nep-reg New Economics Papers
on Regulation
Issue of 2021‒04‒26
seventeen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Cost of Vehicle Ownership: Cost Parity Between Plug-in Electric Vehicles and Conventional Vehicles Is at Least a Decade Away By Chakraborty, Debapriya; Buch, Koral; Tal, Gil
  2. Robust Decarbonization of the US Power Sector: Policy Options By James H. Stock; Daniel N. Stuart
  3. Nonlinear Pricing with Misspecified and Arbitrary Perception of the Marginal Price By Diego Alejandro Murillo Taborda
  4. Why are Some California Consumers Abandoning Electric Vehicle Ownership? By Hardman, Scott; Tal, Gil
  5. Using electricity consumption to predict economic activity during COVID-19 in Brazil By Flávio Menezes; Vivian Figer; Fernanda Jardim; Pedro Medeiros
  6. Competition and Regulatory Challenges in Digital Markets: How to Tackle the Issue of Self-Preferencing? By Frédéric Marty
  7. Universal High-Speed Broadband Provision: An Alternative Policy Approach By Elmar G. Wolfstetter
  8. Rate of Return Regulation to Unlock Natural Gas Pipeline Deployment : insights from a Mozambican project By Florian Perrotton; Olivier Massol
  9. Does Household Electrification Supercharge Economic Development? By Lee, Kenneth; Miguel, Edward; Wolfram, Catherine
  10. Optimal taxation and market power By Jan Eeckhout; Chunyang Fu; Wenjian Li; Xi Weng
  11. Paris Agreement requires substantial, broad, and sustained engagements beyond COVID-19 recovery packages By Katsumasa Tanaka; Christian Azar; Olivier Boucher; Philippe Ciais; Yann Gaucher; John Hassler; Daniel J. A. Johansson
  12. Copper at the Crossroads By Clément Bonnet; Gondia Sokhna Seck; Emmanuel Hache; Marine Simoën; Samuel Carcanague
  13. The Welfare Effect of a Consumer Subsidy with Price Ceilings: The Case of Chinese Cell Phones By Ying Fan; Ge Zhang
  14. CO2 Emissions and Energy Technologies in Western Europe By Josué Barrera-Santana; Gustavo A. Marrero; Luis A. Puch; Antonia Díaz
  15. Regulation and competition in the taxi industry in Vancouver By Monteiro, Joseph; Prentice, Barry E.
  16. Trade barriers in government procurement By Alen Mulabdic; Lorenzo Rotunno
  17. Driving California’s Transportation Emissions to Zero By Chiu, Sam

  1. By: Chakraborty, Debapriya; Buch, Koral; Tal, Gil
    Abstract: While plug-in electric vehicle (PEV) adoption has been rising over the past decade, with PEVs making-up about 7.8% of California’s new vehicle sales in 2019, the trend needs to quickly accelerate for the state to reach its goals of 100% zero-emission vehicle (ZEV) sales by 2035 and a zero-carbon economy by 2045. California has various incentive programs to encourage PEV adoption, but policymakers expect to phase these incentives out as PEVs reach cost parity with conventional internal combustion engine vehicles. Comparing the total cost of ownership—purchase price, operational costs, and resale value—of PEVs or other ZEVs with that of conventional vehicles can inform policy decisions about incentive programs and inform consumers’ purchase decisions, by accounting for PEVs’ higher purchase prices but lower fuel and maintenance costs. Recent research has estimated that cost parity between PEVs and conventional vehicles will be achieved over the next decade. However, the timeline depends on each study’s assumptions about technology improvement and travel behavior. These studies often assign a single total cost of ownership to a specific vehicle model, ignoring the fact that costs can vary across households based on the type of vehicle adopted, travel behavior, access to charging and refueling facilities, gasoline and electricity prices, and other factors. Researchers at the University of California, Davis estimated PEVs’ total cost of ownership for the period of 2020–2030, their cost-competitiveness with conventional vehicles, and consequently the cost of electrification of California’s fleet of more than 30 million light-duty vehicles. The researchers analyzed six market segments, defined by household income and housing type, to account for the heterogeneity in total cost of ownership. The cost of electrification analysis also included fuel cell electric vehicles and was extended out to 2045 to align with California’s emission reduction goals. This policy brief summarizes findings from that research and provides policy implications. View the NCST Project Webpage
