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on Regulation |
| By: | Banban Wang; William A. Pizer; Clayton Munnings |
| Abstract: | Tradable performance standards are widely used sectoral regulatory policies. Examples include the US lead phasedown, fuel economy standards for automobiles, renewable portfolio standards, low carbon fuel standards, and—most recently—China’s new national carbon market. At the same time, theory and experience with traditional cap-and-trade programs suggests an important role for price limits in the form of floors, ceilings, and reserves. In this paper we develop a simple analytical model to derive the welfare comparison between tradable performance standards and a price-based alternative. This works out to be is a simple variant of the traditional Weitzman prices-versus-quantities result. We use this result to show that substantial gains could arise from shifting two programs, China’s new national carbon market (~60% gain) and the California Low Carbon Fuel Standard (~20% gain), to a price mechanism. This will generally be true when the coefficient of variation in the price under a TPS is larger than 50%. We end with a discussion of implementation issues, including full and partial consignment auctions based on actual and expected output. |
| JEL: | D82 Q54 Q58 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28368&r=all |
| By: | Emmanuel Hache (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Samuel Carcanague (IRIS - Institut de Relations Internationales et Stratégiques); Clément Bonnet (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Gondia Sokhna Seck (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Marine Simoën (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles) |
| Abstract: | Why should geopolitics focus on energy transition issues? In many parts of the world, the decarbonisation of the energy and electricity mix has become a priority in order to meet international climate objectives and address local pollution issues. Investments made in renewable energies (REs) represented around $332 billion in 20181 (Figure 1) and those needed to meet the targets set in Paris in 2015 at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) could reshape the concept of energy security. The expression "Geopolitics of Renewable Energies" is not widely used at present, and the geopolitical implications of new energy policies and investments in REs are not very well explored. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03101697&r=all |
| By: | Muthe Mathias Mwampashi (Finance Discipline Group, UTS Business School, University of Technology Sydney); Christina Sklibosios Nikitopoulos (Finance Discipline Group, UTS Business School, University of Technology Sydney); Otto Konstandatos (Finance Discipline Group, UTS Business School, University of Technology Sydney); Alan Rai (University of Technology Sydney) |
| Abstract: | Australia's National Electricity Market (NEM) is experiencing one of the world's fastest and marked transitions toward variable renewable energy generation. This transformation poses challenges to system security and reliability and has triggered increased variability and uncertainty in electricity prices. By employing an exponential generalized autoregressive conditional heteroskedasticity (eGARCH) model, we gauge the effects of wind power generation on the dynamics of electricity prices in the NEM. We find that a 1 GWh increase in wind generation decreases daily prices up to 1.3 AUD/MWh and typically increases price volatility up to 2%. Beyond consumption and gas prices, hydro generation also contributes to an increase in electricity prices and their volatility. The cross-border interconnectors play a significant role in determining price levels and volatility dynamics. This underscores the important role of strategic provisions and investment in the connectivity within the NEM to ensure the reliable and effective delivery of renewable energy generation. Regulatory interventions, such as the carbon pricing mechanism and nationwide lockdown restrictions due to COVID-19 pandemic, also had a measurable impact on electricity price dynamics. |
| Keywords: | wind generation; electricity price volatility; merit order effect; hydro generation; interconnectors; carbon pricing mechanism; COVID-19 |
| JEL: | C22 C58 Q40 Q42 |
| Date: | 2020–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:416&r=all |
| By: | Cong Chen; Lang Tong; Ye Guo |
| Abstract: | The problem of pricing utility-scale energy storage resources (ESRs) in the real-time electricity market is considered. Under a rolling-window dispatch model where the operator centrally dispatches generation and consumption under forecasting uncertainty, it is shown that almost all uniform pricing schemes, including the standard locational marginal pricing (LMP), result in lost opportunity costs that require out-of-the-market settlements. It is also shown that such settlements give rise to disincentives for generating firms and storage participants to bid truthfully, even when these market participants are rational price-takers in a competitive market. Temporal locational marginal pricing (TLMP) is proposed for ESRs as a generalization of LMP to an in-market discriminative form. TLMP is a sum of the system-wide energy price, LMP, and the individual state-of-charge price. It is shown that, under arbitrary forecasting errors, the rolling-window implementation of TLMP eliminates the lost opportunity costs and provides incentives to price-taking firms to bid truthfully with their marginal costs. Numerical examples show insights into the effects of uniform and non-uniform pricing mechanisms on dispatch following and truthful bidding incentives. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.10151&r=all |
| By: | Genakos, Christos; Grey, Felix; Ritz, Robert A. |
