nep-reg New Economics Papers
on Regulation
Issue of 2021‒03‒22
sixteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Analysing the Impact of a Renewable Hydrogen Quota on the European Electricity and Natural Gas Markets By Schlund, David; Schönfisch, Max
  2. WP 04-20 - Fuel for the future - More molecules or deep electrification of Belgium's energy system by 2050 By Danielle Devogelaer
  3. Prepaid electricity and in-home displays: an alternative for the most vulnerable households in Colombia By Cardona, M; Gallego, J; Garcia, J; Franco, J
  4. Sector coupling via hydrogen to lower the cost of energy system decarbonization By Guannan He; Dharik S. Mallapragada; Abhishek Bose; Clara F. Heuberger; Emre Gen\c{c}er
  5. Emission Targets and Coalition Options for a Small, Ambitious Country: An Analysis of Welfare Costs and Distributional Impacts for Norway By Hidemichi Yonezawa; Taran Faehn
  6. Reconsidering Climate Mitigation Policy in the UK By Nicolas Arregui; Ian Parry
  7. Residential solar water heating: California adopters and their experiences By Sanguinetti, Angela; Outcault, Sarah; Alston-Stepnitz, Eli; Moezzi, Mithra; Ingle, Aaron
  8. Carbon Pricing of Basic Materials: Incentives and Risks for the Value Chain and Consumers By Jan Stede; Stefan Pauliuk; Gilang Hardadi; Karsten Neuhoff
  9. Hydrogen Infrastructure Requirements for Zero-Emission Freight Applications in California By Li, Guozhen PhD; Ogden, Joan PhD; Miller, Marshall PhD
  10. A whole-economy carbon price for Europe and how to get there By Ottmar Edenhofer; Mirjam Kosch; Michael Pahle; Georg Zachmann
  11. The professional associations in Italy: the measurement and effects of regulation By Sauro Mocetti; Giacomo Roma
  12. Bribes, Lobbying and Industrial Structure By Roy Cerqueti; Raffaella Coppier; Gustavo Piga
  13. Climate Change Mitigation Policies: Aggregate and Distributional Effects By Cavalcanti, T.; Hasna, Z.; Santos, C.
  14. The Transition from Pigou’s Ideas on Road Pricing to their Application By Button, Kenneth John
  15. Market Definition in the Platform Economy By Jens-Uwe Franck; Martin Peitz
  16. Winners and losers: the distributional impact of a carbon tax in Brazil By Maria Alice Moz-Christofoletti; Paula Carvalho Pereda

  1. By: Schlund, David (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Schönfisch, Max (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: We perform a model-based analysis of the impact of a renewable hydrogen quota on EU gas and electricity markets. By comparing a scenario in which a renewable hydrogen quota with tradable certificates is imposed on final gas consumption in the sectors of the economy outside the EU ETS with a reference scenario without a quota, we assess price, quantity and welfare effects. Our model simulations show that the hydrogen quota leads to a significant expansion in renewable energy sources (RES) capacity to produce renewable hydrogen and synthetic methane with Power-to-Gas (PtG) technologies. On the electricity market, the price increases substantially, rising by up to 12%—mostly due to increasing emission allowance prices—leading to a higher surplus for power producers. The quota’s primary beneficiaries in the power sector are renewable energy producers. On the gas market, the quota leads to a small decrease in prices (by a maximum of -3%) and gas producer surpluses. Quota obliged gas consumers, mainly households, commercial and small industrial consumers, carry the largest part of the burden associated with the obligation. Overall, the quota leads to the redistribution of welfare from these consumers to RES and PtG producers and a significant decline in total welfare.
    Keywords: Hydrogen; power-to-gas; quota obligation; renewable energy support
    JEL: C61 Q41 Q42 Q48
    Date: 2021–03–11
  2. By: Danielle Devogelaer
    Abstract: In this report, the Federal Planning Bureau sets out to scrutinise the place hydrogen can occupy in the future Belgian energy system by 2050. In fact, this publication focuses on two divergent evolutions of energy (end) uses: on the one hand, a far-reaching electrification of the final energy consumption, on the other, a sustained and increased use of gas for transport, (industrial) heating and power generation. Different outcomes of the two future visions are reported such as the required investments in infrastructure (interconnections, electrolysers, storage).