    Keywords: Social and Behavioral Sciences, Total cost of ownership, zero emission vehicles, teardown analysis, market segments
    Date: 2021–04–01
  2. By: James H. Stock; Daniel N. Stuart
    Abstract: To reliably achieve deep decarbonization of the US power sector, a candidate policy must perform robustly across a range of possible future trajectories of demand, fossil fuel prices, and prices of new wind and solar capacity. Using a modified version of the NREL ReEDS model with scenarios that span different trajectories of demand, fuel prices, and technology costs, we find that some recently proposed policies can robustly achieve 80% decarbonization (relative to 2005 emissions) or more by 2035, but many do not. The two robustly successful policies are a tradeable performance standard (TPS) and a hybrid Clean Electricity Standard (CES) with a 100% clean target, partial crediting of gas generation, and a $40/mton CO2 alternative compliance payment (ACP) backstop. Both are nearly as cost effective as the emissions-equivalent efficient policy. A $40 carbon tax nearly achieves the robust 80% threshold and, in most scenarios, drives deep decarbonization. A 90% CES (without partial crediting) fails to achieve robust 2035 decarbonization because it need not drive coal out of the system. Simply extending renewable energy tax credits, which are set to expire, does not drive significant decarbonization in most scenarios, nor does relying on increased ambition in green-leaning states.
    JEL: H23 Q48 Q54 Q58
    Date: 2021–04
  3. By: Diego Alejandro Murillo Taborda
    Abstract: In the context of nonlinear prices, the empirical evidence suggests that the consumers have cognitive biases represented in a limited understanding of nonlinear price structures, and they respond to some alternative perceptions of the marginal prices. In particular, consumers usually make choices based more on the average than the marginal prices, which can result in a suboptimal behavior. Taking the misspecification in the marginal price as exogenous, this document analyzes how is the optimal quadratic price scheme for a monopolist and the optimal quadratic price scheme that maximizes welfare when there is a continuum of representative consumers with an arbitrary perception of the marginal price. Under simple preferences and costs functional forms and very straightforward hypotheses, the results suggest that the bias in the marginal price doesn't affect the maximum welfare attainable with quadratic price schemes, and it has a negligible effect over the efficiency cost caused by the monopolist, so the misspecification in the marginal price is not relevant for welfare increasing policies. However, almost always the misspecification in the marginal price is beneficial for the monopolist. An interesting result is that under these functional forms, more misspecification in the marginal price is beneficial for both the consumers and the monopolist if the level of bias is low, so not always is socially optima to have educated consumers about the real marginal price. Finally, the document shows that the bias in the marginal price has a negative effect on reduction of aggregate consumption using two-tier increasing tariffs, which are commonly used for reduction of aggregate consumption.
