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on Regulation |
| By: | Horn, Henrik (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This paper develops a framework for analyzing the incentives of national transmission system operators (TSOs) to supply cross-border interconnection capacity in an international electricity market. Our results show that equilibrium transmission capacity is downward distorted, even in situations where full capacity utilization is inefficient. We derive a method for quantifying these distortions and propose a market design that uniquely implements efficient dispatch of electricity. In this design, the distribution of trade adjustment payments causes TSOs to internalize the full e¤ect of network congestion. The design would improve, for instance, on the current European market design. |
| Keywords: | International electricity market; Market design; Market power; Network congestion |
| JEL: | F12 F15 L43 L94 Q27 Q41 |
| Date: | 2021–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1394&r= |
| By: | Zarkovic, Maja (University of Basel) |
| Abstract: | A persistent concern in the literature on climate policy is that the emissions abatement, which is achieved via environmental regulation, has potentially adverse affects on firms' economic performance. I investigate this issue in the context of the European Union Emissions Trading Scheme (EU ETS) and the German manufacturing sector. My investigation uses confidential data from an administrative firm-level production census. As a measure of the economic performance, I estimate cost efficiencies and their determinants for narrowly defined industries with a stochastic cost frontier (SCF) analysis. In order to directly compare cost efficiencies across treatment groups, I use a stochastic meta frontier (SMF) analysis. I provide additional evidence of the causal impact of the EU ETS on various types of firms` costs with a difference-in-differences (DD) framework. My results indicate that the EU ETS regulation has resulted in a small but significant increase in costs across the German manufacturing sector. This increase is driven mostly by an increase in energy and capital costs. I demonstrate that the potential to increase cost efficiency exists for most industries in the German manufacturing sector. The analysis of the drivers of cost efficiency confirms that in most industries, exporting firms are more cost efficient than their counterparts. In contrast, the results show that innovating firms and firms that are regulated by the EU ETS are less cost efficient than unregulated firms. |
| Keywords: | Stochastic Frontier Analysis, Meta Frontier Analysis, EU ETS, Manufacturing Sector |
| JEL: | D22 D24 N64 Q52 |
| Date: | 2020–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2020/12&r= |
| By: | Ryan Hawthorne (University of Cape Town); Lukasz Grzybowski (SES - Département Sciences Economiques et Sociales - Télécom ParisTech, ECOGE - Economie Gestion - I3, une unité mixte de recherche CNRS (UMR 9217) - Institut interdisciplinaire de l’innovation - X - École polytechnique - Télécom ParisTech - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris) |
| Abstract: | We test for the distributional effects of regulation and entry in the mobile telecommunications sector in a highly unequal country, South Africa. Using six waves of a consumer survey of over 134,000 individuals between 2009-2014, we estimate a discrete choice model allowing for individual-specific price-responsiveness and preferences for network operators. Next, we use a demand and supply equilibrium framework to simulate prices and the distribution of welfare without entry and mobile termination rate regulation. We find that, in the South African context, regulation benefits consumers significantly more than entry does, and that high-income consumers and city-dwellers benefit more in terms of increased consumer surplus. |
| Keywords: | Mobile telecommunications,Regulation,Entry,Termination rates,Discrete choice JEL Classification: L13,L40,L50,L96 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03235928&r= |
| By: | Brancaccio, Giulia; Kalouptsidi, Myrto; Papageorgiou, Theodore; rosaia, nicola |
| Abstract: | In this paper we explore efficiency and optimal policy in decentralized transportation markets that suffer from search frictions, such as taxicabs, trucks and bulk shipping. We illustrate the impact of two externalities: the well-known thin/thick market externalities and what we call pooling externalities. We characterize analytically the conditions for efficiency, show how they translate into efficient pricing rules, as well as derive the optimal taxes for the case where the planner is not able to set prices. We use our theoretical results to explore welfare loss and optimal policy in dry bulk shipping. We find that the constrained efficient allocation achieves 6% welfare gains, while the first-best allocation corresponding to the frictionless world, achieves 14% welfare gains. This suggests that policy can achieve substantial gains, even if it does not alleviate search frictions, e.g. through a centralizing platform. Finally, we demonstrate that simple policies designed to mimic the optimal taxes perform well. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14827&r= |
