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on Regulation |
| By: | Bushnell, James; Muehlegger, Eric; Rapson, David |
| Abstract: | The operational costs of electric vehicles are lower than those of gas-powered vehicles. This advantage is often cited by manufacturers, advocates, and policy-makers as a significant benefit of driving electric vehicles. Yet, the question of how consumers value operational costs when purchasing an electric vehicle is largely unexplored. While prior research has suggested that gasoline prices are an important factor for conventional vehicle buyers, consumers may not have the same awareness of electricity prices as they do for salient gasoline prices. The question of whether consumers accurately assess the costs and benefits of using electricity as a transportation fuel has important implications for electric vehicle adoption and for achieving deep decarbonization of the transportation sector through electrification. |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2021–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt5f80503b&r= |
| By: | Andrés-Cerezo, David; Fabra, Natalia |
| Abstract: | We assess how firms' incentives to operate and invest in energy storage depend on the market structure. For this purpose, we characterize equilibrium market outcomes allowing for market power in storage and/or production, as well as for vertical integration between storage and production. Market power reduces overall efficiency through two channels: it induces an inefficient use of the storage facilities, and it distorts investment incentives. The worst outcome for consumers and total welfare occurs under vertical integration. We illustrate our theoretical results by simulating the Spanish wholesale electricity market for different levels of storage capacity. The results are key to understanding how to regulate energy storage, an issue which is critical for the deployment of renewables. |
| Keywords: | electricity; investment; market structure; Storage |
| JEL: | L22 L94 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15444&r= |
| By: | Ritz, R. |
| Abstract: | This paper studies a social planner who chooses countries' carbon prices so as to maximize global welfare. Product markets are characterized by firm heterogeneity, market power, and international trade. Because of the market-power distortion, the planner's optimal policy is second-best. The main insight is that optimal carbon prices may be highly asymmetric: zero in some countries and above the social cost of carbon in countries with relatively dirty production. This result obtains even though a uniform global carbon price is always successful at reducing countries' emissions. Competition policy that mitigates market power may enable stronger and more balanced climate action. |
| Keywords: | Carbon leakage, carbon pricing, imperfect competition, international trade, second best |
| JEL: | H23 L11 Q54 |
| Date: | 2021–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2145&r= |
| By: | Ruhnau, Oliver |
| Abstract: | Wind and solar energy are often expected to fall victim to their own success: the higher their share in electricity production, the more their revenue on electricity markets (their “market value”) declines. While in conventional power systems, the market value may converge to zero, this study demonstrates that “green” hydrogen production, through adding electricity demand in low-price hours, can effectively and permanently halt the decline. With an analytical derivation, a Monte Carlo simulation, and a numerical electricity market model, I find that – due to flexible hydrogen production alone – market values across Europe likely converge above €19 ± 9 per MWh for solar energy and above €27 ± 8 per MWh for wind energy in 2050 (annual mean estimate ± standard deviation). This lower boundary is in the range of the projected levelized costs of renewables and has profound implications. Market-based renewables may hence be within reach. |
| Keywords: | Renewable energy,Hydrogen electrolysis,Electricity market,Electricity economics,Integrated energy systems,Flexible electricity demand |
| JEL: | Q4 Q40 Q41 Q42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:233976&r= |
| By: | Filippo Beltrami (Department of Economics (University of Verona)); Fulvio Fontini (University of Padua); Monica Giulietti (Loughborough University); Luigi Grossi (Department of Economics (University of Verona)) |
| Abstract: | This paper estimates the seasonal and zonal CO2 marginal emissions factors (MEFs) from electricity production in the Italian electricity system. The inclusion of the zonal configuration of the Italian wholesale power market leads to a complete measurement of marginal emission factors which takes into account the heterogeneous distribution of RES power plants, their penetration rate and their variability within the zonal power generation mix. This article relies on the fractional cointegration methodology to incorporate the typical features of long memory processes into the estimation of MEFs. We find high variability in annual MEFs estimated at the zonal level. Sardinia reports the highest MEF (0.7189 tCO2/MWh), followed by the Center South (0.7022 tCO2/MWh), the Center North (0.4236 tCO2/MWh), the North (0.2018 tCO2/MWh) and Sicily (0.146 tCO2/MWh). The seasonal analysis also shows a large variability of MEFs in each zone across time. The heterogeneity of results leads us to recommend that policymakers consider the zonal configuration of the power market and the large seasonal variability related to carbon emissions and electricity generation when designing incentives for Renewable Energy Sources (RES) expansion and for achieving emission reduction targets. |
| Keywords: | Decarbonization, Electricity Price, Fractional Cointegration, Marginal Emission Factor (MEF), Renewable Energy Sources (RES) |