| Abstract: | Economic policy and shifts in input market prices often have significant effects on the marginal costs of firms and can prompt strategic responses that make their impact hard to predict. We introduce "generalized linear competition" (GLC), a new model that nests many existing theories of imperfect competition. We show how firm-level cost pass-through is a sufficient statistic to calculate the impact of a cost shift on an individual firm's profits. GLC sidesteps estimation of a demand system and requires no assumptions about the mode of competition, rivals' technologies and strategies, or "equilibrium". In an empirical application to the US airline market, we demonstrate GLC's usefulness for ex ante policy evaluation and identify the winners and losers of climate-change policy. We also show how GLC's structure, under additional assumptions, can be used for welfare analysis and to endogenize the extent of regulation. |
| Keywords: | pass-through; imperfect competition; regulation; carbon pricing; airlines; political economy; ES/J500033/1 |
| JEL: | D43 H23 L51 L93 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108481&r=all |
| By: | Jung, Juan; Melguizo, Angel |
| Abstract: | This paper analyzes the link between regulation, institutions, and telecommunications investment in Latin America. The investment levels of the region lag behind those of advanced economies and are impeding substantial progress on digital transformation. Using a database built for this analysis, which covers nearly 90% of Latin American countries for 2007-2017, we confirm the relevance of regulatory and institutional frameworks to explain investment trends in the sector. We also show that a “good” institutional quality contributes significantly to counteract partially a “bad” regulatory environment, and vice versa. Moreover, their impact is significantly stronger when good regulation and institutions interact, suggesting that joint reforms to improve institutions and the regulatory environment would pay off. In particular, improving cybersecurity and piracy control regulation, and fighting corruption and undue influence stand out as the priorities to increase telecommunication investment in Latin America. |
| Keywords: | Telecommunications, Regulation, Institutions |
| JEL: | L51 L96 L98 |
| Date: | 2020–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105165&r=all |
| By: | Rania Mabrouk (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes, UGA UFR FEG - Université Grenoble Alpes - Faculté d'Économie de Grenoble - UGA - Université Grenoble Alpes); Oliwia Kurtyka (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes, Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes) |
| Abstract: | We analyze firms' choice of abatement technology in vertical chains. A downstream polluting monopoly can buy a license from an upstream supplier with mature end-of-pipe equipment (outsider) or develop an in-house clean technology. Insiders innovation may be undertaken only to increase bargaining power of the polluter. We put the light on the strategic role of environmental regulation to influence this choice. We find that the role of regulator as a technology forcing authority is confirmed in regions of under-investment. However, under certain conditions, an over-investment occurs that forces the regulator to become laxer. Paradoxically, the regulator may oppose innovation even if the resulting technology is used by the innovator. All these results rely upon the creation of total profits from the integrated vertical structure. |
| Keywords: | Environmental innovation,Abatement technology,Clean technology,End-of-pipe equipment,Vertical chain,Regulation,Bargaining,Bargaining. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03081146&r=all |
| By: | Rania Hentati-Kaffel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Alessandro Ravina (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper assesses the impact of low-carbon policy on stock returns by means of an environmental extension of Fama and French's (2015) five factor model. This paper makes four major contributions. Firstly, for the first time a factor, GMC (green minus carbon), meant to provide the premium which results from not paying a carbon price is constructed. The GMC factor is obtained by means of a sample of 182 firms from 19 European countries operating in 35 sectors: from January 2008 to December 2018 the value-weight returns of 91 firms regulated by the 2003/87/CE directive are subtracted from the value-weight returns of 91 firms exempted by the 2003/87/CE directive upon which the EU-ETS is based. Secondly, we provide evidence that the addition of the GMC factor improves the performance of the 5 factor model in Europe in the 2008-2018 time span. Thirdly, results show that there is a high green premium rather than a carbon premium as it was asserted by parts of the literature, and that this green premium is highly statistically significant. Fourthly, after performing a carbon stress test, we show the effects of EU-ETS average price shocks on both carbon and green firms for each market cap tranche. |
| Keywords: | Low-carbon transition risks,EU-ETS,CO2 emissions,asset pricing model,green premium |
| Date: | 2020–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03045804&r=all |
| By: | Robert W. Hahn; Robert D. Metcalfe |
| Abstract: | Economic theory suggests that energy subsidies can lead to excessive consumption and environmental degradation. However, the precise impact of energy subsidies is not well understood. We analyze a large energy subsidy: the California Alternate Rates for Energy (CARE). CARE provides a price reduction for low-income consumers of natural gas and electricity. Using a natural field experiment, we estimate the price elasticity of demand for natural gas to be about -0.35 for CARE customers. An economic model of this subsidy yields three results. First, the natural gas subsidy appears to reduce welfare. Second, the economic impact of various policies, such as cap-and-trade, depends on whether prices for various customers move closer to the marginal social cost. Third, benefits to CARE customers need to increase by 6% to offset the costs of the program. |
| JEL: | D04 D1 D60 Q4 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28371&r=all |
