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on Regulation |
| By: | Lion Hirth |
| Abstract: | This paper provides a comprehensive discussion of the market value of variable renewable energy (VRE). The inherent variability of wind speeds and solar radiation affects the price that VRE generators receive on the market (market value). During wind and sunny times the additional electricity supply reduces the prices. Because the drop is larger with more installed capacity, the market value of VRE falls with higher penetration rate. This study aims to develop a better understanding how the market value with penetration, and how policies and prices affect the market value. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and the calibrated model of the European electricity market EMMA. We find the value of wind power to fall from 110 percent of the average power price to 50-80 percent as wind penetration increases from zero to 30 percent of total electricity consumption. For solar power, similarly low values levels are reached already at 15 percent penetration. Hence, competitive large-scale renewables deployment will be more difficult to accomplish than many anticipate.• The variability of solar and wind power affects their market value.• The market value of variable renewables falls with higher penetration rates.• We quantify the reduction with market data, numerical modeling, and a lit review.• At 30% penetration, wind power is worth only 50-80% of a constant power source. |
| Keywords: | Variable renewables, wind power, solar power, power system modeling, market integration of renewables, electricity markets, intermittency, competitiveness of renewables, cost-benefit analysis |
| JEL: | C61 C63 Q42 D40 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2013/36&r=reg |
| By: | Rozenberg, Julie; Vogt-Schilb, Adrien; Hallegatte, Stephane |
| Abstract: | This paper compares the temporal profile of efforts to curb greenhouse gas emissions induced by two mitigation strategies: a regulation of all emissions with a carbon price and a regulation of emissions embedded in new capital only, using capital-based instruments such as investment regulation, differentiation of capital costs, or a carbon tax with temporary subsidies on brown capital. A Ramsey model is built with two types of capital: brown capital that produces a negative externality and green capital that does not. Abatement is obtained through structural change (green capital accumulation) and possibly through under-utilization of brown capital. Capital-based instruments and the carbon price lead to the same long-term balanced growth path, but they differ during the transition phase. The carbon price maximizes social welfare but may cause temporary under-utilization of brown capital, hurting the owners of brown capital and the workers who depend on it. Capital-based instruments cause larger intertemporal welfare loss, but they maintain the full utilization of brown capital, smooth efforts over time, and cause lower immediate utility loss. Green industrial policies including such capital-based instruments may thus be used to increase the political acceptability of a carbon price. More generally, the carbon price informs on the policy effect on intertemporal welfare but is not a good indicator to estimate the impact of the policy on instantaneous output, consumption, and utility. |
| Keywords: | Climate Change Mitigation and Green House Gases,Economic Theory&Research,Climate Change Economics,Investment and Investment Climate,Emerging Markets |
| Date: | 2013–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6609&r=reg |
| By: | Stephen Lecourt; Clement Palliere; Oliver Sartor |
| Abstract: | From Phase 3 (2013-20) of the European Union Emissions Trading Scheme, carbon-intensive industrial emitters will receive free allocations based on harmonised, EU-wide benchmarks. This paper analyses the impacts of these new rules on allocations to key energy-intensive sectors across Europe. It explores an original dataset that combines recent data from the National Implementing Measures of 20 EU Member States with the Community Independent Transaction Log and other EU documents. The analysis reveals that free allocations to benchmarked sectors will be reduced significantly compared to Phase 2 (2008-12). This reduction should both increase public revenues from carbon auctions and has the potential to enhance the economic efficiency of the carbon market. The analysis also shows that changes in allocation vary mostly across installations within countries, raising the possibility that the carbon-cost competitiveness impacts may be more intense within rather than across countries. Lastly, the analysis finds evidence that the new benchmarking rules will, as intended, reward installations with better emissions performance and will improve harmonisation of free allocations in the EU ETS by reducing differences in allocation levels across countries with similar carbon intensities of production. |
| Keywords: | European Union Emissions Trading Scheme, CO2 allowance allocation, Emissions-performance benchmarking |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1302&r=reg |
| By: | Pierre Garello (CERGAM, FEG, Aix-Marseille Université); Pierre Bentata (CERGAM-CAE, Aix-Marseille Université) |
| Abstract: | The paper analyzes a policy proposition to take into account indirect land use changes in the evaluation of GHG emissions by biofuel industry. Based on an extensive survey of scientific literature onILUC, it is argued that, due to the absence of a satisfactory scientific evaluation of ILUC, the proposition should be rejected for it will necessarily translate into arbitrary decisions and push an already struggling biofuel industry into bankruptcy. The study also provides afirst approximation of the cost of implementing ILUC regulation in terms of employment and subsidies. Also, a different orientation for a policy towards cleaner and renewable energy is outlined that would be based on a realistic account of current scientific and technological knowledge. |
| Keywords: | Indirect land Use Change, global public goods, GHGemissions, EU energy policy |
| JEL: | Q42 Q48 Q51 Q56 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cgm:wpaper:101&r=reg |
| By: | Jean Guillaume Forand (University of Waterloo); Vikram Maheshri (University of Houston) |