| JEL: | P18 Q41 Q42 Q51 C22 C32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:01/2021&r= |
| By: | Bloch, Francis; Demange, Gabrielle |
| Abstract: | This paper analyzes the strategy of a monopolistic digital platform serving users from two jurisdictions with different corporate tax rates. We consider two profit-splitting rules, Separate Accounting (SA) and Formula Apportionment (FA) based on the number of users in the two jurisdictions. We show that, even in the absence of transfer pricing, the platform shifts profit from the high-tax to the low-tax jurisdiction exploiting network externalities under SA and manipulating the apportionment key under FA. In order to shift profit, the platform distorts prices and quantities. Under SA, the direction of the distortions depends on the sign of the externalities. We use a numerical simulation to show that the ranking of fiscal revenues under the two r\'{e}gimes differ in the two jurisdictions: the high-tax jurisdiction prefers SA to FA whereas the low-tax jurisdiction prefers FA to SA. |
| Keywords: | corporate income taxation; Digital Platforms; Formula Apportionment; multinational firms; Separate accountin |
| JEL: | H25 H32 L12 L14 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15376&r= |
| By: | Tavella, Sergio; Noussan, Michel |
| Abstract: | Buildings’ heating represents an important share of the total energy consumption in Italy, and to reach the challenging decarbonization targets set by the EU by 2050, a combination of measures and technologies will be required. This working paper presents an analysis of different scenarios comparing the penetration of buildings’ heating technologies for the residential sector in Italy. The objective of the research is to evaluate the potential contribution of different technologies, with a particular focus of the role that hydrogen may have to play, compared to other solutions, including heat pumps and renewable natural gas. The analysis compares the potential role of these technologies in reaching a decarbonized residential heating by 2050, by also discussing the main barriers and opportunities that lie ahead. The scenarios are defined starting from historical data of heating systems stock and sales, integrated with the know-how of experts of the sector to compare different pathways based on electrification or renewable gases. The results show that a combination of technologies will be in any case required in the heating sector, but also that other external factors will be of paramount importance, including the electricity decarbonization and energy efficiency measures on the building stock. |
| Keywords: | Research and Development/Tech Change/Emerging Technologies |
| Date: | 2021–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:310986&r= |
| By: | Chris Belmert Milindi; Roula Inglesi-Lotz |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:855&r= |
| By: | Johnson, Justin; Rhodes, Andrew; Wildenbeest, Matthijs |
| Abstract: | Using both economic theory and Artificial Intelligence (AI) pricing algorithms, we investigate the ability of a platform to design its marketplace to promote competition, improve consumer surplus, and even raise its own profits. We allow sellers to use Q-learning algorithms (a common reinforcement-learning technique from the computer-science literature) to devise pricing strategies in a setting with repeated interactions, and consider the effect of platform rules that reward firms that cut prices with additional exposure to consumers. Overall, the evidence from our experiments suggests that platform design decisions can meaningfully benefit consumers even when algorithmic collusion might otherwise emerge but that achieving these gains may require more than the simplest steering policies when algorithms value the future highly. We also find that policies that raise consumer surplus can raise the profits of the platform, depending on the platform's revenue model. Finally, we document several learning challenges faced by the algorithms. |
| Keywords: | Algorithms; artificial intelligence; Collusion; platform design |
| JEL: | K21 L00 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15504&r= |
| By: | Cavalcanti, Tiago; Hasna, Zeina; Santos, Cezar |
| 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 Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals. Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15419&r= |
| By: | De Haas, Ralph; Martin, Ralf; Muûls, Mirabelle; Schweiger, Helena |
| Abstract: | We use data on 11,233 firms across 22 emerging markets to analyze 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. |
| JEL: | D22 L23 G32 L20 Q52 Q53 |
| Date: | 2021–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2021_006&r= |
| By: | Ojo/Roedl, Marianne |
| Abstract: | In enhancing the role of innovative techniques which involve the use of distributed ledger technology platforms, consequences or implications of such techniques could initially focus on more obvious risks – such as those risks associated with financial stability, inadequate governance and control mechanisms in place, or cybercrime. However, consideration of climate risk related factors have increasingly made the aim of focus towards a sustainable future, a more popular and increasingly justified topic. In a recent report by the European Environmental Agency, it was highlighted that “ in comparison with alternative payment methods, Bitcoin was claimed to be 20,000 times more energy intensive than Visa – with an energy consumption for each Bitcoin transaction increasing to 635 kWh – an equivalent of electricity that could power approximately 21 US households for 1 day, based on 2019 estimates according to some analysts.” However there are also potential benefits to be derived from blockchain technology - one of which includes environmental protection, as further highlighted in the report. Notwithstanding, efforts and endeavors will still be required to address climate related impacts of engaging the use of such technologies. This paper will focus on other risks – as well as benefits to be derived through the use of innovative techniques such as smart contracts and decentralized finance in a rapidly evolving financial landscape. It will also highlight why central bankers and financial regulation have to adapt and evolve rapidly in engaging the use of supervisory techniques which will not only enhance the efficiency of the use of such innovative techniques but also facilitate an adequate and well balanced approached to regulation – one which whilst not overly regulating technology, seeks to ensure that the abuse or misuse of such technologies are appropriately regulated. |
