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on Regulation |
| By: | Arega Getaneh Abate; Rossana Riccardi; Carlos Ruiz |
| Abstract: | The European Union Emission Trading Scheme (EU ETS) is a cornerstone of the EU's strategy to fight climate change and an important device for plummeting greenhouse gas (GHG) emissions in an economically efficient manner. The power industry has switched to an auction-based allocation system at the onset of Phase III of the EU ETS to bring economic efficiency by negating windfall profits that have been resulted from grandfathered allocation of allowances in the previous phases. In this work, we analyze and simulate the interaction of oligopolistic generators in an electricity market with a game-theoretical framework where the electricity and the emissions markets interact in a two-stage electricity market. For analytical simplicity, we assume a single futures market where the electricity is committed at the futures price, and the emissions allowance is contracted in advance, prior to a spot market where the energy and allowances delivery takes place. Moreover, a coherent risk measure is applied (Conditional Value at Risk) to model both risk averse and risk neutral generators and a two-stage stochastic optimization setting is introduced to deal with the uncertainty of renewable capacity, demand, generation, and emission costs. The performance of the proposed equilibrium model and its main properties are examined through realistic numerical simulations. Our results show that renewable generators are surging and substituting conventional generators without compromising social welfare. Hence, both renewable deployment and emission allowance auctioning are effectively reducing GHG emissions and promoting low-carbon economic path. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.15062&r= |
| By: | Frederik vom Scheidt; Jingyi Qu; Philipp Staudt; Dharik S. Mallapragada; Christof Weinhardt |
| Abstract: | Hydrogen can contribute substantially to the reduction of carbon emissions in industry and transportation. However, the production of hydrogen through electrolysis creates interdependencies between hydrogen supply chains and electricity systems. Therefore, as governments worldwide are planning considerable financial subsidies and new regulation to promote hydrogen infrastructure investments in the next years, energy policy research is needed to guide such policies with holistic analyses. In this study, we link a electrolytic hydrogen supply chain model with an electricity system dispatch model. We use this methodology for a cross-sectoral case study of Germany in 2030. We find that hydrogen infrastructure investments and their effects on the electricity system are strongly influenced by electricity prices. Given current uniform zonal prices, hydrogen production increases congestion costs in the electricity grid by 11%. In contrast, passing spatially resolved electricity price signals leads to electrolyzers being placed at low-cost grid nodes and further away from consumption centers. This causes lower end-use costs for hydrogen. Moreover, congestion management costs decrease substantially, by 24% compared to the benchmark case without hydrogen. These savings could be transferred into according subsidies for hydrogen production. Thus, our study demonstrates the benefits of differentiating subsidies for hydrogen production based on spatial criteria. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.00130&r= |
| By: | Eicke, Anselm; Ruhnau, Oliver; Hirth, Lion |
| Abstract: | Frequency stability requires equalizing supply and demand for electricity at short time scales. Such electricity balancing is often understood as a sequential process in which random shocks, such as weather events, cause imbalances that system operators close by activating balancing reserves. By contrast, we study electricity balancing as a market where the equilibrium price (imbalance price) and quantity (system imbalance) are determined by supply and demand. System operators supply imbalance energy by activating reserves; market parties that, deliberately or not, deviate from schedules create a demand for imbalance energy. The incentives for deliberate strategic deviations emerge from wholesale market prices and the imbalance price. We empirically estimate the demand curve of imbalance energy, which describes how sensitive market parties are to imbalance prices. To overcome the classical endogeneity problem of price and quantity, we deploy instruments derived from a novel theoretical framework. Using data from Germany, we find a decline in the system imbalance by 2.2 MW for each increase in the imbalance price by EUR 1 per MWh. This significant price response is remarkable because the German regulator prohibits strategic deviations. We also estimate cross-market equilibriums between intraday and imbalance markets, finding that a shock to the imbalance price triggers a subsequent adjustment of the intraday price. |
| Keywords: | Electricity Balancing,Intraday electricity market,Imbalance energy |
| JEL: | Q41 L51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:233852&r= |
| By: | Elliott, Jonathan; Houngbonon, Georges Vivien; Ivaldi, Marc; Scott, Paul |
