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on Regulation |
| By: | Fabra, Natalia; Montero, Juan Pablo |
| Abstract: | An imperfectly-informed regulator needs to procure multiple units of a good that can be produced with heterogeneous technologies at various costs. Should she run technology-specific or technology-neutral auctions? Should she allow for partial separation across technologies (technology banding)? Should she instead post separate prices for each technology? What are the trade-offs involved? We find that one size does not fit all: the preferred instrument depends on the nature of the available technologies, the extent of information asymmetry regarding their costs, the costs of public funds, and the degree of market power. Using Spanish data on recently deployed renewables across the country, we illustrate how our theory can shed light on how to more effectively procure these technologies. Beyond this motivation/application, the question of how to procure public goods in the presence of multiple technologies is relevant for a wide variety of goods, including central banks liquidity, pollution reduction, or land conservation, among others. |
| Keywords: | auctions; market power; Price regulation; Procurement; quantity regulation; third degree price discrimination |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15554&r= |
| By: | Fabra, Natalia |
| Abstract: | Addressing climate change requires full decarbonization of our economies. Whether this objective is achieved at least cost for society hinges on good policy design. In turn, this calls for a thorough understanding of firms' and consumers' incentives in the presence of asymmetric information, the determinants of strategic interaction, and the impact of market design and market structure on the intensity of competition. Industrial Economics thus has much to contribute towards a successful Energy Transition, while benefiting from the exciting research opportunities it brings. In this paper, I survey some of the recent developments in this area. My focus is on the power sector, and in particular, on the regulatory and market design challenges triggered by the expansion of intermittent renewables with almost zero marginal costs. I conclude with some questions that merit further research. |
| Keywords: | auctions; Carbon Emissions; Competition; Dynamic pricing; Energy; invecstment; market design; market power; Storage |
| JEL: | L22 L94 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15705&r= |
| By: | Antoniou, Fabio; Delis, Manthos; Ongena, Steven; Tsoumas, Chris |
| Abstract: | Effective environmental policy should consider how the financiers of polluting firms behave. In a theoretical model describing the periods before and after policy implementation, we show that loan spreads for firms participating in cap-and-trade programs are a function of the costs of compliance and the specific features of the permits markets. With higher permits storage and lower permit prices, firm financing costs fall. Our empirical analysis exploits the dichotomy created by phase III of the EU Emission Trading System, designed to increase and pass the cost of CO2 emissions to the polluters. In contrast with possible program intentions but in line with our theoretical predictions, loan spreads fall by 25% on average starting in 2013. We empirically identify permits storage before program implementation and its associated effect as key drivers of the fall in loan spreads for affected firms, and we show that this dynamic partly undermines the expected reduction in CO2 emissions. |
| Keywords: | Bond spreads; CO2 emissions; EU Emission Trading System; Loan spreads; Pollution permits |
| JEL: | G12 G21 Q5 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15517&r= |
| By: | Spash, Clive L. |
| Abstract: | Today, environmental economics is the response of the neoclassical economic school to the ecological crisis, but at one time its leading contributors regarded it as a revolutionary development that would change the conduct and content of economics as a discipline. Understanding and addressing environmental pollution was core to that potential paradigm shift. In tracing the history of conceptualising pollution as an externality and market failure this paper covers the development of ideas by Marshall, Pigou, Pareto, Coase, Stigler, Samuelson, Ciciacy-Wantrup and Kapp. Pollution externality theory is shown to have incorporated an elitist ethics and liberal market ideology. As a market failure pollution was deemed a minor correctible error of the price system. Monetary valuation of social and environmental harm became the means of justifying optimal levels of pollution. Neoliberal theories of spreading property rights further watered down potential interventionist aspects. Bio-physical realism, in the work of Kneese, Ayres and d’Arge, and social realism in Kapp’s theory of cost shifting were lost once environmental economics adopted a deductivist mathematical formalism. Kapp’s alternative theory is based on a classic institutionalists economic understanding of cost shifting and power relations. It advocates a public policy response in the form of objective social minima achieved via regulation and planning. This theory has until now been successfully supressed to prevent a potential revolutionary paradigm shift in economic price theory. |