    Date: 2021–04
  4. By: Hardman, Scott; Tal, Gil
    Abstract: California has set an ambitious goal of 100% zero-emission vehicle sales by 2035. Most consumer research to date has focused on understanding the factors influencing the initial purchase of plug-in electric vehicles (PEVs). But for the market introduction of PEVs, which include both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), to be successful, subsequent vehicle purchases by initial adopters need to continue to be PEVs rather than conventional vehicles. Discontinuance, the act of abandoning a new technology after once being an adopter, could make achieving California’s goal more challenging. Researchers at the University of California, Davis surveyed California PEV buyers two to seven years after they first purchased their electric vehicle to understand whether they have continued to choose PEVs with subsequent purchases, and if not, what factors may have led to their discontinuance of the technology. This policy brief summarizes the findings from that research and provides policy implications. View the NCST Project Webpage
    Keywords: Social and Behavioral Sciences, Electric vehicle, market, consumers, survey
    Date: 2021–04–01
  5. By: Flávio Menezes (School of Economics, University of Queensland, Brisbane, Australia); Vivian Figer (Center of Studies in Infrastructure Regulation, Getulio Vargas Foundation, Rio de Janeiro, Brazil); Fernanda Jardim (Center of Studies in Infrastructure Regulation, Getulio Vargas Foundation, Rio de Janeiro, Brazil; EPGE Brazilian School of Economics and Finance, Getulio Vargas Foundation, Rio de Janeiro, Brazil); Pedro Medeiros (Center of Studies in Infrastructure Regulation, Getulio Vargas Foundation, Rio de Janeiro, Brazil)
    Abstract: COVID-19 has led to substantial societal and economic changes. Social distancing, both voluntary and government-mandated through quarantine or lockdowns, became necessary to reduce the speed of transmission. Governments re- sponded with substantive policies to support businesses that had to shut down and workers who were unable to work from home. Here, we show how hourly electricity consumption data, available with a 2-to-5-day lag, can be used to track economic ac- tivity during the pandemic in Brazil. Our electricity consumption indicator fell 6.9% during the rst three and a half months since the introduction of social distancing requirements on March 16th, with the sharpest decline of 14.61% occurring in April. By using monthly consumption data, our electricity consumption indicator shows a decline of 17.27% and 25.52% for the industrial and commercial sectors, respectively, while there is no signigicant e ect in the residential sector over the same period.
    Date: 2021–04–07
  6. By: Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This contribution deals with the application of competition rules in the digital sector and, in particular, the distortions that can result from self-preferencing strategies. In the context of the European Commission's Digital Markets Act project and the UK's plans to regulate the major digital ecosystems, the aim is to examine the relative effectiveness of the current effects-based approach stemming from competition law enforcement, the use of per-se rules, the implementation of specific regulation or the imposition of structural remedies to address such risks. It is a question of insisting on the objectives pursued (maximisation of consumer welfare, dynamic efficiency, contestability of market positions and fairness) and on the conditions for the implementation of hybrid approaches combining the logic of sectoral regulation and procedures rooted in the enforcement of competition rules.
    Keywords: Digital ecosystems, self-preferencing, exclusionary abuses, exploitative abuses, remedies
    JEL: L12 L41 L42 L86
    Date: 2021–04
  7. By: Elmar G. Wolfstetter
    Abstract: Millions of citizens and firms lack access to high speed internet, even though governments pledged to spend huge sums of money to subsidize internet networks. In this paper we review some systematic flaws of present subsidy policies and outline a promising alternative. We propose that governments should treat the broadband infrastructure as a public responsibility and set up intelligently designed public-private partnerships that fund and temporarily operate the broadband in exchange for collecting service fees and, if necessary, subsidies. Simple “least-present value of revenue” auctions should be used to award all concessions, not only those that require subsidies, and concessions should flexibly revert to public ownership depending on realized revenues. This procurement method is easy to use, immune to strategic manipulations and renegotiations, and has already proven successful in procuring toll-roads and bridges.
    Keywords: public-private partnerships, auctions, universal service auctions, high-speed broadband provision, public finance
    JEL: D44 D47 D86 H20 H54 L96
    Date: 2021
  8. By: Florian Perrotton (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, University of London [London])
    Abstract: In poor developing countries, the discovery of large gas deposits often stimulates the public authorities' appetite for ambitious development strategies requiring the construction of a large national pipeline system. However, the foreign private investors financing its installation usually prefer smaller infrastructure designs that are solely intended to supply a few creditworthy industrial sites. Focusing on the situation in Mozambique, we examine whether the adoption of rate-of-return (RoR) regulation can reconcile these conflicting objectives. As a first step, we assess the magnitude of the overcapitalization generated ex ante at the planning stage by the application of RoR regulation (i.e., the Averch-Johnson effect) to the investors. Then, analyzing the ex post situation when the enlarged domestic demand materializes, we prove that the allowable rate of return can be set by the regulator to obtain ex ante the degree of overcapitalization needed ex post to serve the enlarged demand in a cost-efficient manner. We finally discuss whether RoR regulation can still protect society from monopoly prices when it is tuned to prompt an optimal degree of building ahead of proven demand.
