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on Regulation |
| By: | Per J. Agrell; Peter Bogetoft |
| Abstract: | Climate change policy, in particular in Europe, will a¤ect the energy sector through the exposure to massive penetration of distributed energy resources or decentralized generation into electricity distribution and transmission grids. As the prerequisites for infrastructure regulation still prevail in the future, the question arises whether the current regulatory model is still valid. In this paper, we chararcterize some of the e¤ects of climate change policy on the network tasks, assets and costs and contrast this with the assumptions implicit or explicit in current economic network regulation. The resulting challenge is identi ed as the change in the direction of higher asymmetry of information and higher capital intensity, combined with ambiguities in terms of task separation. Methodolog- ically, we argue that this may require a mobilization of the litterature related to delegated and hierarchical systems, e.g. team performance, as the externalities are joint products from multiple independent stages where individual regulation may introduce distortions. To provide guidance, we present a model of investment provision under regulation between a distribution system operator (DSO) and a potential investor-generation. The results from the model con rm the hypothesis that network regulation should nd a focal point, should integrate externalities in the performance assessment and should avoid wide delegation of contracting-billing for climate change technologies. |
| Keywords: | network regulation; climate change; investments; distributed generation |
| Date: | 2010–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/67&r=reg |
| By: | Eric Brousseau; Jean-Michel Glachant |
| Abstract: | Regulation of utilities in the XXI Century is challenged by the fast pace of change notably the acceleration of innovation, the restructuring of industry as sets of modular chains and the spreading of new information and communication technology. Living in this world of rapid and renewed changes regulators are also challenged by the basic characteristics of their institutional embeddedness. In the real world, far from being the alpha and the omega of regulation, regulators only act in a multilevel and multichannel frame of regulatory institutions. However regulators can bring a core piece of "reflexive governance" to favour the new industry and institutions' changes. It is by building "knowledge platforms" on an "open forum" model. |
| Keywords: | Reflexive Governance; Regulation; Knowledge Platform; Open Forum; Innovation |
| Date: | 2010–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/90&r=reg |
| By: | Nico Keyaerts; Michelle Hallack; Jean-Michel Glachant; William D'haeseleer |
| Abstract: | This paper analyses the value and cost of line-pack flexibility in liberalized gas markets through the examination of the techno-economic characteristics of gas transport pipelines and the trade-offs between the different ways to use the infrastructure: transport and flexibility. Line-pack flexibility is becoming increasingly important as a tool to balance gas supply and demand over different periods. In the European liberalized market context, a monopolist unbundled network operator offers regulated transport services and flexibility (balancing) services according to the network code and the balancing rules. Therefore, gas policy makers should understand the role and consequences of line-pack regulation. The analysis shows that the line-pack flexibility service has an important economic value for the shippers and the TSO. Furthermore, the analysis identifies distorting effects in the gas market due to inadequate regulation of line-pack flexibility: by disregarding the fixed cost of the flexibility in the balancing rules, the overall efficiency of the gas system is decreased. Because a full market based approach to line-pack pricing is unlikely, a framework is presented to calculate a cost reflective price for pipeline flexibility based on the trade-offs and opportunity costs between the right to use the linepack flexibility and the provision of transport services. |
| Keywords: | gas flexibility; gas balancing rules; EU gas market |
| Date: | 2010–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/71&r=reg |
| By: | Rostam-Afschar, Davud |
| Abstract: | The amendment to the German Trade and Crafts Code in 2004 offers a natural experiment to asses the causal effects of this reform on the probabilities of being self-employed and transition into and out of self-employment, using cross-sections (2002-2006) of German microcensus data. This study applies the difference-in-differences technique in logit models for four occupational groups. Easing the educational entry requirement has fostered self-employment significantly for less qualified craftsmen, almost doubling the entry probability, even as exit rates remained unaffected. Weaker effects occur for other occupational groups. These findings have implications for the design of regulations with educational requirements. -- |
| Keywords: | Regulation,Entrepreneurship,Educational entry requirement Natural experiment,Craftsmanship |
| JEL: | L51 J24 I28 M13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:201024&r=reg |
