-year period. Energy prices, geography, climate, housing characteristics, and household income are shown to collectively explain 90% of the increase, with changing energy prices by far the most important single factor. This framework is then used to calculate the economic cost of an electrification mandate for new homes. Households in warm states are close to indifferent between electric and natural gas heating, so would be made worse off by less than $500 annually. Household in cold states, however, tend to strongly prefer natural gas so would be made worse off by $3000+ annually. These findings are directly relevant to a growing number of policies aimed at reducing carbon dioxide emissions through electrification, and underscore the importance of pricing energy efficiently. |
| JEL: | H23 L51 Q41 Q42 Q48 Q54 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28324&r=all |
| By: | Anthony D Stephens; David R Walwyn |
| Abstract: | Sales of new petrol and diesel passenger vehicles may not be permitted in the United Kingdom (UK) post-2030. Should this happen, it is likely that vehicles presently powered by hydrocarbons will be progressively replaced by Battery Electric Vehicles (BEVs). This paper describes the use of mathematical modelling, drawing on real time records of the UK electricity grid, to investigate the likely performance of the grid when supplying power to a fleet of up to 35 million BEVs. The model highlights the importance of understanding how the grid will cope when powering a BEV fleet under conditions similar to those experienced during an extended wind lull during the 3rd week of January 2017. Allowing a two-way flow of electricity between the BEVs and the grid, known as the vehicle-to-grid (V2G) configuration, turns out to be of key importance in minimising the need for additional gas turbine generation or energy storage during wind lulls. This study has shown that with the use of V2G, it should be possible to provide power to about 15 million BEVs with the gas turbine capacity currently available. Without V2G, it is likely that the current capacity of the gas turbines and associated gas infrastructure might be overwhelmed by even a relatively small BEV fleet. Since it is anticipated that 80% of BEV owners will be able to park the vehicles at their residences, widespread V2G will enable both the powering of residences when supply from the grid is constrained and the charging of BEVs when supply is in excess. The model shows that this configuration will maintain a constant load on the grid and avoid the use of either expensive alternative storage or hydrogen obtained by reforming methane. There should be no insuperable problem in providing power to the 20% of BEV owners who do not have parking at their residences; their power could come directly from the grid. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.01065&r=all |
| By: | Akshaya Jha; Stephen A. Karolyi; Nicholas Z. Muller |
| Abstract: | We present three findings on the effects of environmental regulation on the municipal bond market. First, yields increase (decrease) after a new standard is proposed (finalized), consistent with the resolution of regulatory uncertainty. Second, around annual compliance announcements, yields fall for counties that remain in compliance but increase for newly noncompliant counties. Third, yields are substantially higher for bonds from counties just above the pollution threshold relative to counties just below the threshold. Our findings suggest that increases in regulatory stringency or uncertainty over future environmental policy increase the cost of municipal debt raised to fund critical infrastructure. |
| JEL: | G12 G14 Q52 Q53 Q58 R51 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28210&r=all |
| By: | Yutao Han,; Patrice Pieretti; Giuseppe Pulina |
| Abstract: | International capital mobility intensifies tax competition between jurisdictions. However, many firms only operate domestically and are internationally immobile. This paper aims to analyze the effect of tax competition on the profitability of local (immobile) firms, especially when tax and non-tax instruments, including infrastructure provision, are involved. We show that tax competition decreases investment and profit of local firms when internationally mobile fims do not benefit suficiently from local infrastructure. |
| Keywords: | Local firms, multinational rms, tax competition, infrastructure competition, tax harmonization. |
| JEL: | F21 F23 H25 H26 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp149&r=all |
| By: | Carlos Suarez (Department of Econometrics, Statistics and Applied Economics, Research Group on Governments and Markets, University of Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Tower 6 Floor 3. Engineering Department, Research Group on Energy, Environment and Development, Jorge Tadeo Lozano University.) |
| Abstract: | Using information on price bids in wholesale electricity pools and empirical techniques described in the literature on electricity markets, this study identifies the market power mitigation effect of public firms in the Colombian market. The results suggest that while private firms exercise less market power than is predicted by a profit-maximization model, there are marked differences between private and public firms in their exercise of unilateral market power. These findings support the hypothesis of the market power mitigation effect of public firms. |
