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on Regulation |
| By: | Djedjiga Kachenoura; David CHETBOUN; Marine Lagarde,; Laurent Mélère,; Damien Serra. |
| Abstract: | In 2015, in the run-up to COP21 in Paris, the speech by Mark Carney, then Governor of the Bank of England and mandated by the G20's Financial Stability Board, made history. He warned of the importance of financial climate risks for the stability of financial institutions and the financial system as a whole. The political burden of transition was left to governments, provided it was orderly, while the responsibility for stability fell to regulators and central banks. Finance”, informed by extra-financial disclosure regimes, would drive demand as a provider of capital. These disclosure regimes were to be initiated by private players and supported by regulators. Mr. Carney feared, however, that they would lack coherence, comparability and clarity. Since then, these schemes have proliferated, covering both risks and the alignment of financial flows with the Paris Agreement. Nevertheless, this “theory of change” and the division of responsibilities between players remain unclear and ambiguous. Financial regulators need to work together to make these different regimes interoperable and clarify their objectives. What's more, compliance costs and the disconnection of certain frameworks from national realities are holding back the mobilization of funding, and may lead to the exclusion of the most vulnerable entities, a subject that has received little attention. |
| JEL: | Q |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:avg:wpaper:en17673 |
| By: | Benjamin Laufer; Jon Kleinberg; Hoda Heidari |
| Abstract: | Recent policy proposals aim to improve the safety of general-purpose AI, but there is little understanding of the efficacy of different regulatory approaches to AI safety. We present a strategic model that explores the interactions between the regulator, the general-purpose AI technology creators, and domain specialists--those who adapt the AI for specific applications. Our analysis examines how different regulatory measures, targeting different parts of the development chain, affect the outcome of the development process. In particular, we assume AI technology is described by two key attributes: safety and performance. The regulator first sets a minimum safety standard that applies to one or both players, with strict penalties for non-compliance. The general-purpose creator then develops the technology, establishing its initial safety and performance levels. Next, domain specialists refine the AI for their specific use cases, and the resulting revenue is distributed between the specialist and generalist through an ex-ante bargaining process. Our analysis of this game reveals two key insights: First, weak safety regulation imposed only on the domain specialists can backfire. While it might seem logical to regulate use cases (as opposed to the general-purpose technology), our analysis shows that weak regulations targeting domain specialists alone can unintentionally reduce safety. This effect persists across a wide range of settings. Second, in sharp contrast to the previous finding, we observe that stronger, well-placed regulation can in fact benefit all players subjected to it. When regulators impose appropriate safety standards on both AI creators and domain specialists, the regulation functions as a commitment mechanism, leading to safety and performance gains, surpassing what is achieved under no regulation or regulating one player only. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.20848 |
| By: | António Afonso; M. Carmen Blanco-Arana |
| Abstract: | This paper assesses the impact of the regulatory environment on the new business creation in 45 Least Developed Countries (LDC) using a panel data from 2000 to 2021. Empirical evidence, derived from a fixed effects (FE) model, indicates a strong relationship between business regulation and new business creation in LDC. This suggests that the regulatory framework of a country is a crucial factor that influences entrepreneurial decisions and can significantly contribute to economic growth. The overall economic situation of a country also has a positive and significant impact. Additionally, factors such as accessibility to financial services, political stability, control of corruption, and economic freedom clearly affect the establishment of new businesses in these countries. Similar results are obtained using the Generalised Method of Moments (GMM) estimator, through the use of a dynamic panel data approach. Finally, business regulation is also strongly associated with new business creation in OECD countries. |
| Keywords: | new business, regulatory environment, FE, GMM, panel data, LDC. |
| JEL: | M20 G18 C23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11838 |
| By: | Shawhan, Daniel (Resources for the Future); Peplinski, McKenna (Resources for the Future); Robson, Sally; Russell, Ethan; Ziegler, Ethan (Resources for the Future); Palmer, Karen (Resources for the Future) |