| By: | Joan-Ramon Borrell (Research Group on Governments and Markets (GiM) - Dep. de Política Econòmica - Institut d’Economia Aplicada (IREA), Universitat de Barcelona, Diagonal 690, 08034 Barcelona, Spain); Laura Fernández-Villadangos (Research Group on Governments and Markets (GiM) - Dep. de Política Econòmica - Institut d’Economia Aplicada (IREA), Universitat de Barcelona, Diagonal 690, 08034 Barcelona, Spain.) |
| Abstract: | Concerns on the clustering of retail industries and professional services in main streets had traditionally been the public interest rationale for supporting distance regulations. Although many geographic restrictions have been suppressed, deregulation has hinged mostly upon the theory results on the natural tendency of outlets to differentiate spatially. Empirical evidence has so far offered mixed results. Using the case of deregulation of pharmacy establishment in a region of Spain, we empirically show how pharmacy locations scatter, and that there is not rationale for distance regulation apart from the underlying private interest of very few incumbents. |
| Keywords: | distance, location, regulation, retailing |
| JEL: | L51 K23 H42 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2010-12&r=reg |
| By: | Halvor Briseid Storrøsten (Statistics Norway) |
| Abstract: | This paper shows that tradable emissions permits and an emissions tax have a risk-related technology choice effect. We first examine the first- and second-order moments in the probability distributions of optimal abatement and production under the two instruments. The two instruments will, in general, lead to different expected aggregate production levels when technology choice is endogenous, given that regulation is designed to induce equal expected aggregate emissions. Moreover, either regulatory approach may induce larger variance in optimal production and optimal abatement levels, depending on the specification of the stochastic variables. Finally, because firms’ valuation of a flexible technology increases if the variance in abatement is inflated and vice versa, either of the two instruments may induce the most flexible technology. Specifically, a tax encourages the most flexibility if and only if abatement costs and the equilibrium permit price have sufficiently strong positive covariance compared with the variance in the price on the good produced. |
| Keywords: | Regulation; Technology choice; Uncertainty; Investment. |
| JEL: | H23 Q55 Q58 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:643&r=reg |
| By: | Kotsios, Panayotis |
| Abstract: | The entry of new competitors operates as a balancing force against high levels of industrial concentration and the abuse of dominant position by firms with large market shares. Entry increases supply, lowers prices, intensifies innovation and brings equilibrium to the markets that don’t operate in a socially desirable manner. This paper examines the impact of regulatory restrictions to the entry of new competitors in industrial sectors. It provides a short description of the 13 most important sources of regulatory barriers and assesses their role and importance as entry barriers. The conclusion is that regulatory restrictions can be a very important, almost insurmountable barrier to the entry of new competitors, but their role is not always socially harmful. The use of certain sources of regulatory barriers is effective in protecting social welfare instead of harming it. Barriers that promote new competition or are applied in order to protect consumer welfare are socially useful, while barriers that restrict competition and limit new competitor entry, in cases other than natural monopolies, are socially harmful. |
| Keywords: | entry; competition; industry; barriers |
| JEL: | L0 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27976&r=reg |
| By: | Antonio Estache; Liam Wren-Lewis |
| Abstract: | This paper reviews the theories of corruption in regulated sectors to further understand the impact of corruption and the ways in which it can be reduced. The aim is to draw out the policy implications of the different theoretical approaches and to examine the support that can be garnered for such policies from empirical evidence and practice. We then attempt to draw out some of the broader lessons that can be learnt for anti-corruption policy in general. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/63115&r=reg |
| By: | Antonio Manganelli; Antonio Nicita; Maria Alessandra Rossi |
| Abstract: | This paper analyzes the institutional design of the European competition policy system. Besides the multi-level public enforcement, the paper describes other two fundamental dimensions of the European competition policy system: the relationship between public and private enforcement and that between competition law enforcement and sector specific regulation, with particular regards with the Electronic Communications sector. The main effort of the paper consists in representing the EU Competition policy system as a web of vertical and horizontal relationships among a large set of actors, sometimes coordinated by formal or informal mechanisms but still characterized by competence overlaps and strategic interdependencies. Finally the paper aims at assessing the relevant economic trade-offs associated to these overlaps and interactions in terms of efficiency and effectiveness of the system, giving some policy suggestions for the future evolution of its overall design. |