| Keywords: | Electricity Markets, Market Power, Privatization, Mixed Oligopoly, Regulatory Intervention. JEL classification: L13, L94, C10. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202101&r=all |
| By: | Choi, Pak-Sing (Washington State University); Espinola-Arredondo, Ana (Washington State University); Munoz, Felix (Washington State University) |
| Abstract: | This paper considers firms’ incentives to merge under duopoly, where we allow for product differentiation, cost asymmetries, and pollution intensities (green and brown goods). We first analyze mergers in the absence of environmental regulation, showing that mergers induce an output shift towards the lowest cost firm. When emission fees are introduced, however, firms also consider their relative pollution intensities, potentially reverting the above output shift. We show that firms have stronger incentives to merge when goods are more differentiated, costs are more symmetric, and products generate similar environmental damages. However, socially excessive mergers can arise when firms shift output to the more cost-efficient firm after the merger, which may cause more pollution. In contrast, socially insufficient mergers can arise if output shifts after the merger would have reduced pollution. |
| Keywords: | socially excessive/insufficient mergers; product differentiation; cost asymmetry; pollution intensity; emission fees; antitrust authorities; environmental regulation losses; Policy uncertainty. |
| JEL: | G34 H23 L41 Q50 |
| Date: | 2020–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:ris:wsuwpa:2020_001&r=all |
| By: | Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka |
| Abstract: | An increasing body of empirical evidence is documenting trends toward rising concentration, profits, and markups in many industries around the world since the 1980s. Two major criticisms of these studies is that concentration and market shares are poorly measured at the national industry level while firm level revenues are a poor indicator of product sales. We use a novel database that identifies over 20,000 product/geographic antitrust markets affected by over2,000 mergers scrutinized by the European Commission between 1995 and 2014. We show that concentration, as measured by the market-specific post-merger HHI, is larger than reported in the extant literature (at least) by a factor of ten. We also show that concentration has increased over time on average. Yet, there is a great deal of heterogeneity across geographic markets and within broader industries. In a regression analysis that exploits this within-industry variation, we show that barriers to entry are unambiguously positively related to concentration irrespective of time periods, sectors of activity, and geographical market dimension analyzed. Strict past merger enforcement negatively correlates with concentration. Yet, this effect is stronger in the earlier decade (1995-2004) than subsequently. Intangibility of investments consistently displays positive correlation with concentration only for EU wide and worldwide services markets. In contrast, the correlation is negative in national markets. This underscores the importance of the large heterogeneity present in concentration developments across markets. |
| Keywords: | Concentration, HHI, market definition, entry barriers, mergers, merger control, intangibles |
| JEL: | L24 L44 K21 O32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1930&r=all |
| By: | Andrew Sweeting; Dun Jia; Shen Hui; Xinlu Yao |
| Abstract: | We generalize recent models of dynamic price competition where sellers benefit from learning-by-doing by allowing for long-lived strategic buyers, with a single parameter capturing the extent to which each buyer internalizes future buyer surplus. Many of the equilibria that exist when buyers are atomistic or myopic are eliminated when buyers internalize even a modest share of their effects on future surplus. The equilibria that survive tend to be those where long-run market competition is preserved. |
| JEL: | C73 D21 D43 L13 L41 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28272&r=all |
| By: | Joseph S. Shapiro; Reed Walker |
| Abstract: | This paper describes a novel approach to estimating the marginal cost of air pollution regulation, then applies it to assess whether a large set of existing U.S. air pollution regulations have marginal costs exceeding their marginal benefits. The approach utilizes an important yet underexplored provision of the Clean Air Act requiring new or expanding plants to pay incumbents in the same or neighboring counties to reduce their pollution emissions. These “offset” regulations create several hundred decentralized, local markets for pollution that differ by pollutant and location. We describe conditions under which offset transaction prices can be interpreted as measures of the marginal cost of pollution abatement, and we compare estimates of the marginal benefit of abatement from leading air quality models to offset prices. We find that for most regions and pollutants, the marginal benefits of pollution abatement exceed mean offset prices more than ten-fold. In at least one market, however, estimated marginal benefits are below offset prices. Marginal abatement costs are increasing rapidly in real terms. Notably, our revealed preference estimates of marginal abatement costs differ enormously from typical engineering estimates. Some evidence suggests that using price rather than existing quantity regulation in these markets may increase social welfare. |