| Keywords: | distributed ledger technologies; block chains; smart contracts, decentralized finance; central banks; embedded regulation; legal; technical codes |
| JEL: | F3 F6 G1 G2 G3 K2 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107717&r= |
| By: | Pagnozzi, Marco; Piccolo, Salvatore; Reisinger, Markus |
| Abstract: | We analyze vertical contracting between a manufacturer and retailers who have correlated private information. The manufacturer chooses the number of retailers and secretly contracts with each of them. We highlight a new trade-off between limiting competition and reducing retailers' information rents that shapes the optimal size of the distribution network. We show how the manufacturer's technology and the characteristics of demand affect this distribution network. In contrast to previous literature, we show that the manufacturer may choose a number of retailers that exceeds the socially optimal one, and that vertical integration can raise consumer welfare. |
| Keywords: | asymmetric information; distribution network; opportunism; retail market structure; Vertical contracting |
| JEL: | D43 L11 L42 L81 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15472&r= |
| By: | Reghezza, Alessio; Altunbas, Yener; Marqués-Ibáñez, David; Rodriguez d’Acri, Costanza; Spaggiari, Martina |
| Abstract: | Do climate-oriented regulatory policies affect the flow of credit towards polluting corporations? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement that the United States was withdrawing from the Paris Agreement, lending by European banks to polluting firms in the United States decreased even further in relative terms. It follows that green regulatory initiatives in banking can have a significant impact combating climate change. JEL Classification: E51, G28, H23 |
| Keywords: | climate change, difference-in-differences, loan-level data, Paris Agreement, Trump |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212550&r= |
| By: | Kabelo Masike; Cobus Vermeulen |
| Abstract: | This study estimates the price and income elasticity coefficients of domestic South African electricity demand for the period 1980 to 2018, considering both the aggregate economy as well as the mining sector in isolation. South African electricity prices were falling in real terms between 1983–2005. It then increased sharply in response to substantial tariff increases between 2008–2011. A time-varying parameter model with the Kalman filter is applied to estimate the evolution of the elasticities over time. This allows the analysis to distinguish between the two regimes of decreasing and increasing real electricity prices, and evaluate the evolution of demand elasticities accordingly. The main result, consistent with existing South African literature, is that electricity consumption was unresponsive to price changes in the period of falling real electricity prices up to 2005. However, when real prices started increasing, the price elasticity coefficient increased markedly in absolute terms. This indicates that aggregate price sensitivity is notably higher when real prices are increasing. A secondary result is that electricity consumption in the mining sector, due to the inertial nature of mining operations, is much less responsive to price changes. |
| Keywords: | price elasticity, income elasticity, electricity demand, Kalman Filter |
| JEL: | L94 Q41 Q48 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:839&r= |
| By: | Lopez, Claude; Smith, Benjamin |
| Abstract: | This report summarizes the recent key regulatory changes in the US, Europe, and China. It shows these jurisdictions have different regulatory approaches while being confronted with similar challenges. They all seek the right regulatory balance between: • promoting market efficiency while minimizing antitrust issues, • strengthening financial inclusion while ensuring financial stability, and • improving consumers’ welfare while limiting data usage misconduct. But can these approaches be reconciled under the umbrella of an inclusive and flexible global framework? While global coordination seems unlikely on many policy issues such as antitrust or government access to data, it works for technical standards. The coherence they bring to the regulatory landscape will benefit all countries, consumers, and firms. We identify data sharing as a necessary technical standard to restore consumer choice and strengthen competition in tech companies’ different economic sectors. We define data sharing as the combination of (i) data portability, (ii) platforms’ interoperability, and (iii) data reciprocity. In highly innovative markets such as those in the digital space, these requirements ensure low entry barriers. They also provide convenient and cost-effective alternatives to customers, allowing them to sanction firms’ poor behavior or quality of services by switching to another. Ultimately these requirements will favor competition, innovation, and consumers’ privacy. |
| Keywords: | data sharing, tech, bigtech, regulation, interoperability, portability, fianancial stability |
| JEL: | F3 F4 F5 F6 O3 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107679&r= |