| By: | Tamara Sheldon; Rubal Dua; Omar Al Harbi (King Abdullah Petroleum Studies and Research Center) |
| Abstract: | The transportation sector accounts for 24% of global greenhouse gas (GHG) emissions (IEA 2020). Road transport is the most utilized mode because of its convenience (Van Essen 2008). However, it is also the most emissions intensive mode, accounting for 75% of global transport GHG emissions, with roughly 44% coming from road passenger vehicles alone (IEA 2020). |
| Keywords: | Fleet Fuel Economy, Freight transport activity, |
| Date: | 2021–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:prc:dpaper:ks--2021-dp07&r= |
| By: | Kalantzis, Fotios; Niczyporuk, Hanna |
| Abstract: | Energy efficiency investments are essential for transitioning to a carbon-neutral economy. Nevertheless, despite being financially viable, many energy efficiency investment opportunities do not materialise. The existing literature attributes this situation to financial and non-financial factors. Research suggests that many firms focus only on direct energy savings and neglect non-energy benefits that include increased labour productivity. Up to date, due to lack of high-quality data, few studies attempted to quantify the effects of the energy efficiency investments on firm-level outcomes other than the reductions in energy consumption. This paper overcomes this barrier by using novel data from a firm-level survey conducted by the European Investment Bank that covers more than 15,000 firms in 27 European Union member states and the UK during 2018-2019. It studies the relationship between the energy efficiency investment and the labour productivity of the European firms, utilising instrumental variables methodology to account for potential endogeneity. The results show a positive and causal relationship between energy efficiency investment and labour productivity. The findings of the paper suggest that firms can benefit much more from the energy efficiency investment than what is often assumed, and highlight a need for government policies that would increase firms' awareness of the non-energy benefits. |
| Keywords: | Energy Efficiency,Climate Investment,Productivity |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202107&r= |
| By: | Hoekman, Bernard; Tas, Bedri Kamil Onur |
| Abstract: | This paper investigates the relationship between regulatory policies governing public procurement and participation by small and medium enterprises (SMEs), using a large dataset on European procurement. We find that countries with better quality procurement regulation have greater SME participation and higher probability that SMEs win contracts. Dividing contracts into smaller lots bolsters participation by SMEs, but only increases the probability of SMEs winning contracts for small value lots (â?¬25,000 or less). Counterfactual simulations suggest if governments want to enhance participation by SMEs in public procurement the focus should be on improving the overall quality of procurement processes. |
| Keywords: | international good practice; lot size; public procurement; regulation; SME participation |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14836&r= |
| By: | James E. Archsmith; Erich Muehlegger; David S. Rapson |
| Abstract: | This paper identifies and quantifies major determinants of future electric vehicle (EV) demand in order to inform widely-held aspirations for market growth. Our model compares three channels that will affect EV market share in the United States from 2020-2035: intrinsic (no-subsidy) EV demand growth, net-of-subsidy EV cost declines (e.g. batteries), and government subsidies. Geographic variation in preferences for sedans and light trucks highlights the importance of viable EV alternatives to conventional light trucks; belief in climate change is highly correlated with EV adoption patterns; and the first $500 billion in cumulative nationwide EV subsidies is associated a 7-10 percent increase in EV market share in 2035, an effect that diminishes as subsidies increase. The rate of intrinsic demand growth dwarfs the impact of demand-side subsidies and battery cost declines, highlighting the importance of non-monetary factors (e.g. charging infrastructure, product quality and/or cultural acceptance) on EV demand. |
| JEL: | H23 Q47 Q48 Q5 R4 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28933&r= |
| By: | Olijslager, Stan; van der Ploeg, Frederick; van Wijnbergen, Sweder |