| JEL: | H23 Q52 Q53 R11 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28199&r=all |
| By: | Eckstein, Johannes; Ordonez, Jose Antonio; Wachsmuth, Jakob |
| Abstract: | The unconditional target of Mexico's NDC foresees a reduction of GHG emissions of 22% relative to a Business-as-Usual (BAU) scenario, to reach 762 MtCO2eq in 2030. It further specifies that specifies that electricity generation shall take a share of 30% of this mitigation effort to reduce emissions by 31.4% relative to BAU, reaching 139 MtCO2eq in 2030. This study analyses how falling cost projections of renewable energy technologies (solar PV and wind energy) could inform energy sector and climate change mitigation plans of Indonesia. We show that cost projections valid for Mexico for renewables have dramatically fallen over the past years. Costs projected for 2030 a couple of years ago are well undercut by more recent projections for 2030. Recent cost projections for 2030 for wind energy are 77% lower than projections dating from 2015, solar PV cost projections have fallen by 74% on average. If falling costs for renewables are considered, the renewable capacities given in PRODESEN (the national power sector plan) could be revised at constant investments. The overall renewable energy capacity given in PRODESEN for 2030 could be increased from 37 GW to 52 GW. This increase in renewable capacities could inform the revision of Mexico's NDC. If falling cost projections of renewable energies are considered, the unconditional target could be reduced from 762 MtCO2eq to 747 MtCO2eq at constant costs. This corresponds an increase from 22% to 23.5% reduction and presents a 23.4% increase in the ambition of the power sector. Further Reading In a companion paper, Eckstein et al. (2020a) discuss the processes and assumptions underlying the current revision of the NDC in Mexico. Based on Interviews, they discuss the roles of the different institutions responsible for energy and climate mitigation plans, their policy and planning instruments and the relationship between these. Within the same project, the team of authors has written two more studies of the same structure for Indonesia (Eckstein et al. 2020b, Ordonez and Eckstein 2020) and Argentina (Nascimento et al.2020, Kurdziel et al.2020). |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s152020&r=all |
| By: | Minh Ha-Duong (VIET - Vietnam Initiative for Energy Transition, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Ngo To Nhien (VIET - Vietnam Initiative for Energy Transition) |
| Abstract: | This policy note examines the rationale for enacting a Renewable Energy Law in Vietnam, and to use an Auction mechanism to replace the Feed In Tariff as the main instrument to develop renewable energy sources electricity production. |
| Date: | 2019–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ciredw:hal-03088132&r=all |
| By: | Luis Aguiar (UZH - University of Zürich [Zürich]); Philippe Gagnepain (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We attempt to identify and measure potential knowledge spillovers in the French urban transport sector, which is strongly regulated and where a few large corporations are in charge of operating several urban networks simultaneously. We build and estimate a structural cost model where the service is regulated by a local government and is provided by a single operator. Knowledge spillovers are directly linked to the know-how of a specific corporation, but they also depend on the incentive power of the regulatory contract which shapes the effort of the local managers. Exerting an effort in a specific network allows a cost reduction in this network, but it also benefit other networks that are members of the same corporation. Our model provides us with estimates of the operators' absorptive capacity, which is their in-house knowledge power in order to optimally benefit from spillovers. We find that diversity of knowledge across operators of a same corporation improves absorptive capacity and increases the flow of spillovers. Simulation exercises provide evidence of significant reductions in total operating cost following the enlargement of industrial groups. |
| Keywords: | Knowledge spillovers,Absorptive capacity,Cost incentives,Effort,Diversity of knowledge,Public transport |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03110851&r=all |
| By: | Eckstein, Johannes; Ordonez, Jose Antonio; Wachsmuth, Jakob |
| Abstract: | The unconditional target of Indonesia's NDC foresees a reduction of GHG emissions of 29% relative to a Business-as-Usual (BAU) scenario, to reach 2034 MtCO2eq in 2030. It further specifies that the energy sector shall take a share of 37.6% of this mitigation effort to reduce emissions by 18.8% relative to BAU, reaching 1355 MtCO2eq emissions in 2030. This study analyses how falling cost projections of renewable energy technologies (solar PV and wind energy) could inform energy sector and climate change mitigation plans of Indonesia.We show that cost projections valid for Indonesia for renewable energies have dramatically fallen over the past years. Costs projected for 2030 a couple of years ago are well undercut by more recent projections for 2030. Recent cost projections for 2030 for wind energy are 31% lower than projections dating from 2015, solar PV cost projections have fallen by 49% on average. If falling costs for renewables are considered, the renewable capacities given in RUEN (the National Energy Master Plan) could be revised at constant investments. The overall renewable energy capacity given in RUEN for 2030 could be increased from 70 GW to 85 GW. Solar PV would become the dominant source of renewable energy, wind energy would slightly surpass geothermal power generation. This increase in renewable capacities could inform the revision of Indonesia's NDC. If falling cost projections of renewables are considered, the unconditional target could be reduced from 2034 MtCO2eq to 2005 MtCO2eq at constant costs. This corresponds an increase from 29% to 30.1% reduction and presents a 9.1% increase in the ambition of the energy sector. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s132020&r=all |