| Keywords: | externalities; market failure, cost shifting; price theory; pollution; Pigou; Coase; Kapp; paradigm shift; environmental economics, neoclassical economics; institutional economics, neoliberal |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus009:8108&r= |
| By: | Economic Research Institute for ASEAN and East Asia (ERIA) |
| Abstract: | Key Messages; (i) The spread of the coronavirus disease (COVID-19) and the resulting reduction in demand for products and services will likely cut total annual carbon dioxide (CO2) emissions, but this will be temporary. While public health and economic rescue packages dominate the headlines, climate action is in danger of suffering a setback.(ii) Low oil prices could make clean energy sources, such as renewables, less competitive and disincentivise the transition to clean energy. (iii) Ongoing behavioural changes, such as working from home, could alter energy consumption patterns after the pandemic and facilitate a low-carbon future. (iv) Energy prices should be made affordable during the faltering economic recovery, as they affect industrial competitiveness.(v) The Association of Southeast Asian Nations (ASEAN) should seize new investment opportunities with stimulus packages for enhancing regional energy security, resilience, and climate change objectives (e.g. expanding the electricity network and increasing oil stockpiling). |
| Date: | 2020–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:pb-2020-02&r= |
| By: | Pollitt, M. |
| Abstract: | This paper draws on international experience to examine how the ongoing power sector reform (PSR) in China since 2015 should be measured and assessed. We proceed by reviewing some relevant international reform experience and then applying this to the Chinese context. Thus we focus on some of the extensive previous literature which has documented reforms in cross-country and in single country studies. We pay particular attention to the European Union (EU) single electricity market, which is the largest integrated electricity market in the world. We also look at a social cost benefit analyses of UK electricity market reforms and how these might applied in a given Chinese province. We go on to examine the actual price impact evidence from two leading provinces – Guangdong and Zhejiang – on the overall price effect and on exactly how those price effects have been achieved. We then offer some insights from the extensive regulatory reporting by leading regulators on market performance that is relevant to PSR in China based on excellent annual reporting from the UK, Australia and the US. |
| Keywords: | Power sector reform, social cost benefit analysis, state of the market |
| JEL: | L94 |
| Date: | 2021–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2137&r= |
| By: | Schmitz, Patrick W. |
| Abstract: | Consider two parties who can make non-contractible investments in the provision of a public good. Who should own the physical assets needed to provide the public good? In the literature it has been argued that the party who values the public good most should be the owner, regardless of the investment technologies. Yet, this result has been derived under the assumption of symmetric information. We show that technology matters when the negotiations over the provision of the public good take place under asymmetric information. If party A has a better investment technology, ownership by party A can be optimal even when party B has a larger expected valuation of the public good. |
| Keywords: | incomplete contracts; control rights; public goods; private information; investment incentives |
| JEL: | D23 D82 D86 H41 L33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107609&r= |
| By: | Shihe Fu (Xiamen University); V. Brian Viard (Cheung Kong Graduate School of Business) |
| Abstract: | We review recent empirical economic studies on urban ambient air pollution from a mayor’s perspective. We discuss the sources of urban air pollution, the economic costs that it imposes, and the policy tools available to a mayor to alleviate it. For economic costs, we briefly summarize traditional estimates of health and mortality costs and focus on more recent evidence on mental and psychological health, labor productivity and supply, avoidance behavior, willingness to pay for clean air and long-term (multi-decade) impacts. The policy tools we evaluate include pollution information disclosure, auto license and driving restrictions, congestion tolls, public transit investments, emission standards and controls, and gasoline taxes. We also discuss challenges posed by transboundary pollution across cities and the extent to which mayors’ incentives encourage tackling air pollution under different political systems. We briefly discuss possible future research agendas. |