| Abstract: | Regulation is a set of constraints imposed on transactions between buyers and sellers. We introduce a dynamic frictional matching model with horizontal differentiation and nontransferable utility in which a regulator determines permissible transactions. We show the existence and uniqueness of a market equilibrium for any level of regulation and characterize the regulator’s optimal choice of regulatory environment. We argue that in ‘thin’, markets, regulation can correct market failure arising from mismatch between buyers and sellers. However, in ‘thick’ markets, deregulation is optimal, as a regulator can rely on market participants’ equilibrium behavior instead of explicit constraints on economic activities. |
| Keywords: | Regulation, Search, Thickness, Horizontal Differentiation |
| JEL: | D L |
| Date: | 2013–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:hou:wpaper:2013-252-38&r=reg |
| By: | Ronald J. Shadbegian; Wayne B. Gray; Chumbei Wang; Merve Cebi |
| Abstract: | Many believe that environmental regulation must reduce employment, since regulations are expected to increase production costs, raising prices and reducing demand for output. A careful microeconomic analysis shows that this not guaranteed. Even if environmental regulation reduces output in the regulated industry, abating pollution could require additional labor (e.g. to monitor the abatement capital and meet EPA reporting requirements). Pollution abatement technologies could also be labor enhancing. In this paper we analyze how a particular EPA regulation, the “Cluster Rule” (CR) imposed on the pulp and paper industry in 2001, affected employment in that sector. Using establishment level data from the Census of Manufacturers and Annual Survey of Manufacturers at the U.S. Census Bureau from 1992-2007 we find evidence of small employment declines (on the order of 3%-7%), sometimes statistically significant, at a subset of the plants covered by the CR. |
| Keywords: | Cluster Rule, regulatory costs, multimedia regulation, employment effects |
| JEL: | Q52 Q53 Q58 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nev:wpaper:wp201303&r=reg |
| By: | Lawrence H. Goulder; Andrew Schein |
| Abstract: | We examine the relative attractions of a carbon tax, a “pure” cap-and-trade system, and a “hybrid” option (a cap-and-trade system with a price ceiling and/or price floor). We show that the various options are equivalent along more dimensions than often are recognized. In addition, we bring out important dimensions along which the approaches have very different impacts. Several of these dimensions have received little attention in prior literature. A key finding is that exogenous emissions pricing (whether through a carbon tax or through the hybrid option) has a number of attractions over pure cap and trade. Beyond helping prevent price volatility and reducing expected policy errors in the face of uncertainties, exogenous pricing helps avoid problematic interactions with other climate policies and helps avoid large wealth transfers to oil exporting countries. |
| JEL: | H23 Q50 Q54 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19338&r=reg |
| By: | Førsund, Finn R. (Dept. of Economics, University of Oslo) |
| Abstract: | The distinction between the concepts outputs and outcomes can be made operational based on the consideration of the degree of control a public service producer has over its production activity. Resources are transformed into service outputs under the control of the organisation in question, while outcomes represent some higher social goals than outputs and are determined by the outputs and other exogenous variables, but the production of outcomes is outside the control of the organisation. The link to the calculation of savings potentials and efficiency measurement is provided based on introducing the concept of a benchmark frontier technology for the type of production in question. A new measure of overall preference efficiency is introduced and its decomposition into output-oriented technical efficiency and output mix efficiency is shown. The rather monumental task of providing the necessary information for calculating mix efficiency is highlighted. |
| Keywords: | outputs; outcomes; factorially dete rmined multioutput production; Farrell efficiency measures; savings potentials; overall preference effectiveness; output mix effectivenes |
| JEL: | D24 H40 |
| Date: | 2013–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2013_016&r=reg |
| By: | Aruga, Kentaka |
| Abstract: | This paper investigated whether the effect of the shale gas revolution on the U.S. gas market is still a domestic phenomenon or this revolution is influencing the global natural gas market. We used the Bai-Perron test to identify the break date related to the shale gas revolution and tested the price linkages among the U.S., European and Japanese gas markets for the periods before and after this break date. The result indicated that the U.S. gas market had a price linkage with the international market for the period before the revolution affected the U.S. gas production, but this price linkage disappeared for the period after the revolution. This result implied that the U.S. gas market became independent after the shale gas revolution occurred and that the price linkage between the U.S. and international gas market became weaker after the shale gas revolution occurred. |
| Keywords: | shale gas revolution, natural gas market, structural break |
| JEL: | Q4 |
| Date: | 2013–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49545&r=reg |
| By: | Neeraj Kaushal; Felix Muchomba |
| Abstract: | We study the effect on nutrition of an exogenous increase in food price subsidy from a targeted subsidy program in India. Households with incomes below the federal poverty threshold were issued ration cards to buy wheat and rice at half the market price. We use probability of ration card ownership as an instrumental variable to predict household food price subsidy. Estimates suggest that the predicted price subsidy had a negligible to negative effect on calorie intake; it increased calorie intake from wheat and rice, but lowered calorie intake from coarse grains that are less expensive substitutes of wheat and rice, but have fewer non-nutritional attributes (such as taste). |
| JEL: | I10 I32 I38 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19404&r=reg |