| By: | Tu, Gengyang; Faure, Corinne; Schleich, Joachim; Guetlein, Marie-Charlotte |
| Abstract: | Smart thermostats may provide up to 10% savings in residential thermal energy use without loss of comfort, yet their diffusion has typically been slow. To better understand adoption of these devices, we conducted an online survey with approximately 5,500 respondents from eight European countries that included both a discrete choice experiment (DCE) and stated past adoption of smart thermostats. The results we obtained by estimating mixed logit models suggest that households value heating cost savings, remote temperature control, the display of changes in energy consumption, and recommendations by experts, albeit with substantial heterogeneity across countries; in comparison, subsidies are positively valued in all countries except for Germany and Spain, and recommendations by energy providers in all countries except Poland where they are negatively valued. Further, the findings provide evidence that consumer innovativeness reinforces the acceptance of technical attributes (heating cost savings, feedback functionalities, and remote temperature control), that privacy concerns reduce the acceptance of remote functionalities, and that stronger environmental identity reinforces the acceptance of environmentally related attributes (heating cost savings and feedback functionalities). The results we obtained from estimating binary response models of stated past adoption of smart thermostats are generally consistent with those of the DCE. |
| Keywords: | smart thermostats,smart home devices,choice experiment,mixed logit,innovativeness,privacy |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s202020&r=all |
| By: | Rodrigo Carril |
| Abstract: | I study the trade-off between rules and discretion in the context of US federal procurement. Below an arbitrary threshold amount, contracts can be awarded using procedures that are subject to significantly fewer rules and less oversight. Leveraging a change in the threshold value, I document three key empirical findings. First, there is substantial bunching of contracts at the threshold. Second, the added scrutiny introduced by rules distorts the award amount of some contracts, while discouraging other purchases altogether. Third, contracts subject to more scrutiny perform worse ex post. I propose and estimate a stylized model of public procurement that is consistent with these findings. I find that, at current levels, the benefits from waste prevention are modest relative to the size of the compliance costs introduced by regulation. I find that the optimal threshold is substantially higher than the current one, and that a proposed increase in the threshold will leave the government better off. The model highlights the key role of incentive misalignment in bureaucracies, and shows quantitatively how increased discretion can be optimal as misalignment is reduced. |
| Keywords: | public procurement, Bureaucracy, discretion, Regulation, compliance |
| JEL: | D73 H57 K23 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1765&r=all |
| By: | Francesco Decarolis; Raymond Fisman; Paolo Pinotti; Silvia Vannutelli |
| Abstract: | The benefits of bureaucratic discretion depend on the extent to which it is used for public benefit versus exploited for private gain. We study the relationship between discretion and corruption in Italian government procurement auctions, using a confidential database of firms and procurement officials investigated for corruption by Italian enforcement authorities. We show that discretionary procedure auctions (those awarded based on negotiated rather than open bidding) are associated with corruption only when conducted with fewer than the formally required number of bidders or employing discretionary criteria ("scoring rule" rather than first price). We further show that, while these "corruptible" discretionary auctions are chosen more often by officials who are themselves investigated for corruption, they are used less often in procurement administrations in which at least one official is investigated for corruption. These findings fit with a framework in which more discretion leads to greater efficiency as well as more opportunities for theft, and a central monitor manages this trade-off by limiting discretion for high-corruption procedures and locales. Additional results based on two standard tools for curbing corruption -- turnover and subcontracting limits -- corroborate this interpretation. Overall, our results imply that discretion may be under-utilized, given the high potential benefits as compared to the modest increment in corruption. |
| JEL: | D72 D73 H57 K42 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28209&r=all |