| Keywords: | Competition policy; institutional design; multi-level governance; public and private enforcement; competition policy in regulated industries |
| Date: | 2010–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/79&r=reg |
| By: | Selim, Sheikh (Cardiff Business School) |
| Abstract: | The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural prices; this apparently motivated the government to take over the control of agricultural prices in 1998. We examine how and to what extent this reform affected the productivity and welfare of grain farmers in China at the regional level. We find that the price regulation that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers. welfare. Although the price regulations resulted in short term improvement in welfare across all the regions, for the long run such regulations can result in larger drop in agricultural production because of its negative impact on incentives to produce more. |
| Keywords: | China; Welfare; TFP; Agriculture; Grain Production |
| JEL: | N55 O13 O53 Q12 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/2&r=reg |
| By: | Komarek, Timothy |
| Abstract: | Many governments, firms, institutions and individuals have become increasingly cognizant of their impact on the environment, most notably with respect to global climate change. This coupled with a threat of future regulation and a desire for a âgreenâ image, among other reasons, has led firms and institutions to begin critically evaluating and managing their own âcarbon footprintâ. Effective programs to manage greenhouse gas emissions (GHG) benefit from understanding the preferences of the constituents the program intends to serve. This study uses a survey at Michigan State University to examine the preferences of constituents (students, faculty and staff) for attributes of alternative greenhouse gas (GHG) reduction strategies. The first essay examines how much respondents were willing to pay for GHG reduction program attributes and the welfare implications of several alternative policies. The second essay examines how the attributes of alternative GHG management plans influence the universityâs âgreenâ reputation. |
| Keywords: | 'Green' reputation, pro-environmental behavior, conjoint analysis, climate change policy, choice experiment, institution, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q40, Q42, Q51, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ags:midagr:98248&r=reg |
| By: | Jean-Michel Glachant |
| Abstract: | The achievement of the internal market for energy is going ahead in the EU 15 since a model is emerging for “coupling the national markets for electricity”. For about 15 years the EU 15 was made up of national markets open to each other through rules of access to the grids while organized market pricing was kept national. The main exception was in the Nordic countries (Sweden, Finland and Denmark plus Norway –not a member of the EU). In this region the coupling of national markets is obtained through a single Power Exchange being a common subsidiary of the Nordic transmission system operators (TSOs). This single PX runs a single Day Ahead market pricing zone when the grid is not constrained and splits itself into different pricing areas when structural constraints arise. This model is known as “market splitting”. The Netherlands, Belgium and France did later create a less centralized single pricing mechanism by “coupling” their three national PXs with a common pricing algorithm coordinating the price formation among the three national exchanges. The empirical success of this new model has validated it as an EU model for other regional markets. A counter-model has been experimented between Germany and Denmark. It consisted of a coupling of “volumes” linking the quantities offered and demanded in the two exchanges while keeping the price formation in these two markets separated. That experiment failed and started to work again only when elements of price coupling have been introduced. Having now three workable models of market coupling, the European Union (at least EU 15) should be able to successfully achieve one layer of its internal market soon. However, several further questions are kept open such as how to successfully bridge several regional markets all over the EU 15 or how to integrate more and more PXs having different regulatory frames. A centralized approach (known as CMU) is advocating creating a single pan-European trading entity by a mandatory restructuring of all existing PXs plus a clubbing of all TSOs and the extensive harmonization of all existing national regulatory frames. An alternative approach is the one known as PCR (“Price Coupling of Regions”). It allows building a less demanding common pricing mechanism to coordinate existing PXs in a decentralized network. It is permitting grid access and trading to keep a national flavour when requested by particular local preferences. |
| Keywords: | market coupling; market splitting; power exchange; electricity internal market; day ahead market |
| Date: | 2010–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/87&r=reg |
| By: | Gian Carlo Scarsi; Gregory Smith |