| Keywords: | urban air pollution, environmental costs and benefits, urban public policy, environmental policies, incentives |
| JEL: | H23 H75 O18 Q51 Q52 |
| Date: | 2021–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2021_009&r= |
| By: | Ferentinos, Konstantinos (Lancaster University); Gibberd, Alex (Lancaster University); Guin, Benjamin (Bank of England) |
| Abstract: | Public policies aimed at mitigating climate change can come with the transition risk of sudden adjustments of asset prices. We study the consequences of a policy intervention addressing greenhouse gas emissions in the housing market. Leveraging a unique data set of the population of all house transactions in England and Wales, we document novel evidence of transition risk. Prices of carbon-intensive properties affected by this policy decreased by about £5,000 to £9,000 relative to unaffected ones. We interpret this result as evidence in favour of semi-strong market efficiency in the housing market. We infer moderate implications for financial stability and for the wealth distribution among homeowners. |
| Keywords: | Climate policy; transition risk; house prices; financial stability; wealth inequality |
| JEL: | C54 Q54 Q58 |
| Date: | 2021–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0918&r= |
| By: | M. A. Ehyaei (Islamic Azad University); Simin Baloochzadeh (University of Sunderland); A. Ahmadi (IUST - Iran University of Science and Technology [Tehran]); Stéphane Abanades (PROMES - Procédés, Matériaux et Energie Solaire - UPVD - Université de Perpignan Via Domitia - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | One of the necessities of human beings in this century is the potable water supply. This supply has more environmental benefits if the potable water is supplied by renewable energy resources. In this paper, a combination of combined cooling and power system (Goswami cycle), with the reverse osmosis and sodium hypochlorite plant powered by geothermal energy resources is proposed. The products of this system are electrical and cooling energy, potable water, hydrogen and salt. To investigate all of the system aspects, energy, exergy, economic, exergoenvironmental, and environmental analyses are performed. In environmental analysis, the social costs of air pollution are considered. It means that for the same amount of system electrical power produced by non-renewable energy resource power generation systems, the produced air pollution gases and their costs considering the social cost of air pollution are quantified. In this regard, four scenarios are defined. Results show this multi-generation system produces 1.751 GJ/year electrical energy, 1.04 GJ/year cooling energy, 18106.8 m 3 /year potable water, 7.396 Ton/year hydrogen, and 3.838 Ton/year salt throughout a year. The system energy and exergy efficiencies are equal to 12.25%, and 19.6%. The payback period time of this system is equal to 2.7 years. |
| Keywords: | Goswami Cycle,Reverse Osmosis,Salt,Exergy,Economic,Exergoenvironmental |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03221045&r= |
| By: | Javier Donna (University of Florida); José Antonio Espín-Sánchez(Yale (Yale University) |
| Abstract: | We investigate the efficiency of a market institution (an auction) relative to a non- market institution (a quota) as a water allocation mechanism in the presence of frictions, by exploring a particular historical institutional change in Mula, Spain. We estimate a structural dynamic model under the auction accounting for the three main features in the empirical setting: intertemporal substitution, liquidity constraints, and season- ality. We use the estimated model to compute the welfare under auctions, quotas, and the highest-valuation allocation. We find that the institutional change in Mula, from auctions to quotas, was welfare improving for the apricot farmers considered. |
| Keywords: | Institutions Financial Markets Demand Dynamic Bidding Market Efficiency |
| JEL: | D02 D53 L11 L13 G14 Q25 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:60&r= |
| By: | James H Merrick; John E. T. Bistline; Geoffrey J. Blanford |
| Abstract: | This paper considers the representation of energy storage in electricity sector capacity planning models. The incorporation of storage in long-term systems models of this type is increasingly relevant as the cost of storage technologies, particularly batteries, and of complementary variable renewable technologies, decline. To value storage technologies appropriately, a representation of linkages between time periods is required, breaking classical temporal aggregation strategies that greatly improve computation time. This paper appraises approaches to address this problem, highlighting a common underlying structure and challenges of aggregation at relevant geographical scales, and investigates improvements on the literature state of the art. We also demonstrate a novel decomposition scheme to avoid temporal aggregation for applications where longer runtimes are permissible. These examples frame aspects of the problem ripe for contributions from the operations research community. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.03707&r= |