    Keywords: Buildingahead of demand,Overcapitalization,Natural gas,Pipeline,Regulatory economics,Developing countries,Mozambique
    Date: 2019–09–21
  9. By: Lee, Kenneth; Miguel, Edward; Wolfram, Catherine
    Abstract: In recent years, electrification has re-emerged as a key priority in low-income countries, with a particular focus on electrifying households. Yet the microeconomic literature examining the impacts of electrifying households on economic development has produced a set of conflicting results. Does household electrification lead to measurable gains in living standards or not? Focusing on grid electrification, we discuss how the divergent conclusions across the literature can be explained by differences in methods, interventions, potential for spillovers, and populations. We then use experimental data from Lee, Miguel, and Wolfram (2019) — a field experiment that connected randomly-selected households to the grid in rural Kenya— to show that impacts can vary even across individuals in neighboring villages. Specifically, we show that households that were willing to pay more for a grid electrification may gain more from electrification compared to households that would only connect for free. We conclude that access to household electrification alone is not enough to drive meaningful gains in development outcomes. Instead, future initiatives may work better if paired with complementary inputs that allow people to do more with power.
    Keywords: Social and Behavioral Sciences
    Date: 2019–12–12
  10. By: Jan Eeckhout; Chunyang Fu; Wenjian Li; Xi Weng
    Abstract: Should optimal income taxation change when firms have market power? The recent rise of market power has led to an increase in income inequality and a deterioration in efficiency and welfare. We analyze how the planner can optimally set taxes on labor income of workers and on the profits of entrepreneurs to induce a constrained efficient allocation. Our results show that optimal taxation in the presence of market power can substantially increase welfare, but it also highlights the severe constraints that the Planner faces to correct the negative externality from market power, using the income tax as a Pigouvian taxes. Pigouvian taxes compete with Mirrleesian incentive concerns, which generally leads to opposing forces. Overall, we find that due to incentive concerns, market power tends to lower marginal tax rates on workers, whereas it increases the marginal tax rate on entrepreneurs.
    Keywords: Optimal taxation, optimal profit tax, market power, market structure, markups
    JEL: D3 D4 J41
    Date: 2021–04
  11. By: Katsumasa Tanaka; Christian Azar; Olivier Boucher; Philippe Ciais; Yann Gaucher; John Hassler; Daniel J. A. Johansson
    Abstract: Andrijevic et al. (Policy Forum, 16 October 2020, p.298) claim that "low-carbon investments to put the world on an ambitious track toward net zero carbon dioxide emissions by mid-century are dwarfed by currently announced COVID-19 stimulus funds." We argue that this short-sighted and public investment-led view misrepresents the grand challenges that climate change entails.
    Date: 2021–04
  12. By: Clément Bonnet (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Gondia Sokhna Seck (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Emmanuel Hache (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Marine Simoën (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Samuel Carcanague (IRIS - Institut de Relations Internationales et Stratégiques)
    Abstract: The aim of this article is to assess the impact of copper availability on the energy transition and to answer the question whether copper could become critical to the power and the transport sectors due to the high copper content of low-carbon technologies compared to conventional technologies. In order to assess the copper availability by 2055, we rely on our linear programming world energy-transport model, TIAM-IFPEN. We conduct two climate scenarios (2°C and 4°C) with two mobility scenarios implemented with a recycling chain. The penetration of low-carbon technologies in the transport and energy sectors (electric vehicles and low-carbon power generation technologies) tends to significantly increase copper demand by 2055. In order to investigate how the tension over copper resources can be reduced in the energy transition context, we consider several public policy drivers: a sustainable mobility and recycling practices. Results show that in the most stringent scenario, 96.1% of the copper resources known in 2010 have to be extracted. They also pinpoint the importance of China and Chile in the future copper market evolution.