| Abstract: | This paper describes the approach to investment in rail infrastructure in four different European countries (Great Britain, France, Germany, and the Netherlands) with a view to understanding whether and how these countries differ in their approach to the sustainability of investment in infrastructure. We compare and contrast different approaches to investment, such as: The direct role of government; The role of the economic regulator, where available; The influence of particular ownership agreements, such as the use of concessions for high-speed lines; Any differential treatment of different assets, and any differential treatment of different items of expenditure, such as maintenance, renewals, and enhancements; The role played by private capital (in infrastructure as separate from passenger and freight train operations); and The existence of a (more or less unlimited), either direct or indirect, state guarantee on debt issued to fund investment in network assets. In analysing the European case studies, the paper asks the following questions, which may differ across infrastructure categories (for instance track/signalling, stations, and high-speed lines): (i) What is the ownership structure of each IM? (ii) Who “sponsors” and specifies investment? (iii) Who is responsible for planning and approving investment? (iv) What are the ultimate funding sources of investment? (v) Who is responsible for delivering investment? (vi) What is the role of the independent economic and technical regulator (where availble) vis-à-vis the government? (vii) Is there any (direct or indirect) market mechanism, for instance as part of incentive regulation, that is mimicked when incentivising the monopoly provider of infrastructure to achieve a sustainable level of investment? The paper concludes with some policy considerations and recommendations based on the four case studies examined. |
| Keywords: | railway; reform; investment in public transport |
| Date: | 2010–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/88&r=reg |
| By: | Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Much of the improvement in living standards in developed and developing countries alike is attributable to the exploitation of nonrenewable and renewable resources. The problem is to know when the exploitation occurs at rates and with technologies that are sustainable. If they are not sustainable, this state of affairs presents a serious problem for the future. A long-term management perspective is needed in order to avoid irreversible degradation of renewable resources. This paper examines major challenges to natural resource management as well as policy options.<p> |
| Keywords: | Natural resources; policy instruments; property rights; environmental regulations; tradable quotas; taxes; voluntary agreements; liability; subsidies; subsidy reduction; deposit-refunds. |
| JEL: | Q50 |
| Date: | 2011–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0480&r=reg |
| By: | Michael Pahle; Lin Fan; Wolf-Peter Schill |
| Abstract: | Despite political activities to foster a low-carbon energy transition, Germany currently sees a considerable number of new coal power plants being added to its power mix. There are several possible drivers for this "dash for coal", but it is widely accepted that windfall profits gained through free allocation of ETS certificates play an important role. Yet the quantification of allocation-related investment distortions has been limited to back-of-the envelope calculations and stylized models so far. We close this gap with a numerical model integrating both Germany's particular allocation rules and its specific power generation structure. We find that technology specific new entrant provisions have substantially increased incentives to invest in hard coal plants compared to natural gas at the time of the ETS onset. Expected windfall profits compensated more than half the total capital costs of a hard coal plant. Moreover, a shorter period of free allocations would not have turned investors' favours towards the cleaner natural gas technology because of preexisting economic advantages for coal. In contrast, full auctioning of permits or a single best available technology benchmark would have made natural gas the predominant technology of choice. |
| Keywords: | Emissions trading; Allocation rules; Power markets; Investments |
| JEL: | Q48 Q54 Q58 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1097&r=reg |
| By: | Maria Lykidi; Jean-Michel Glachant; Pascal Gourdel |
| Abstract: | In many countries, the electricity systems are quitting the vertically integrated monopoly organization for an operation framed by competitive markets. In such a competitive regime one can ask what the optimal management of the nuclear generation set is. We place ourselves in a medium-term horizon of the management in order to take into account the seasonal variation of the demand level between winter (high demand) and summer (low demand). A flexible nuclear set is operated to follow a part of the demand variations. In this context, nuclear fuel stock can be analyzed like a reservoir since nuclear plants stop periodically (every 12 or 18 months) to reload their fuel. The operation of the reservoir allows different profiles of nuclear fuel uses during the different seasons of the year. We analyze it within a general deterministic dynamic framework with two types of generation: nuclear and non-nuclear thermal. We study the optimal management of the production in a perfectly competitive market. Then, we build a very simple numerical model (based on data from the French market) with nuclear plants being not operated strictly as base load power plants but within a flexible dispatch frame (like the French nuclear set). Our simulations explain why we must anticipate future demand to manage the current production of the nuclear set (myopia can not be total). Moreover, it is necessary in order to ensure the equilibrium supply-demand, to take into account the non-nuclear thermal capacities in the management of the nuclear set. They also suggest that non-nuclear thermal could stay marginal during most of the year including the months of low demand. |