| By: | Ana Babus; Kinda Cheryl Hachem |
| Abstract: | Regulatory debates about centralized trading assume security design is immune to market structure. We consider a regulator who introduces an exchange to increase liquidity, understanding that security design is endogenous. For a given security, investors would like to trade in a larger market and, for a given market structure, they would like to trade a safer security. We show that financial intermediaries design riskier securities after the exchange is introduced, even when the exchange leads to the origination of safer underlying assets. The results reflect a relative dilution of investor market power and motivate coordinated policies to improve investor welfare. |
| JEL: | D47 D86 G23 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28764&r= |
| By: | Lutz Sager (McCourt School of Public Policy, Georgetown University) |
| Abstract: | I investigate the distributional effects of environmental trade measures. Distributional effects are assigned to two channels: ‘Use-side’ effects describe which consumers bear the burden of changing prices, while ‘source-side’ effects describe shifts in income between sectors, factors of production and different groups of workers. I present simple statistics to characterize the distributional tendencies of climate policies in each of these channels. I then apply these statistics to assess the distributional effects of two types of policy instruments: Border Carbon Adjustments and Green Industrial Policy. I conclude with a more detailed case study investigating the distributional effects of introducing Border Carbon Adjustments to complement an EU-wide carbon price. The analysis highlights the importance of modeling the effects of environmental trade policy at different scales, capturing shifts between countries, as well as shifts between sectors and income groups within them. Classification-Q56, Q58, F18 |
| Keywords: | Climate Policy, International Trade, Redistributive Effects, Border Carbon Adjustment, Industrial Policy |
| Date: | 2021–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~21-21-11&r= |
| By: | Griffith, Rachel; O'Connell, Martin; Smith, Kate |
| Abstract: | We study the introduction of a price floor for alcohol that is aimed at correcting for negative consumption externalities. Policy effectiveness depends on whether the measure achieves large reductions in the most socially costly consumption. We exploit a natural experiment to show the policy raised prices of cheap products favored by heavy consumers, and achieved large demand reductions among this group. We use pre-reform data to estimate a model of consumer demand that is able to match these patterns, and use this to compare the welfare performance of a price floor with the counterfactual introduction of an ethanol tax. We show that if the marginal external cost of drinking is at least moderately higher for heavy drinkers, then a price floor is better targeted at the most socially costly consumption and therefore achieves larger welfare gains than an ethanol tax. Although the price floor leads to a larger fraction of the consumer burden falling on those with low incomes compared with the tax reform, it leads to a consumer burden that is smaller for all income groups. |
| Keywords: | Alcohol; corrective taxes; externality; price floors |
| JEL: | D12 D62 H21 H23 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15476&r= |
| By: | Martín A. Rossi; Antonia Vazquez; Juan Cruz Vieyra |
| Abstract: | This paper provides experimental evidence about the causal impact of publishing information related to public investment projects on the performance of these projects. Specifically, it analyzes the impact of the launch of the website MapaInversiones on the physical and financial progress of public investment projects in Costa Rica. The study finds that published projects (the treatment group) perform better than unpublished projects (the control group). Three months after the release of MapaInversiones, financial progress of public investment projects uploaded onto the platform increased by 18 percentage points, and physical progress increased by 8 percentage points compared to unpublished projects. A year after the intervention, financial progress of treated projects was approximately 15 percentage points higher relative to control projects, while the increase in physical progress after one year of launching the platform was approximately 1 percent. |
| Keywords: | digital innovation, efficiency, investment projects, monitoring, transparency |
| JEL: | D73 O31 H50 H83 L78 O54 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4424&r= |