| Abstract: | CO2 pricing is essential for an efficient transition to the green economy. Despite Daniel, Litterman and Wagner (2019)' claim that CO2 prices should decline, CO2 prices should rise over time. First, damages from global warming are proportional to economic activity and this makes CO2 prices grow at the same rate as the economy. Second, even if uncertainty about the damage ratio is gradually resolved over time, this only slows down the price rise. Third, if CCS is allowed for, the optimal CO2 price will rise before it declines but this decline does not occur until more than two centuries ahead. Fourth, damages are likely to be a very convex function of temperature which with rising temperature implies that CO2 prices must grow faster than the economy. Fifth, internalizing the social benefits of learning by doing or a shift towards technical progress in renewable energy production requires a subsidy for renewable energy, not a temporary spike in CO2 prices. Having high CO2 prices upfront is an artefact of failing to separate out renewable energy subsidies from the carbon price. Finally, efficient intertemporal allocation of policy efforts implies that a temperature cap or cap on cumulative emissions requires that CO2 prices must rise at a rate equal to the risk-adjusted interest rate, typically higher than the economic growth rate. Summing up, CO2 prices must rise at a rate at least equal to the economic growth rate and at most to the risk-adjusted interest rate. They should not decline. |
| Keywords: | CO2 prices; Damages; risk |
| JEL: | H23 Q51 Q54 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14795&r= |
| By: | Decarolis, Francesco; Fisman, Raymond; Pinotti, Paolo; Vannutelli, Silvia |
| Abstract: | The benefits of bureaucratic discretion depend on the extent to which it is used for public benefit versus exploited for private gain. We study the relationship between discretion and corruption in Italian government procurement auctions, using a confidential database of firms and procurement officials investigated for corruption by Italian enforcement authorities. Based on a regression discontinuity design around thresholds for discretion, we find that, overall, a large increase in the use of discretionary procedures in the 2000s led to a minimal increase in auctions won by investigated firms. By further investigating the attributes of ``corrupted'' auctions, we uncover two main factors that drive this ``non-result.'' First, discretionary procedure auctions are associated with corruption only when conducted with fewer than the formally required number of bidders or employing discretionary criteria (``scoring rule'' rather than first price), which comprise a small fraction of discretionary auctions overall. We further show that, while these ``corruptible'' discretionary auctions are chosen more often by officials who are themselves investigated for corruption, they are used less often in procurement administrations in which at least one official is investigated for corruption. These findings fit with a framework in which more discretion leads to greater efficiency as well as more opportunities for theft, and a central monitor manages this trade-off by limiting discretion for high-corruption procedures and locales. Additional results based on two standard tools for curbing corruption -- turnover and subcontracting limits -- corroborate this interpretation. Overall, our results imply that discretion is under-utilized, given the high potential benefits as compared to the modest increment in corruption. |
| Keywords: | Bribes; bureaucracy; Competition; Corruption; Procurement |
| JEL: | D73 H57 K42 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14794&r= |
| By: | Baranzini, Andrea; Carattini, Stefano; Tesauro, Linda |
| Abstract: | While instruments to price congestion exist since the 1970s, less than a dozen cities around the world have a cordon or zone pricing scheme. Geneva, Switzerland, may be soon joining them. This paper builds on a detailed review of the existing schemes to identify a set of plausible design options for the Geneva congestion charge. In turn, it analyzes their acceptability, leveraging a large survey of residents of both Geneva and the surrounding areas of Switzerland and France. Our original approach combines a discrete choice experiment with randomized informational treatments. We consider an extensive set of attributes, such as perimeter, price and price modulation, use of revenues, and exemption levels and beneficiaries. The informational treatments address potential biased beliefs concerning the charge’s expected effects on congestion and pollution. We find that public support depends crucially on the policy design. We identify an important demand for exemptions, which, albeit frequently used in the design of environmental taxation, is underexplored in the analysis of public support. This demand for exemptions is not motivated by efficiency reasons. It comes mostly by local residents, for local residents. Further, people show a marked preference for constant prices, even if efficiency would point to dynamic pricing based on external costs. Hence, we highlight a clear trade-off between efficiency and acceptability. However, we also show, causally, that this gap can in part be closed, with information provision. Analyzing heterogeneity, we show that preferences vary substantially with where people live and how they commute. Even so, we identify several designs that reach majority support. |