| Abstract: | The United States is entering a period of rapid electricity demand growth spurred by electrification of buildings and transport, a renewed emphasis on domestic manufacturing, and a booming data center market. At the same time, a combination of challenges has extended typical development timelines to 10 years for transmission and 5 years for generation infrastructure (Solomon 2023; Rand et al. 2024). These long timelines slow cost-reducing system additions and compound the difficulty of meeting the new demand. Delaying the build-out of energy infrastructure also increases system congestion and thereby reduces the resilience and reliability of the grid. In this paper, we estimate some of the major effects of having longer development timelines like the current ones, which we term “delays.”We estimate the effects of such delays on the generation resource mix, costs for electricity and natural gas customers, profits of the electricity and natural gas supply industries, government revenue, and network congestion for the entire US and Canadian power system. We find that these delays cause electricity scarcity, which leads to increased energy bills and system congestion. The resulting changes to the generation mix increase the emissions from the power sector. Delays also have some positive economic effects, such as increased energy producer profit and higher government tax revenue. We find that the effects of the transmission development delays are similar to those of the generation development delays, per billion dollars of investment (levelized cost) delayed. Our results indicate that shortening the development times for transmission and generation in the United States and Canada would be likely to save energy customers tens of billions of dollars per year and reduce transmission congestion considerably.For our analysis, we use the Engineering, Economic, and Environmental Electricity Simulation Tool (E4ST), a detailed simulation model of the US and Canadian electricity sector. E4ST predicts hourly system operation, generator construction, generator retirements, system costs, and other outcomes under each simulated set of circumstances. We focus on outcomes that are realized in the year 2032. To estimate the effects of delays, we simulate the future with and without a shift in a set of transmission or generation investments that would have occurred by 2032 to after 2032. In the simulations with delays, we allow existing generators to defer their retirements but limit what generators can be constructed that are not built in the no-delays simulation. The set of delayed transmission investments represents 6 percent of US and Canadian transmission megawatt-miles (MW-miles). This deferred investment represents between one and several years’ worth of transmission investments, depending on the period of comparison. We represent generation development delays by reducing wind-, solar-, and gas-fueled generation capacity added between 2028 and 2032 (“new capacity”) by 20 percent each. The delayed generation investments equal 4 percent of total generation capacity, or approximately one year of projected generation capacity additions. Our results can be used in the evaluation of the costs and benefits of policy changes or regulatory or process changes that would shorten or lengthen development times.Our central set of background assumptions includes the US Inflation Reduction Act tax credits for new nonemitting generators and existing nuclear generators. It omits the 2024 EPA greenhouse gas rules and the 2024 Good Neighbor Plan for NOx emissions, as they are likely to be revised under the current administration. In three alternative sets of background assumptions (sensitivity cases), we employ different policy assumptions or technology costs.Our results show that delays have a negative impact on the development of both emitting and nonemitting generators. While the magnitude of prevented capacity additions is greater for wind and solar, this is mainly because, in all scenarios, investors choose to build more wind- and solar-powered capacity than natural gas–fueled capacity. Across all cases, we find that the transmission and generation delays reduce the construction of generation facilities powered by wind, sun, and natural gas approximately in proportion to their shares of new capacity additions (all between 20 and 29 percent). This means that transmission capacity additions are approximately as likely to be important for a given new gas-fueled generator as for a given new wind or solar generation farm.Despite reducing new wind-, solar-, and gas-powered capacity by similar proportions, the delays increase gas-fueled (and coal-fueled) generation and reduce wind- and solar-powered generation. The main reason is that gas- and coal-fueled generators are the existing generators that can most commonly generate more, through a higher utilization rate or deferral of retirement. In the transmission-delays scenario, gas- and coal-fueled generation rises by 9 percent, while wind- and solar-powered