nep-reg New Economics Papers
on Regulation
Issue of 2021‒04‒05
eighteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Managing the spatial externalities of renewable energy deployment: Uniform vs. differentiated regulation By Geiger, Charlotte; Lehmann, Paul
  2. The economic and environmental benefits from international co-ordination on carbon pricing: Insights from economic modelling studies By Daniel Nachtigall; Jane Ellis
  3. Research Brief: Charging Forward: Deploying Electric Vehicle Infrastructure for Uber and Lyft in California By Jenn, Alan
  4. Which combination of battery capacity and charging power for battery electric vehicles: urban versus rural French case studies By Bassem Haidar; Pascal da Costa; Jan Lepoutre; Fabrice Vidal
  5. Long-run Effects of Real-time Electricity Pricing in the Saudi Power Sector By Walid Matar
  6. Retailers' strategies facing demand response and markets interactions By Cédric Clastres; Haikel Khalfallah
  7. Imperfect competition in electricity markets with partially flexible technologies By Crampes, Claude; Renault, Jérôme
  8. A survey of electricity spot and futures price models for risk management applications By Thomas Deschatre; Olivier F\'eron; Pierre Gruet
  9. Patent Auctions and Bidding Coalitions: Structuring the Sale of Club Goods By John Asker; Mariagiovanna Baccara; SangMok Lee
  10. Sustainability in a Market Design for Electricity By Lamia Varawala; Mohammad Reza Hesamzadeh; Gy\"orgy D\'an; Derek Bunn; Juan Rosell\'on
  11. Competition, Innovation, and Inclusive Growth By Philippe Aghion; Reda Cherif; Fuad Hasanov
  12. Contracting Out Public Transit Services: An Incentive Performance-Based Approach By João M. Pinto; Mário Coutinho dos Santos; Pedro Verga Matos
  13. Impact of technological progress on carbon emissions in different country income groups By Chris Belmert Milindi; Roula Inglesi-Lotz
  14. Are Electric Vehicle Subsidies Becoming More Impactful Over Time? By Tamara Sheldon; Rubal Dua; Omar Al Harbi
  15. Liberalization, Technology Adoption, and Stock Returns: Evidence from Telecom By Rabah Arezki; Vianney Dequiedt; Rachel Fan; Carlo Rossotto
  16. Firms’ Environmental Performance and the COVID-19 Crisis By Pierre Guérin; Felix Suntheim
  17. Navigating through hydrogen By Ben McWilliams; Georg Zachmann
  18. A Dynamic Theory of Regulatory Capture By Alessandro De Chiara; Marco Alexander Schwarz

  1. By: Geiger, Charlotte; Lehmann, Paul
    Abstract: With the expansion of renewable energy sources (RES) in countries all over the world, policy design to address the negative impacts of RES plants on their local and regional environment gains in importance. We analyse whether policy design should be spatially-differentiated or uniform when negative RES environmental externalities are spatially heterogeneous and display interregional cumulative effects. In a theoretical model of the RES electricity generation sector, we compare the welfare differential between both regulatory designs and analyse how it is affected by cumulative environmental effects. While we confirm that the welfare costs of attaining a RES deployment target are lower under a spatially-differentiated than a spatiallyuniform regulation, we find that the welfare costs are contingent on the presence of cumulative environmental effects. This depends on the heterogeneity of region-specific generation cost parameters and social cost parameters of RES electricity generation. If heterogeneity is more (less) pronounced in regional generation cost parameters than in regional social cost parameters, positive (negative) cumulative effects decrease the welfare costs of a uniform instrument.
    Keywords: environmental regulation,renewable energy subsidies,regional environmental damages,interregional environmental damages,renewable energy deployment
    JEL: D61 D62 H21 H23 Q48 Q58
    Date: 2021
  2. By: Daniel Nachtigall (OECD); Jane Ellis (OECD)
    Abstract: This paper assesses quantitative estimates based on economic modelling studies of the economic and environmental benefits from different forms of international co-ordination on carbon pricing. Forms of international co-ordination include: harmonising carbon prices (e.g. through linking carbon markets), extending the coverage of pricing schemes, phasing out fossil fuel subsidies, developing international sectoral agreements, and establishing co-ordination mechanisms to mitigate carbon leakage. All forms of international co-operation on carbon pricing can deliver benefits, both economic (e.g. lower mitigation costs) and/or environmental (e.g. reducing GHG emissions and carbon leakage). Benefits tend to be higher with broader participation of countries, broader coverage of emissions and sectors and more ambitious policy goals. Most, but not all, countries gain economic benefits from international co-operation, and these benefits vary significantly across countries and regions. Complementary measures outside co-operation on carbon pricing (e.g. technology transfers) could ensure that co-operation provides economic benefits for all countries.