| Keywords: | acceptability; congestion charge; poicy design; public support; road pricing; Centre for Climate Change Economics and Policy; PZ00P1_180006/1 |
| JEL: | D72 H23 Q53 Q58 R41 R48 |
| Date: | 2021–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:110870&r= |
| By: | Çam , Eren (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Lencz, Dominic (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)) |
| Abstract: | In the European Union’s (EU) gas transmission system the relative prices of short-term transmission capacities are specified via factors called multipliers. Previous literature indicates that, depending on the region, there exist optimal multiplier levels that can allow transport tariffs to be reduced and consumer surplus to be maximised. However, since multiplier levels in a region can cause externalities in other regions, it is not clear if individually optimal multipliers in regions would also lead to a joint optimum. In order to provide insight into optimal multiplier levels in different regions in the EU we use a numerical optimisation model to simulate the European gas dispatch. We analyse the effects of multipliers in regional clusters; identify and differentiate between internal and external effects. We show that those effects and the individually optimal multiplier levels vary among regions depending on factors such as demand structure and storage availability. Our analysis confirms that individually adjusting multipliers in a region can cause external effects in other regions, depending largely on the location along the gas transport chain. With 92 million EUR per year, the potential EU consumer surplus gains with individually optimal multipliers is found to be 9% lower than the maximum achievable EU consumer surplus gains via multipliers. Hence, we show that because of the external effects of multipliers, individually optimal multipliers do not result in the EU optimum. |
| Keywords: | Gas transmission networks; entry-exit tariffs; multipliers; numerical optimisation model |
| JEL: | L51 L95 Q41 |
| Date: | 2021–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:ewikln:2021_004&r= |
| By: | Jussila Hammes, Johanna (Swedish National Road & Transport Research Institute (VTI)); Volden, Gro Holst (NTNU – Norwegian University of Science and Technology, 7491 Trondheim, Norway); Welde, Morten (NTNU – Norwegian University of Science and Technology, 7491 Trondheim, Norway); Börjesson, Maria (Swedish National Road & Transport Research Institute (VTI)); Odeck, James (Swedish National Road & Transport Research Institute (VTI)) |
| Abstract: | We use cost-benefit data from 1052 projects in Norway and Sweden to analyse ex ante factors that can explain which characteristics of transport infrastructure projects explain high value for money. The aim is to identify characteristics that can be used in assessments of projects before a cost-benefit analysis is feasible. We find that in Norway, road toll financing is a good indicator of high value projects, especially in the poorer municipalities. In Sweden, co-financing serves to raise investment volumes, but tends to lead to worse value for money. In Sweden, congestion seems to be the biggest problem in medium-income municipalities, while there are traffic safety benefits to be obtained in the rural areas. A higher initial capacity on a link raises both benefits and costs, and costs are higher in more densely populated areas in both countries. We find diminishing economies of scale in Norway and increasing economies of scale in Sweden. |
| Keywords: | CBA; Transport infrastructure planning; Value for money |
| JEL: | R40 R42 |
| Date: | 2021–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2021_004&r= |
| By: | Zach Y. Brown; Alexander MacKay |
| Abstract: | Increasingly, retailers have access to better pricing technology, especially in online markets. Using hourly data from five major online retailers, we show that retailers set prices at regular intervals that differ across firms. In addition, faster firms appear to use automated pricing rules that are functions of rivals' prices. These features are inconsistent with the standard assumptions about pricing technology used in the empirical literature. Motivated by these facts, we consider a model of competition in which firms can differ in pricing frequency and choose pricing algorithms rather than prices. We demonstrate that, relative to the standard simultaneous price-setting model, pricing technology with these features can increase prices in Markov perfect equilibrium. A simple counterfactual simulation implies that pricing algorithms lead to meaningful increases in markups in our empirical setting, especially for firms with the fastest pricing technology. |
| JEL: | D43 L13 L81 L86 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28860&r= |