generation decreases by 7 percent, compared with the scenario without the delays. In the generation-delays scenario central case, gas- and coal-fueled generation increases by 7 percent, while wind- and solar-powered generation decreases by 6 percent, compared with the scenario without the delays.Transmission and generation delays can also increase system congestion, meaning transmission lines are being operated at their limits more frequently. Transmission line congestion can reduce the efficiency, reliability, and resilience of the power system and lead to higher electricity costs. We find that transmission and generation delays increase system congestion across all cases. With our central background assumptions, the transmission delays increase system congestion by 14 percent, and the generation delays increase it by 7 percent.Changes to the mix of grid resources and to system operation are consequential for costs and prices in the power system. They affect the economic outcomes for consumers, producers, and the government. Different generation facilities have different capital and operation costs, and transmission and generation constraints increase electricity scarcity and prices. Further, higher natural gas demand within the electric power sector increases the cost of natural gas for both power plants and other gas users. The delays affect government tax revenue mainly by changing the amount of generation capacity built that qualifies for federal tax credits.The deferral of transmission and generation investments produces the effects described in this paper, some of which are costs. It also results in what we describe as capital cost savings, which simply refers to the savings associated with not building new transmission and generation. The estimated annual capital cost savings from either the transmission development or generation investment delays are $5 billion. We assume that the transmission capital cost savings accrues to electricity users and the generation capital cost savings to generation investors. This benefit of the delays can be compared with the costs for electricity users:The modeled transmission delays increase the cost of electricity and natural gas together by $22 billion (or $27 billion before counting the transmission capital cost savings). Hence the net cost to energy users is more than four times the capital cost savings. A $22 billion increase is $55 per capita, which represents a 3 percent increase of economy-wide retail spending on electricity and natural gas. The electricity price increase is a third of a cent per kilowatt-hour (kWh).The modeled generation delays increase the cost of electricity and natural gas together by $28 billion. This cost to energy users is more than five times the capital cost savings. A $28 billion increase is $70 per capita, which represents a 4 percent increase of economy-wide retail spending on electricity and natural gas. The electricity price increase is 0.45 cents per kWh.The model estimates of price increases from the delays are not unreasonably large; in 2024, capacity prices in PJM, which serves one-sixth of the US and Canadian population, increased by $12 billion.We also find that certain stakeholders benefit from the delays across all cases. In the central case, we estimate the following:The transmission delays increase the total profits of electricity and gas producers together by $19 billion, through higher electricity and natural gas prices.The generation delays increase the total profits of electricity and gas producers together by $22 billion (or $17 billion before counting the generation capital cost savings), through higher electricity and natural gas prices.Transmission and generation delays increase government tax revenue by $10 billion and $7 billion, respectively, because there are fewer generators that receive government incentives.The results are similar in the sensitivity cases. The largest difference is that the costs, benefits, and net costs of the delays are larger in the sensitivity case with higher wind and solar costs, and the delays increase tax revenue much less in the sensitivity case without the Inflation Reduction Act incentives for clean generation.In our second paper, we estimate and incorporate the effects of the delays on air pollution, mortality from air pollution, climate change damages, and disadvantaged Americans to better characterize the full net costs of transmission and generation delays. Other effects we have not included in this paper include the costs of financing projects longer before they start producing, the costs of projects canceled because of delays, the effects of slowed technology advancement, and the detriment to customers that must delay expansion plans (e.g., new data center, factory, or home) as a result of the transmission or generation delays. |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-25-14 |
| By: | Sergio Potenciano Menci; Laura Andolfi; Rawan Akkouch |