| Abstract: | We develop a model of competition in prices and infrastructural investment among mobile network providers. Market shares and service quality (download speed) are simultaneously determined, for demand affects the network load just as delivered quality affects consumer demand. While consolidation typically has adverse impacts on consumer surplus, economies of scale (which we derive from physical principles) push in the other direction, and we find that consumer surplus is maximized at a moderate number of firms, and that the optimal number of firms is higher for lower income consumers. Our modeling framework allows us to quantify the marginal social value of allocating more spectrum to mobile telecommunications, finding it is roughly five times an individual firm’s willingness to pay for a marginal unit of spectrum. |
| Keywords: | Market structure; scale efficiency,;antitrust policy; infrastructure; endogenous; quality; queuing, mobile telecommunications |
| JEL: | D21 D22 L13 L40 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125551&r= |
| By: | Duso, Tomaso; Nardotto, Mattia; Seldeslachts, Jo |
| Abstract: | We provide an evaluation of the impact of public subsidy schemes that aimed to support the development of basic broadband infrastructure in rural areas of Germany. Such subsidies are subject to state aid control by the European Commission (EC). While the EC increasingly recognises the role of economic analysis in controlling public aid to companies, there are to date no full retrospective studies performed on state aid control, especially assessing the so-called balancing test. In this study, we do not only analyse whether the aid was effective in solving a market failure -- low broadband coverage in rural areas -- but also study its impact on competitive outcomes, on both rival firms and consumers. We adopt a difference-in-differences framework after using a matching procedure to account for selection on observables. We find that the aid significantly increased broadband coverage. More importantly, we find that the number of internet providers has significantly increased in the municipalities receiving aid. This additional entry decreased average prices. Therefore, the subsidies complied with EU state aid rules, both in terms of effectiveness and competition. |
| Keywords: | Broadband; Competition; Coverage; Entry; Ex-Post Evaluation; prices; state aid |
| JEL: | C23 D22 L1 L4 L64 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15779&r= |
| By: | Diana B\"ottger; Philipp H\"artel |
| Abstract: | Climate and energy policy targets of the European Commission aim to make Europe the first climate-neutral continent by 2050. For low-carbon and net-neutral energy systems primarily based on variable renewable power generation, issues related to the market integration, cannibalisation of revenues, and cost recovery of wind and solar photovoltaics have become major concerns. The traditional discussion of the merit-order effect expects wholesale power prices in a system with 100 % renewable energy sources to alternate between very high and very low values. Unlike previous work, we present a structured and technology-specific analysis of the cross-sectoral demand bidding effect for the price formation in low-carbon power markets. Starting from a stylised market arrangement and by successively augmenting it with all relevant technologies, we construct and quantify the cross-sectoral demand bidding effects in future European power markets with the cross-sectoral market modelling framework SCOPE SD. As the main contribution, we explain and substantiate the market clearing effects of new market participants in detail. Hereby, we put a special focus on hybrid heat supply systems consisting of combined heat and power plant, fuel boiler, thermal storage and electrical back up and derive the opportunity costs of these systems. Furthermore, we show the effects of cross-border integration for a large-scale European net-neutral energy scenario. Finally, the detailed information on market clearing effects allows us to evaluate the resulting revenues of all major technology categories on future electricity markets. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.01127&r= |
| By: | Affeldt, Pauline; Duso, Tomaso; Gugler, Klaus; Piechucka, Joanna |
| 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 over 2,000 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; Entry Barriers; HHI; Intangibles; Market Definition; Merger Control; mergers |
| JEL: | K21 L24 L44 O32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15699&r= |
| By: | Asker, John; Baccara, Mariagiovanna; Lee, SangMok |
| Abstract: | Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished from standard ones by the patents being non-rivalrous, but still excludable, in consumption--that is, they are club goods. This affects the way 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 per se 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. We show that 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. |
| Keywords: | asymmetric auctions; Club goods; Intellectual Property; patents |
| JEL: | D44 D47 K1 L14 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15703&r= |
| By: | Saruta, Fuyuki |
| Abstract: | This study examines zero-rating (ZR), a commercial method implemented by Internet service providers (ISPs) that treat particular content providers' (CPs) data as free content. In this study, a model is constructed in which an end-user uses content from two CPs within a data cap, and the ISP chooses an optimal ZR plan which maximizes its profit. We show that the ISP zero-rates one or both CPs in equilibrium depending on (1) the ISP's marginal cost to deliver content, (2) the difference between the quality of the content provided by the two CPs, and (3) the two CPs' advertising power. We demonstrate that an increase in the ISP's marginal cost makes it more likely that a ZR plan resulting in heavy traffic will be implemented, and an increase in the difference between the content quality makes it less likely that a ZR plan in favor of the higher quality CP will be implemented. |