| By: | Maximilian Parzen; Fabian Neumann; Addrian H. Van Der Weijde; Daniel Friedrich; Aristides Kiprakis |
| Abstract: | An energy storage technology is valuable if it makes energy systems cheaper. Traditional ways to improve storage technologies are to reduce their costs; however, the cheapest energy storage is not always the most valuable in energy systems. This paper reviews techno-economic storage valuation methods and expands them by the new "market potential method" which derives a system-value by examining the capacities obtained from a long-term investment planning optimisation. We apply and compare this method to other cost metrics in a renewables-based European power system model, covering diverse energy storage technologies. We find that characteristics of high-cost hydrogen storage can be equally or even more valuable than low-cost hydrogen storage. Additionally, we show that modifying the freedom of storage sizing and component interactions can make the energy system 10% cheaper and impact the value of technologies. The results suggest to look beyond the pure cost reduction paradigm and focus on developing technologies with value approaches that can lead to cheaper electricity systems in future. One practical and useful value method to guide energy storage innovation could be the market potential method. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.10092&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:wpaper:halshs-03110851&r=all |
| By: | Naonari Yajima (Waseda INstitute of Political EConomy, Waseda University); Toshi H. Arimura (Faculty of Political Science and Economics, Waseda University; Research Institute for Environmental Economics and Management, Waseda University) |
| Abstract: | “Management-based regulation” has no tangible incentives and such regulations may not be effective. Therefore, a mixed policy that uses both “management-based regulation” and with some clear incentives may be effective and necessary. In this paper, we investigate the effectiveness of combination of “management-based regulation”, some economic incentives and/or information provision on climate change actions. We focus on the “Emissions Reduction Program” (ERP) in Japan, which is one of “management-based regulation”, aiming to promote large facilities reducing greenhouse gas (GHG) emissions. Using the prefecture-industry level aggregated data, we find that information provision, reward for good practices and designation of responsible department for climate change has positive impacts on GHG emissions reduction under ERP. |
| Keywords: | Management-based regulation; Provincial-level policy; Greenhouse gas reduction |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:1916&r=all |
| By: | Rosa Sanchis-Guarner; José Montalbán; Felix Weinhardt |
| Abstract: | This paper estimates the effect of home high-speed internet on national test scores of students at age 14. We combine comprehensive information on the telecom network, administrative student records, house prices and local amenities in England in a fuzzy spatial regression discontinuity design across invisible telephone exchange catchment areas. Using this strategy, we find that increasing broadband speed by 1 Mbit/s increases test scores by 1.37 percentile ranks in the years 2005-2008. This effect is sizeable, equivalent to 5% of a standard deviation in the national score distribution, and not driven by other technological mediating factors or school characteristics. |
| Keywords: | broadband, education, student performance, spatial regression discontinuity |
| JEL: | J24 I21 I28 D83 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8846&r=all |
| By: | Morgan Ubeda (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon) |
| Abstract: | This paper studies the effect of transportation networks on spatial inequality within metropolitan areas. It uses a spatial equilibrium model featuring nonhomotheticities and worker heterogeneity, allowing to capture rich patterns of workers sorting on commuting costs and amenities. The model is calibrated for the Paris urban area. Counterfactual simulations study the effects of a) the Regional Express Rail and b) restricting car use in the city center. Despite a strong contribution to suburbanization and reducing welfare inequality, the public transport network plays no role in reducing income segregation. The effects of banning cars depends critically on the response of residential amenities in the city. If it is low enough, it reduces income disparities between Paris and its suburbs at the cost of a substantial welfare loss. If it is high enough, the policy creates welfare gains but steepens the income gradient. |
| Keywords: | commuting,amenities,income sorting,stratification commuting,stratification |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03082448&r=all |
| By: | Foarta, Dana (Stanford U); Morelli, Massimo (Bocconi U and IGIER) |
| Abstract: | Decision makers called to evaluate and approve a reform proposed by a politician, a bureaucrat, or an interest group face a double asymmetric information problem: about the competence of the proposer and the consequences of the proposal. Moreover, the ability of decision makers to evaluate proposals depends on the complexity of the legislative environment, itself a product of past reforms. We model the strategic interaction between reformers and decision makers as a function of legislative complexity and study the resulting endogenous complexity and stability of reforms. Reform complexity is non-monotonic in the expected competence of the proposer. Dynamically, complexification-simplification cycles can occur on the equilibrium path. Expected complexity is path dependent when competence of reform proposers is lower, leading to 'complexity traps,' with bad or unnecessary complex reforms, or 'inaction traps,' where reforms are blocked. The results nest and reconcile a number of recent findings in legislative and regulation studies, and provide implications for institutional design. |
| JEL: | D73 G28 H83 L51 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3891&r=all |