| Abstract: | European electricity markets have been complex since their inception. Policies and technologies advancing renewable integration, consumer empowerment, flexibility, and electrification are reshaping generation and consumption, increasing this complexity. System operators face congestion, voltage management, and redispatch challenges while market actors navigate imbalances and volatility. New market structures, such as energy communities and local flexibility markets, aim to address local energy dynamics and integrate decentralized flexibility. However, their fit within existing market frameworks remains unclear, leading to inconsistent interpretations and regulatory uncertainties. This manuscript presents a graphical classification of local markets, positioning them within electricity procurement (e.g., wholesale) and system operation (e.g., ancillary) services while illustrating their interrelations. Despite their potential, these markets remain in early development, facing regulatory ambiguities, resource limitations, and coordination challenges. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.13919 |
| By: | Dante B. Canlas (School of Economics, University of the Philippines Diliman); Karl Robert L. Jandoc (School of Economics, University of the Philippines Diliman) |
| Abstract: | This paper examines the implications of renewing Meralco’s electricity distribution franchise, which was recently extended for another 25 years. Several unresolved competition and regulatory issues challenge the alignment of this extension with the Electric Power Industry Reform Act (EPIRA) of 2001. Key concerns include Meralco’s dominant market position, cross-ownership with generation companies, potential franchise creep, and its influence in the retail market. The paper advocates for structural reforms such as competitive franchise auctions, stricter cross-ownership limitations, and the possible division of Meralco’s service areas to promote market efficiency and consumer welfare. It also proposes granting the Energy Regulatory Commission (ERC) the authority to oversee franchise bidding and to enforce more rigorous monitoring of market behavior. The findings emphasize that automatic renewal without reforms risks entrenching monopolistic practices and foregoing opportunities for improving transparency, competition, and efficiency in the electricity distribution sector. |
| Keywords: | Electricity Distribution; Franchise Regulation; Competition Policy |
| JEL: | L94 L51 L41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:phs:dpaper:202502 |
| By: | Ibrahim Abada; Andreas Ehrenmann |
| Keywords: | Incomplete markets, market distortion, bi-level programming, stochastic equilibrium models, optimal regulation, power markets |
| JEL: | D81 C72 C73 Q41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2507 |
| By: | Paul Simshauser; Joel Gilmore |
| Keywords: | Electrification, renewables, natural gas, energy-only markets, dispatchable plant capacity |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2509 |
| By: | David Newbery; Chi Kong Chyong |
| Keywords: | Variable renewable electricity, marginal curtailment, least-cost expansion |
| JEL: | H23 L94 Q28 Q42 Q48 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2505 |
| By: | Ambati, Murari; Munipalle, Pravith |
| Abstract: | The pharmaceutical industry is important in global healthcare, and drives innovation in drug development ensuring access to life-saving treatments. However, the industries economic structure and competitive dynamics give rise to anticompetitive practices that distort market efficiency, limit consumer choice, and inflate drug prices. This paper shows a comprehensive review of the anticompetitive behaviors employed by pharmaceutical firms, including patent evergreening, pay-for-delay agreements, price collusion, and product hopping. The paper analyzes prominent strategies in the pharmaceutical industries that are anticompetitive through the lens of industrial organization theory, game theory, and market microstructure models. Additionally, we examine the role of financial markets in monitoring and mitigating these inefficiencies, with a particular focus on short-selling. We assess how short sellers act as market watchdogs, and identify overvalued pharmaceutical stocks that may be engaging in rent-seeking behavior. Furthermore, the paper explores the regulatory landscape, and highlight antitrust interventions along with legal challenges. Furthermore, the paper explores recent policy proposals aimed at curbing market manipulation. The paper concludes by discussing potential reforms and market-based solutions to foster competition, enhance price transparency, and improve drug accessibility. Our findings contribute to the broader discourse on financial market oversight, economic efficiency, and the intersection of healthcare economics and capital markets. |
| Date: | 2025–03–03 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:8rd7w_v1 |
| By: | Paul Simshauser; Evan Shellshear |
| Keywords: | Renewable Energy Zones, renewables, battery storage, Shapely value |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2506 |