    Keywords: Border carbon adjustment, Climate change mitigation, Climate-economy-modelling, Fossil fuel subsidy reforms, Harmonising carbon prices, International Co-operation, Sectoral agreements
    JEL: F18 H23 Q54 Q56 Q58
    Date: 2021–04–01
  3. By: Jenn, Alan
    Abstract: This research brief summarizes the research and findings from a University of California, Davis, study that investigated how to deploy electric vehicle charging infrastructure to meet the electricity demand coming from electric vehicles (EVs) on ride-hailing services such as Uber and Lyft in California.
    Keywords: Engineering, Social and Behavioral Sciences, Electric vehicles, charging infrastructure, transportation network companies, Clean Miles Standard
    Date: 2021–03–01
  4. By: Bassem Haidar (LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay); Pascal da Costa; Jan Lepoutre; Fabrice Vidal
    Abstract: Battery Electric Vehicles (BEVs) are essential for reducing greenhouse gas emissions related to the transport sector towards meeting global emissions targets. Although this technology is gaining much attention, techno-economic barriers hinder the widespread of BEVs, namely the high investments, the limited autonomy, and the lack of public-charging infrastructure. A bigger battery leads simultaneously to more autonomy and higher-priced BEV, due to the battery-pack cost. Deploying more public chargers, a solution for limited autonomy BEVs, is facing other obstacles: vehicle-charger adaptability in terms of charging power, and additional investments for charging operators. Therefore, this paper aims to find the most cost-efficient solution(s) of battery capacity and charging power combination(s), considering technoeconomic factors. Based on French travel surveys data, we simulate the needs of 12 scenarios of 5,000 identical privately-purchased BEVs, by changing their battery capacity for both urban and rural areas, before determining the optimal number of charging stations. We then analyze the BEV owner and the charging operator business models in order to conclude with win-win situations for both parties. Results show cheaper investments in charging infrastructure, especially 22 kW charger, rather than in bigger batteries. For urban (rural) areas, purchasing a 35 to 50 kWh BEV (65 kWh BEV for rural) and deploying 22 and 50 kW chargers (50 kW for rural) proves the most cost-efficient and profitable solutions for both BEV owners and charging operators. We finally recommend charging operators to review their charging tariffs, and to take into account the acceptability of customer.
    Keywords: Battery range,Charging infrastructure,Electric vehicles,Innovative business model,Techno-economic scenarios
    Date: 2020–11–25
  5. By: Walid Matar (King Abdullah Petroleum Studies and Research Center)
    Abstract: This study explores the potential effects of real-time electricity pricing on the operations of Saudi Arabia’s power generation sector. The Kingdom currently sets fuel prices for power utilities at levels that suppress the costs of power generation. However, this analysis provides insights into the effects of a real-time electricity pricing scheme in the context of liberalized fuel prices.
    Keywords: Agent based modeling, Bargaining modeling, Behavior analysis, Collective decision making processes
    Date: 2021–03–22
  6. By: Cédric Clastres (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, Chaire EEM - Chaire European Electricity Markets - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres); Haikel Khalfallah (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)
    Abstract: Demand response programmes reduce peak-load consumption and could increase off-peak demand as a load-shifting effect often exists. In this research we use a three-stage game to assess the effectiveness of dynamic pricing regarding load-shifting and its economic consequences. We consider a retailer's strategic supplies on forward or real time markets, when demand is uncertain and with consumer disutility incurred from load-shedding or load-shifting. Our main results show that a retailer could internalize part of demand uncertainty by using both markets. A retailer raises the quantities committed to the forward market if energy prices or balancing costs are high. If the consumer suffers disutility, then the retailer contracts larger volumes on the forward market for peak periods and less off peak, due to a lower load-shifting effect and lower off-peak energy prices.