    Keywords: Copper,Bottom-up modeling,Energy transition,Transport sector,Power sector,Recycling
    Date: 2019–07
  13. By: Ying Fan; Ge Zhang
    Abstract: Subsidies to consumers may cause firms to charge higher prices, which offsets consumer benefits from subsidies. We study a subsidy program design that mitigates such price increases by making products' eligibility for a subsidy dependent on firms' commitment to price ceilings. To quantify the importance of such competition for eligibility, we develop a structural model and an estimation procedure that accommodate binding pricing constraints. We find that competition for eligibility mitigates the price increases arising from the subsidy and even leads to a reduction in prices for some products. It improves consumer and total surpluses while limiting government subsidy payments.
    JEL: D4 H2 L1
    Date: 2021–04
  14. By: Josué Barrera-Santana (Universidad de La Laguna and CEDESOG.); Gustavo A. Marrero (Universidad de La Laguna and CEDESOG.); Luis A. Puch (Universidad Complutense de Madrid and ICAE.); Antonia Díaz (Universidad Carlos III de Madrid.)
    Abstract: In this paper we investigate the path to the green transition in Europe. In so doing, we implement an empirical model of dynamic panel data on a sample of sixteen Western European countries over the period 1980 to 2019. The model is consistent with various features of neo- classical growth theory incorporating energy use. Our focus is on the short-run determinants of carbon emissions within that set of countries. We provide evidence that the relationship between economic activity and CO2 emissions is strong in economies where economic booms depend on energy intensive sectors. Also, the mitigating role of renewable energy technologies is key when energy intensity rebounds. These circumstances may constitute a challenge for the climate transition goals targeted in the EU’s Recovery Plan, whose main objective at this very moment is to mitigate the economic and social impact of the coronavirus pandemic.
    Keywords: CO2 Emissions; Energy; Business Cycles; Panel Data.
    JEL: C23 Q43 Q5
    Date: 2021–03
  15. By: Monteiro, Joseph; Prentice, Barry E.
    Abstract: The evolution of the motorized taxi industry in Vancouver is examined with respect to regulatory changes affecting competition. After initial laissez-faire policy, the industry was tightly regulated after 1946. As newer technologies emerged, newer types of services emerged and the demands of the public evolved. Vancouver remains one of the few large Canadian cities to resist increased competition. The protected taxi industry does not want changes pointing to congestion as a justification. The theory on externalities is examined with respect to congestion and information asymmetries. The paper document the most recent developments.
    Keywords: taxi regulation Vancouver competition
    JEL: R48
    Date: 2019–05
  16. By: Alen Mulabdic (World Bank Group); Lorenzo Rotunno (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper estimates trade barriers in government procurement, a market that accounts for 12% of world GDP. Using data from inter-country input-output tables in a gravity model, we find that home bias in government procurement is significantly higher than in trade between firms. However, this difference has been shrinking over time. Results also show that trade agreements with provisions on government procurement increase cross-border flows of services, whereas the effect on goods is small and not different from that in private markets. Provisions containing transparency and procedural requirements drive the liberalizing effect of trade agreements.
    Keywords: government procurement,trade agreements,gravity equation
    Date: 2021–04
  17. By: Chiu, Sam
    Abstract: California has long been a global leader in clean energy and climate policy, and it has demonstrated how industrial economies can reduce greenhouse gas (GHG) emissions while supporting strong economic growth and promoting equitable and just outcomes. In September 2018, Executive Order B-55-18 set a target for the state to achieve carbon neutrality by 2045. The University of California Institute of Transportation Studies (UC ITS) produced the first comprehensive research report analyzing the policy options that could put California’s transportation sector on a path to be carbon-neutral by 2045 while also centering equity, health, and workforce impacts. The report, summarized in this brief, presents a study conducted by 23 researchers from the four branches of the UC ITS located at UC Berkeley, UC Irvine, UC Davis, and UCLA.
    Keywords: Engineering
    Date: 2021–04–01

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