| Keywords: | Mobile Internet; Zero-rating; Sponsored-data; Net Neutrality; Vertical integration |
| JEL: | D21 L11 L96 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107505&r= |
| By: | Willem Pieter De Groen |
| Abstract: | Debit and credit cards have gradually increased in importance as instruments for retail payments. This has prompted anti-trust authorities at both national and European levels to investigate and limit the interchange fee-based revenue model of four-party schemes. These moves were followed in 2015 by the introduction of the Interchange Fee Regulation (IFR), which introduced price rules to nurture a competitive, innovative and secure payments environment for all stakeholders. The IFR caps the interchange fees on consumer debit and credit cards and prohibits restrictions on co-badging and certain requirements to honour all cards for merchants. This paper assesses the impact of the IFR. Based on a literature review and data analysis, it concludes that the IFR has led to a drop in interchange fees – in some cases below the maximum defined in the legislation in all EU member states. The decrease in the interchange fee is largely reflected in lower charges for merchants, although the reduction is – at least partially – offset by higher scheme fees charged by international four-party card schemes and by higher fees for cardholders. The policy recommendations aim to increase transparency for a fuller understanding of the functioning of the market and to enhance competitiveness in both the market for card payments and other payment instruments. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:eps:ecriwp:26316&r= |
| By: | Grafström, Jonas (The Ratio Institute); Poudineh, Rahmat (Oxford Institute for Energy Studies) |
| Abstract: | The learning curve concept, which relates historically observed reductions in the cost of a technology to the number of units produced or the capacity cumulatively installed, has been widely adopted to analyse the technological progress of renewable resources, such as solar PV and wind power, and to predict their future penetration. Learning curves were originally an empirical tool to evaluate learning-by-doing in manufacturing, and the jump to analysis of country-level technological change in renewable energy is an extension that requires careful consideration. This paper provides a review of the problems associated with learning curves for solar and wind power technologies. Issues such as whether the past cost reductions affect the future, learning curve specification problems, changing price ratios and econometric issues are discussed. Learning curves have a place in research, but there are several pitfalls that researchers should be careful not to overlook. |
| Keywords: | learning curve; learning rate; energy technology; wind power; solar power |
| JEL: | E61 O32 Q20 Q58 |
| Date: | 2021–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0347&r= |
| By: | Abrell, Jan; Kosch, Mirjam; Rausch, Sebastian |
| Abstract: | While carbon taxes are generally seen as a rational policy response to climate change, knowledge about their performance from an expost perspective is still limited. This paper analyzes the emissions and cost impacts of the UK CPS, a carbon tax levied on all fossil-fired power plants. To overcome the problem of a missing control group, we propose a policy evaluation approach which leverages economic theory and machine learning for counterfactual prediction. Our results indicate that in the period 2013-2016 the CPS lowered emissions by 6.2 percent at an average cost of €18 per ton. We find substantial temporal heterogeneity in tax-induced impacts which stems from variation in relative fuel prices. An important implication for climate policy is that in the short run a higher carbon tax does not necessarily lead to higher emissions reductions or higher costs. |
| JEL: | C54 Q48 Q52 Q58 L94 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21039&r= |
| By: | Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John |
| Abstract: | Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to "swing for the fence" with more radical (and labor saving) breakthroughs. |
| Keywords: | firm size; Innovation; patents; Regulation |
| JEL: | J8 L11 L25 L51 O31 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15743&r= |
| By: | Themann, Michael; Koch, Nikolas |
| Abstract: | This paper assesses the potential impact of the European Union Emissions Trading System (EU ETS) on firm productivity. We estimate a stylized version of the neo-Schumpeterian model, which incorporates innovation and productivity catch-up as two potential sources of firm's productivity growth, while at the same time accounting for persistent productivity dispersion within industries. This dynamic model allows us to differentiate the potential effects of the EU ETS on total factor productivity (TFP) depending on the level of firms' technological advancement. The identification approach is based on a difference-in-difference approach exploiting the incomplete participation requirements of the EU ETS and the rich panel structure of firm-level data for eight EU countries from 2002 to 2012. We find evidence that the policy effects on TFP are highly heterogeneous and depend on the distance to the technological frontier, measured as the highest TFP in each year-industry. Productivity effects are positive for firms that are close to the frontier, but they turn negative for firms operating far behind the frontier. |