    Keywords: Dynamic and Stochastic Model,Electricity Markets,Load-Shifting,Disutility
    Date: 2020–04
  7. By: Crampes, Claude; Renault, Jérôme
    Abstract: The producers of electricity using dispatchable plants rely on partially flexible technologies to match the variability of demand and intermittent renewables. We analyse flexibility in a two-stage decision process where production decided at the last moment is more costly than if it is planned in advance. We first determine the first best outputs, prices and gains. We then consider a model where two partially flexible firms compete in quantities to supply a random residual demand. We determine the subgame perfect equilibria corresponding to two market designs: one where all trade occurs in a spot market with known demand, the other where a day-ahead market with random demand is added to the ex-post market, first in a general setting, then using a quadratic specification. We show that when all trade occurs ex post, the least flexible firm is not necessarily disadvantaged. We also show that adding a day-ahead market makes consumers better off and firms worse off by increasing total output. It increases welfare but it also transfers risks from firms to consumers.
    Keywords: Flexibility; electricity; market design; production costs; risk transfer
    JEL: C72 D24 D47 L23 L94
    Date: 2021–03
  8. By: Thomas Deschatre; Olivier F\'eron; Pierre Gruet
    Abstract: This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their ability to represent the random behavior of prices and some of their characteristics. In particular, this classification helps users to choose among the most suitable models for their risk management problems.
    Date: 2021–03
  9. By: John Asker; Mariagiovanna Baccara; SangMok Lee
    Abstract: Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished by the good for sale being non-rivalrous, but still excludable, in consumption{that is, they auctions of club goods. This affects how coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second-price (or equivalently, ascending-price) auctions. Although the formation of coalitions can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. Limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multi-license auctions, and we find that the latter are superior in a large class of environments.
    JEL: D44 D47 K21 L14 L24 L4 O34
    Date: 2021–03
  10. By: Lamia Varawala; Mohammad Reza Hesamzadeh; Gy\"orgy D\'an; Derek Bunn; Juan Rosell\'on
    Abstract: The electricity sector has tended to be one of the first industries to face technology change motivated by sustainability concerns. Whilst efficient market designs for electricity have tended to focus upon market power concerns, environmental externalities pose extra challenges for efficient solutions. Thus, we show that ad hoc remedies for market power alongside administered carbon prices are inefficient unless they are integrated. Accordingly, we develop an incentive-based market clearing design that can include externalities as well as market power mitigation. A feature of the solution is that it copes with incomplete information of the system operator regarding generation costs. It is uses a network representation of the power system and the proposed incentive mechanism holds even with energy limited technologies having temporal constraints, e.g., storage. The shortcomings of price caps to mitigate market power, in the context of sustainability externalities, are overcome under the proposed incentive mechanism.
    Date: 2021–04
  11. By: Philippe Aghion; Reda Cherif; Fuad Hasanov
    Abstract: We provide an overview of the theories and empricial evidence on the complex relationship among innovation, competition, and inclusive growth. Competition and innovation-led growth are critical to drive productivity gains and support broad-based growth. However, new technologies and trends in market concentration are stifling future innovation while contributing to the marked increase in inequality. Beyond consumer welfare in a narrow market, competition policy should adapt to this new reality by considering the spillover and dynamic effects of market power, especially on firm entry, innovation, and inequality. Innovation policies should tackle not only government failures but also market failures.
    Date: 2021–03–19
  12. By: João M. Pinto (Universidade Católica Portuguesa, Católica Porto Business School and CEGE); Mário Coutinho dos Santos (CICEE – Centro de Investigação em Ciências Económicas e Empresariais); Pedro Verga Matos (Instituto Superior de Economia e Gestão, Universidade de Lisboa)
    Keywords: public transportation; privatization; performance-based contracting; bonus / malus mechanism
    JEL: H40 L24 L33
    Date: 2021–03
  13. By: Chris Belmert Milindi (Department of Economics, University of Pretoria, Pretoria, South Africa); Roula Inglesi-Lotz (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: This study examines the complex relationship between carbon emissions and technological progress in a sample of 60 countries, divided into four categories based on their per capita income between the periods of 1989-2018. For robustness purposes and due to the broad definition of technology, we use six different proxies to represent technology; namely: Information and telecommunication technology (ICT); patents; public R&D expenditure; total factor of productivity (TFP); and a number of science and technology publications. After applying the fixed-effect method with Driscoll and Kraay standard errors, for the full sample, the results show that the ICT variables are a good instrument for carbon abatement, while R&D expenditure and patents do not have a clear impact on carbon emissions, TFP increases carbon emissions, and science and technology publications are negatively related to carbon emissions. The impact of the indicators on the various income levels groups of countries vary which has significant policy implications.