    Keywords: Electricity, Electricity demand, Renewable energy sources, Energy modelling, energy transition, Long-term energy projections, Hydrogen
    JEL: C61 L94 Q41 Q42
    Date: 2020–10–21
  3. By: Cardona, M; Gallego, J; Garcia, J; Franco, J
    Abstract: Exploiting the implementation of a Prepaid Electricity Program in the region of Antioquia (Colombia), we estimate the impact that switching to a prepaid program has on users’ energy consumption behavior. In particular, we focus the analysis on those that are more vulnerable from a socio-economic perspective. The results show that the new metering scheme and the information provision is associated with a decline in electricity consumption.This scheme allow users to improve their consumption paths, while their access to public electricity services is guaranteed, minimizing disconnection risks and the associated costs.
    Keywords: Prepaid schemes; In-home displays; Electricity consumption; Smart meters; Energy efficiency
    JEL: L94
    Date: 2020–06–01
  4. By: Guannan He; Dharik S. Mallapragada; Abhishek Bose; Clara F. Heuberger; Emre Gen\c{c}er
    Abstract: There is growing interest in hydrogen (H$_2$) use for long-duration energy storage in a future electric grid dominated by variable renewable energy (VRE) resources. Modelling the role of H$_2$ as grid-scale energy storage, often referred as "power-to-gas-to-power (P2G2P)" overlooks the cost-sharing and emission benefits from using the deployed H$_2$ production and storage assets to also supply H$_2$ for decarbonizing other end-use sectors where direct electrification may be challenged. Here, we develop a generalized modelling framework for co-optimizing energy infrastructure investment and operation across power and transportation sectors and the supply chains of electricity and H$_2$, while accounting for spatio-temporal variations in energy demand and supply. Applying this sector-coupling framework to the U.S. Northeast under a range of technology cost and carbon price scenarios, we find a greater value of power-to-H$_2$ (P2G) versus P2G2P routes. P2G provides flexible demand response, while the extra cost and efficiency penalties of P2G2P routes make the solution less attractive for grid balancing. The effects of sector-coupling are significant, boosting VRE generation by 12-55% with both increased capacities and reduced curtailments and reducing the total system cost (or levelized costs of energy) by 6-14% under 96% decarbonization scenarios. Both the cost savings and emission reductions from sector coupling increase with H$_2$ demand for other end-uses, more than doubling for a 96% decarbonization scenario as H$_2$ demand quadraples. Moreover, we found that the deployment of carbon capture and storage is more cost-effective in the H$_2$ sector because of the lower cost and higher utilization rate. These findings highlight the importance of using an integrated multi-sector energy system framework with multiple energy vectors in planning energy system decarbonization pathways.
    Date: 2021–03
  5. By: Hidemichi Yonezawa; Taran Faehn
    Abstract: We theoretically and numerically analyse the impacts for a small, open country with carbon abatement ambitions of joining a coalition with allowance trading. Besides welfare impacts for both the coalition and the small, open economy joining the coalition, we scrutinise how the studied policy options differ with respect to their distributional impacts across domestic income groups. Our example is the EU 2030 policies and Norway’s linking to it. In spite of theoretical ambiguity, the findings suggest that the tighter the links with the EU, the lower the abatement costs for Norway. The distributional profile of the welfare costs tends to be progressive regardless of the choice of linking options; however, the less progressive, the lower the overall welfare cost. This indicates a trade-off between efficiency and distribution concerns. A national cap-and-trade system without linking to the EU is the least cost-effective option for Norway but also the most progressive as the higher income deciles face lower capital return and wages.
    Keywords: carbon policies, distributional impact, Emission Trading System, Effort Sharing Regulation, Computable General Equilibrium model
    JEL: C68 Q43 Q48 Q54 Q58
    Date: 2021
  6. By: Nicolas Arregui; Ian Parry
    Abstract: The UK has pledged to cut greenhouse gases 68 percent below 1990 levels by 2030, to be emissions neutral by 2050, and to phase out internal combustion engine vehicles by 2030. Much progress has been made, but fully achieving these ambitious objectives with the current policy framework will be challenging as it involves multiple and overlapping pricing schemes with significant sectoral differences in carbon prices and may be difficult to scale up on political and administrative grounds. This paper discusses an alternative framework consisting of: (i) a comprehensive carbon price (ideally a tax) rising to at least £60 (US $75) per ton by 2030; and (ii) reinforcing sectoral policies, most importantly feebates for the transport, industrial, and building sectors. This framework could implement mitigation targets, while limiting burdens on households and firms to enhance acceptability, and still raise revenues of 0.8 percent of GDP in 2030. The UK could also leverage its COP26 presidency to promote dialogue on international carbon price floors and pricing of international transport emissions.