| By: | Elena Prager; Nicholas Tilipman |
| Abstract: | Recent policy proposals seek to regulate out-of-network hospital prices. We study how such regulation affects equilibrium prices, network formation, and hospital exit. We estimate a structural model of insurer-hospital bargaining that allows for out-of-network transactions between non-contracting parties. These transactions generate a notion of exit by rendering hospitals unprofitable under some regulations. Estimation relies on a novel measure of out-of-network prices. We find that reducing out-of-network prices would also lower negotiated prices, but potentially at the cost of narrower hospital networks. Aggressive regulation could induce substantial hospital exit, but only under the restrictive assumption that negotiators cannot anticipate the exits. |
| JEL: | C78 I11 L13 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33727 |
| By: | Leonardo Madio; Matthew Mitchell; Martin Quinn; Carlo Reggiani |
| Abstract: | We study the competitive impact of content moderation by a dominant online platform. We exploit an exogenous shock that led the largest adult content platform to remove all non-verified content, eliminating 80% of its video library. Using a difference-in-differences approach and leveraging on daily website-country level traffic data, we find that this policy resulted in a 41% drop in traffic within one month, suggesting strong user preferences for the removed content. However, much of the displaced traffic was absorbed by competing platforms, including both mainstream rivals and less regulated fringe websites. Over six months, fringe sites experienced a 55% increase in visits, far outpacing the 10% growth of mainstream competitors. Search engines played a critical role in this reallocation: fringe platforms saw a surge in traffic from search referrals and aggregators, as users actively sought alternative content sources. We document an intensification of competition in search: the leading platform became more aggressive towards copyright-infringing rivals, strategically using DMCA filings to remove competing content from search results. Our findings highlight how asymmetric exposure to content moderation shocks can reshape market competition, drive consumers toward less regulated spaces, and alter substitution patterns across platforms. |
| Keywords: | content moderation, platforms, adult websites, search. |
| JEL: | D83 K42 L82 O39 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11842 |
| By: | Piyush Akimitsu |
| Abstract: | This study explores Telehealth Parity Laws (TPLs) and their heterogeneous treatment effects by policy type on outpatient utilization and Medicare costs, considering broadband and licensure infrastructure. State-specific legislative framings create varied Price (physician reimbursement) and Cost (consumer expense) control combinations within a quasi-experimental design. Partial equilibrium causal estimates reveal negligible impacts on Medicare enrollment, indicating that Medicare cost shifts stem purely from outpatient utilization changes. Broadband access correlates with increased preventable hospital stays but lower Medicare costs and enrollment. Additionally, the Interstate Licensure Compact increases enrollment among the aged and disabled, possibly addressing previously unmet demand for healthcare services. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.14784 |
| By: | Fiona Burlig; Amir Jina; Anant Sudarshan |
| Abstract: | Over 2 billion people lack clean drinking water. Existing solutions face high costs (piped water) or low demand (point-of-use chlorine). Using a 60, 000 household cluster-randomized experiment we test an increasingly popular alternative: decentralized treatment and home delivery of clean water to the rural poor. At low prices, take-up exceeds 90 percent, sustained throughout the experiment. High prices reduce take-up but are privately profitable. Self-reported health measures improve. We experimentally recover revealed-preference measures of valuation. Willingness-to-pay is several times higher than prior indirect estimates; willingness-to-accept is larger and exceeds marginal cost. On a cost-per-disability-adjusted-life-year basis, free water delivery regimes appear highly cost-effective. |
| JEL: | O13 Q25 Q53 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33557 |
| By: | Urban Jermann; Haotian Xiang |
| Abstract: | We study capital regulation in a dynamic model for bank deposits. Capital regulation addresses banks’ incentive for excessive leverage that dilutes depositors, but preserves some dilution to reduce bank defaults. We show theoretically that capital regulation is subject to a time inconsistency problem. In a model with non-maturing deposits where optimal withdrawals make deposits endogenously long-term, we find commitment to have important effects on the optimal level and cyclicality of capital adequacy. Our results call for a systematic framework that limits capital regulators’ discretion. |
| JEL: | E44 G21 G28 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33578 |