| Keywords: | Environmental regulation,EU ETS,productivity,competitiveness |
| JEL: | D22 Q54 Q58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:904&r= |
| By: | de Haas, Ralph; Martin, Ralf; Muûls, Mirabelle; Schweiger, Helena |
| Abstract: | We use data on 11,233 firms across 22 emerging markets to analyse how credit constraints and low-quality firm management inhibit corporate investment in green technologies. For identification, we exploit quasi-exogenous variation in local credit conditions and in exposure to weather shocks. Our results suggest that both financial frictions and managerial constraints slow down firm investment in more energy efficient and less polluting technologies. Complementary analysis of data from the European Pollutant Release and Transfer Register (E-PRTR) corroborates some of this evidence by revealing that in areas where banks deleveraged more after the global financial crisis, industrial facilities reduced their carbon emissions by less. On aggregate this kept local emissions 15% above the level they would have been in the absence of financial frictions. |
| Keywords: | CO2 emissions; energy efficiency; Financial Frictions; Management Practices |
| JEL: | D22 G32 L20 L23 Q52 Q53 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15886&r= |
| By: | Garcia, Daniel; Janssen, Maarten; Shopova, Radostina |
| Abstract: | In markets, such as those for airline tickets and hotel accommodations, firms sell time-dated products and have private information about unsold capacities. We show that competition under private information explains observed phenomena, such as increased price dispersion and higher expected prices towards the deadline, without making specific assumptions about demand. We also show that private information severely limits the market power of firms and that information exchange about capacity negatively affects consumers. Finally, we inquire into the incentives to unilaterally disclose information or to engage in espionage about rival's capacity and show that these activities are particularly harmful for consumers. |
| Keywords: | asymmetric information; capacity constraints; Disclosure; Dynamic pricing; industrial espionage |
| JEL: | D40 D83 L13 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15767&r= |
| By: | Ioannis Tikoudis (OECD); Luis Martinez (International Transport Forum); Katherine Farrow (OECD); Clara García Bouyssou (University of Copenhagen); Olga Petrik (International Transport Forum); Walid Oueslati (OECD) |
| Abstract: | Policy action to avoid the impending societal costs of climate change is particularly warranted in transport sector, which is responsible for 30% of greenhouse gas emissions in OECD countries. To design appropriate interventions in this sector, policy makers should account for the recent emergence of shared mobility services in urban areas and their potential advantages in terms of emissions mitigation. This study estimates the impact that the widespread uptake of shared mobility services could have on the carbon footprint of urban transport. To this end, it simulates the share of each transport mode and aggregate emissions from passenger transport in 247 cities across 29 OECD countries between 2015 and 2050. The analysis indicates that they have the potential to eliminate, on average, 6.3% of urban passenger transport emissions by the end of this period. |
| Keywords: | CO2 emissions, mode competition, ridesharing, shared mobility, urban transport |
| JEL: | R41 Q54 |
| Date: | 2021–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:175-en&r= |
| By: | Basso, Gaetano; Brandimarti, Eleonora; Pellizzari, Michele; Pica, Giovanni |
| Abstract: | Entry in many occupations is regulated with the objective to screen out the least able producers and guarantee high quality of output. Unfortunately, the available empirical evidence suggests that in most cases these objectives are not achieved. In this paper we investigate entry into the legal profession in Italy and we document that such a failure is due to the combination of the incomplete anonymity of the entry exam and the intergenerational transmission of business opportunities. We use microdata covering the universe of law school graduates from 2007 to 2013 matched with their careers and earnings up to 5 years after graduation. Variation generated by the random assignment of the entry exam grading commissions allows us to identify the role of family ties in the selection process. We find that connected candidates, i.e. those with relatives already active in the profession, are more likely to pass the exam and eventually earn more, especially those who performed poorly in law school. When we simulate the process of occupational choice assuming family connections did not matter, we find that strong positive selection on ability would emerge. |
| Keywords: | intergenerational mobility; licensing; occupational regulation |
| JEL: | J24 J44 J62 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15674&r= |