    Keywords: climate change, net-zero, UK climate mitigation, carbon pricing, feebate, international carbon price floor
    JEL: Q48 Q54 Q58 H23
    Date: 2021
  7. By: Sanguinetti, Angela; Outcault, Sarah; Alston-Stepnitz, Eli; Moezzi, Mithra; Ingle, Aaron
    Abstract: Solar water heating provides domestic hot water with lower greenhouse gas emissions compared to more typical natural-gas water heating. Solar water heating has a long history, particularly in places where the climate is favorable, such as California where state-backed incentive programs have been successful in creating small bursts of adoption. However, widespread adoption of solar water heating has not occurred in California despite these conditions. This research surveyed 227 single-family households with solar water heating across the state of California to understand their motivations and experiences, and draw implications regarding barriers to adoption. The survey explored households’ experiences across five stages of adoption, as outlined in Rogers’ Diffusion of Innovation theory: Knowledge, Persuasion, Decision, Implementation, and Confirmation. Findings revealed challenges at each stage. Most notably, prevalent disappointment in lower-than-expected energy and bill savings (31%) and high rates of technical problems (41%) appear to be the most significant issues.
    Keywords: Social and Behavioral Sciences, solar water heating, residential water heating, household water, consumer adoption, barriers
    Date: 2021–06–01
  8. By: Jan Stede; Stefan Pauliuk; Gilang Hardadi; Karsten Neuhoff
    Abstract: For the European Union to realise its ambition of carbon neutrality, emissions from basic material production need to be reduced through low-carbon production processes, material efficiency and substitution, as well as enhanced recycling. Different reform options for the EU ETS are discussed that ensure a consistent carbon price incentive for all these mitigation options, while avoiding the risk of carbon leakage. This paper offers a first quantification of potential carbon leakage risks, distributional implications and additional revenues associated with different mechanisms: an import- only border carbon adjustment (BCA), a symmetric BCA, and an excise for embodied carbon emissions at a fixed benchmark level in combination with continued free allocation. We estimate the product-level carbon intensities for about 4,400 commodity groups, including basic materials, material products, and manufactured goods and compute implied price changes and cost increases relative to gross value added to assess the scale of carbon leakage risks.
    Keywords: emissions trading, border carbon adjustment (BCA), excise duty, carbon intensity, carbon leakage, distributional effects, fiscal revenues
    JEL: F18 C67
    Date: 2021
  9. By: Li, Guozhen PhD; Ogden, Joan PhD; Miller, Marshall PhD
    Abstract: Zero-emission vehicles are seen as key technologies for reducing freight- related air pollution and greenhouse gas emissions. California’s 2016 Sustainable Freight Action Plan established a target of 100,000 zero-emission freight vehicles utilizing renewable fuels by 2030. Hydrogen fuel cell vehicles are a promising zero-emission technology, especially for applications where batteries might be difficult to implement, such as heavy-duty trucks, rail, shipping and aviation. However, California’s current hydrogen infrastructure is sparse, with about 25 stations, primarily sited to serve fuel cell passenger vehicles and buses. New infrastructure strategies will be critical for implementing hydrogen freight applications. The researchers analyzed hydrogen infrastructure requirements, focusing on hydrogen fuel cells in freight applications, using a California-specific EXCEL-based scenario model developed under the Sustainable Transportation Energy Pathways program (STEPS) at the Institute of Transportation Studies at UC Davis (Miller et al, 2017). Hydrogen vehicle adoption and demand was estimated for trucks, rail, shipping, and aviation, for a range of scenarios out to 2050.
    Keywords: Engineering, Zero emission vehicles, hydrogen fuels, fuel cells, freight transportation, heavy duty trucks, service stations, demand, mathematical models
    Date: 2021–03–01
  10. By: Ottmar Edenhofer; Mirjam Kosch; Michael Pahle; Georg Zachmann
    Abstract: The European Union’s plan for climate neutrality by 2050 reopens the question of the role carbon pricing can and should play. Carbon pricing should not – and ultimately cannot – only be an enforcement tool or backstop that ensures targets are met, while the heavy-lifting of decarbonisation comes from directed technological change policies. Instead, a technologyneutral carbon price must become the main element, providing signals for decarbonised operations, investment and...
    Date: 2021–03
  11. By: Sauro Mocetti (Bank of Italy); Giacomo Roma (Bank of Italy)
    Abstract: In Italy, regulated occupations that require enrolment in a professional association represent a significant share of overall employment, especially of more highly educated workers. This paper presents a new index measuring the degree of regulation that highlights the heterogeneity between the different professional bodies and shows the impact on the corresponding income from work. Some evidence on the processes of (self) selection in the occupations and the need to take into account the structural changes in the service market suggest that the quality of regulation could improve in some areas.