| Keywords: | Electricity Market; nuclear generation; optimal reservoir operation; electricity fuel mix; perfect competition with reservoir |
| Date: | 2010–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/68&r=reg |
| By: | Paul L. Joskow |
| Abstract: | Economic evaluations of alternative electric generating technologies typically rely on comparisons between their expected life-cycle production costs per unit of electricity supplied. The standard life-cycle cost metric utilized is the “levelized cost” per MWh supplied. This paper demonstrates that this metric is inappropriate for comparing intermittent generating technologies like wind and solar with dispatchable generating technologies like nuclear, gas combined cycle, and coal. Levelized cost comparisons are a misleading metric for comparing intermittent and dispatchable generating technologies because they fail to take into account differences in the production profiles of intermittent and dispatchable generating technologies and the associated large variations in the market value of the electricity they supply. Levelized cost comparisons overvalue intermittent generating technologies compared to dispatchable base load generating technologies. They also overvalue wind generating technologies compared to solar generating technologies. Integrating differences in production profiles, the associated variations in the market value of the electricity supplied, and life-cycle costs associated with different generating technologies is necessary to provide meaningful comparisons between them. This market-based framework also has implications for the appropriate design of procurement auctions created to implement renewable energy procurement mandates, the efficient structure of production tax credits for renewable energy, and the evaluation of the additional costs of integrating intermittent generation into electric power networks. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:1013&r=reg |
| By: | Nasrollahi Shahri, Nima |
| Abstract: | Following the successful experience of some developed counties in Power market restructuring and reforms, many developing countries have followed suit. Iran has for the last thirty years, since its Islamic revolution of 1979, had an economy dominated by the state, but has been pushed to take some legal steps towards private participation in the electricity sector so as to meet the rapidly rising electricity demand. This paper aims to appraise the stressfulness of Power market restructuring and privatization of electricity industry in Iran. A few years from the commencement of the reforms, the program can be assessed as realistically successful. However, there are plentiful challenges which need to be addressed through legislation. In this study, challenges to competition and Pitfalls of the reforms in the Iranian restructured electricity market will be reviewed. as well as this, a number of recommendations will be offered. |
| Keywords: | Power market restructuring; privatization;Islamic Republic of Iran |
| JEL: | N70 O13 Q4 |
| Date: | 2011–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28047&r=reg |
| By: | Gary. D. Libecap; Terry Anderson; Ragnar Arnason |
| Abstract: | We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ, but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action. |
| Keywords: | Fishing rights, property rights, allocating fishing rights, grandfathering fishing rights, auctions of fishing rights, fisheries rent |
| JEL: | N Q0 Q22 K11 D23 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:31-2010&r=reg |
| By: | Gary D. Libecap |
| Abstract: | There are both high resource and political costs in defining and enforcing property rights to water and in managing it with markets. In this paper, I examine these issues in the semi-arid U.S. West where many of the intensifying demand and supply problems regarding fresh water are playing out. I begin by illustrating the current state of water markets in 12 western U.S. states. There are major differences in water prices across uses (agriculture, urban, environmental) and these differences appear to persist, suggesting that water markets have not developed fully enough to narrow the gaps. Moreover, there is considerable difference in the extent and nature of water trading across the western states, suggesting that water values and transaction costs of trade vary considerably across jurisdictions. I then turn to the resource and political costs of defining water rights and expanding the use of markets. In this discussion, efficiency and equity objectives play important, often conflicting, roles. This tension reflects the very social nature of the water resource. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:30-2010&r=reg |