    Keywords: Technological progress, Income groups, rebound effect, fixed effect methodology with Driscoll and Kraay standards errors
    JEL: O30 O32 C23 Q56
    Date: 2021–03
  14. By: Tamara Sheldon; Rubal Dua; Omar Al Harbi (King Abdullah Petroleum Studies and Research Center)
    Abstract: Various subsidies for plug-in electric vehicles (PEVs) have been implemented worldwide at the federal, state and regional levels. These subsidies aim to promote PEV adoption to help reduce both local air pollution and greenhouse gas emissions (Hardman 2019). In the United States (U.S.), the federal government began subsidizing PEVs in 2010.
    Keywords: Fleet fuel economy, Plug-in electric vehicles, Subsidies
    Date: 2021–03–22
  15. By: Rabah Arezki (BAD - Banque africaine de développement / African Development Bank, Kennedy School of Government, Harvard University, Cambridge, MA - affiliation inconnue); Vianney Dequiedt (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Rachel Fan (Banque Mondiale - Banque Mondiale - Banque Mondiale); Carlo Rossotto (Banque Mondiale - Banque Mondiale - Banque Mondiale)
    Abstract: The paper investigates the pace of technology adoption in telecom technology post liberalization and its effect on stock returns using a new global panel dataset. Results are twofold. First, evidence points to the complementarity between telecom liberalization and regulatory independence in driving a sustained pace of technology adoption. Second, results show a positive and economically significant effect of telecom adoption on stock returns pointing to significant spillovers of telecom to the rest of the economy.
    Keywords: Telecom,Regulation,Technology adoption,Liberalization,Stock returns
    Date: 2021–03–17
  16. By: Pierre Guérin; Felix Suntheim
    Abstract: The shutdown in economic activity due to the coronavirus disease (COVID-19) crisis has resulted in a short-term decline in global carbon emissions, but the long-term impact of the pandemic on the transition to a low-carbon economy is uncertain. Looking at previous episodes of financial and economic stress to draw implications for the current crisis, we find that tighter financial constraints and adverse economic conditions are generally detrimental to firms’ environmental performance, reducing green investments. The COVID-19 crisis could thus potentially slow down the transition to a low-carbon economy. In light of the urgent need to reduce global greenhouse gas emissions, these findings underline the importance of climate policies and green recovery packages to boost green investment and support the energy transition. Policies that support the sustainable finance sector, such as improved transparency and standardization, could further help mobilize green investments.
    Date: 2021–03–19
  17. By: Ben McWilliams; Georg Zachmann
    Abstract: Hydrogen is seen as a means to decarbonise sectors with greenhouse gas emissions that are hard to reduce, as a medium for energy storage, and as a fallback in case halted fossil-fuel imports lead to energy shortages. Hydrogen is likely to play at least some role in the European Union's achievement by 2050 of a net-zero greenhouse gas emissions target. However, production of hydrogen in the EU is currently emissions...
    Date: 2021–03
  18. By: Alessandro De Chiara; Marco Alexander Schwarz
    Abstract: Firms often try to influence individuals that, like regulators, are tasked with advising or deciding on behalf of a third party. In a dynamic regulatory setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm’s eagerness and commitment to rewarding lenient regulators, which facilitates collusive equilibria. We find that opening the revolving door conditional on the regulator’s report is usually more efficient than a blanket ban on post-agency employment and may increase social welfare. This insight extends to a variety of applications and can also be used to determine the optimal length of cooling-off periods.
    Keywords: collusion, cooling-off periods, corruption, dynamic games, experts, regulation, regulatory capture, revolving door
    JEL: D73 D86 H11 J45 L51
    Date: 2021

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