    Keywords: regulated professions, professional associations, regulation, incomes
    JEL: J44 K20 J24
    Date: 2021–02
  12. By: Roy Cerqueti (Sapienza University of Rome); Raffaella Coppier (University of Macerata); Gustavo Piga (CEIS & DEF, Università di Roma "Tor Vergata")
    Abstract: This paper deals with the relationship between regulatory compliance, bureaucratic corruption, lobbying and the industrial structure of a country. We show that lobbying and bureaucratic corruption can coexist at the macro level when we allow for heterogeneity in firm size. Countries with similar level of development are often characterized by very different industrial structures: we show the implications this has for the level of compliance, corruption and lobbying in that country. Welfare implications of our model point toward encouraging policies that support the small business sector of an economy and toward exible regulatory policies meant to suppress regulation for small enough firms.
    Keywords: Bureaucratic Corruption, Lobbying, Industrial Organization
    JEL: H26 L51 K42
    Date: 2021–03–11
  13. By: Cavalcanti, T.; Hasna, Z.; Santos, C.
    Abstract: We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its original Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. In the US, workers with a comparative advantage in dirty energy sectors who do not reallocate suffer a welfare loss 12 times higher than workers in non-dirty sectors, but constitute less than 1% of the labor force.
    Keywords: Climate change, carbon taxes, worker heterogeneity, labor reallocation
    JEL: E13 H23 J24
    Date: 2021–03–09
  14. By: Button, Kenneth John
    Abstract: A century ago Arthur Pigou published The Economics of Welfare. Within this volume are a few lines relating to the pricing of traffic congestion. Over the years, these lines have attracted the attention and thoughts of some of the leading economists of their day. These have included, Knight, Clapham, and Robertson in the 1920s, Kahn and Viner in the 1930s, Ellis and Fellner in the 1940s, and Buchanan, Vickrey, Solow, Friedman, Walters, Demsetz, Newbery, and Allais in the post-World War II period. Here I look at the academic arguments from the 1920s concerning how roads should be priced, and by whom. I then move to consider the continuation of the intellectual debates after World War II and their implications for policy design and implementation. Finally, I briefly look at the extent to which some of the existing road congestion pricing systems meet the requirements of the economic theory.
    Date: 2020–09–01
  15. By: Jens-Uwe Franck; Martin Peitz
    Abstract: The article addresses the role market definition can play for EU competition practice in the platform economy. The focus is on intermediaries that bring together two (or more) groups of users whose decisions are interdependent and which therefore are commonly referred to as “two-sided platforms”. We address challenges to market definition that accompany these cross-group network effects, assess current practice in a number of cases with the European Commission and Member States’ competition authorities, and provide guidance on how practice is to be adapted to properly account for the economic forces shaping markets with two-sided platforms. Owing to the complementarities of services provided to the user groups the platforms cater to, the question arises whether and when a single market can be defined that encompasses both sides. We advocate a multi-markets approach that takes account of cross-market linkages, acknowledges the existence of zero-price markets, and properly accounts for the homing behaviour of market participants.
    Keywords: antitrust law, EU competition practice, market definition, market power, Market Definition Notice, two-sided platforms, digital markets, network effects, matching platforms, zero-price markets, homing decisions, SSNIP test
    JEL: K21
    Date: 2021–01
  16. By: Maria Alice Moz-Christofoletti; Paula Carvalho Pereda
    Abstract: Through its NDC, Brazil pledged to reduce its GHG emissions by 43% below 2005 levels in 2030, respectively. Carbon pricing could play a key role in meeting this objective. However, a range of issues can emerge when introducing it. Among these issues, the distributional impact has been frequently highlighted as an obstacle to the public acceptance of such a mitigation policy. This paper examines the short-run welfare and emission effects of an economy-wide carbon tax on Brazilian households. The distributional impact is examined by estimating the tax burden relative to annual expenditures and changes in total GHG emissions across income levels, using tax rates consistent with the Paris Agreement and considering a lump-sum rebate that keeps the government revenue neutral. For this, we calculate energy-related GHG emissions coefficients from fossil fuel burning for the whole household consumption basket, and price and expenditure elasticities which account for the zero-expenditure and underdeclaration problems. Our results indicate that the incidence of the carbon tax is effective in reducing emissions in the short run, but imposes welfare losses, especially on the poor. The consideration of compensation mechanisms is critical when designing this type of environmental tax, specially in the context of a highly complex tax-system.
    Keywords: Carbon Taxation; Censored QUAIDS; Hybrid Input Output
    JEL: H23 K32 O13
    Date: 2021–03–12

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