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on Regulation |
| By: | Silvester van Koten |
| Abstract: | Cap-and-trade programs, such as the EU carbon Emission Trading Scheme, are currently the most prominent market-based method used to reduce carbon emissions. Cap-and-trade programs are, on theoretical grounds, considered to be a cost-efficient method. Experimental evidence, however, shows that experimental subjects make highly inefficient abatement choices and that permit allocation methods (allocating permits for free or against payment) bias subjects to too much or too little abatement. The experimental evidence thus suggests that cap-and-trade programs may in practice be more costly than theory predicts. This study, however, challenges this interpretation and shows that, when they are price takers (as in thick markets) and have ample opportunities for learning, subjects quickly learn to make accurate decisions and that these decisions are not affected by the permit allocation method. |
| Keywords: | abatement; cap-and-trade; experimental economics; emission trading system; carbon permits; experience effects; |
| JEL: | C91 D62 Q54 Q55 Q58 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp503&r=reg |
| By: | Brigitte Knopf (Potsdam Institute for Climate Impact Research (PIK)); Yen-Heng Henry Chen (Massachusetts Institute of Technology (MIT), Joint Program on the Science and Policy of Global Change); Enrica De Cian (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center on Climate Change); Hannah Förster (Öko-Institut); Amit Kanudia (KanORS-EMR); Ioanna Karkatsouli (Massachusetts Institute of Technology (MIT), Joint Program on the Science and Policy of Global Change); Ilkka Keppo (University College London); Tiina Koljonen (VTT Technical Research Centre of Finland); Katja Schumacher (Öko-Institut); Detlef van Vuuren (PBL Netherlands Environmental Assessment Agency and Utrecht University, Department of Geosciences) |
| Abstract: | The Energy Modeling Forum 28 (EMF28) study systematically explores the energy system transition required to meet the European goal of reducing greenhouse gas (GHG) emissions by 80% by 2050. The 80% scenario is compared to a reference case that aims to achieve a 40% GHG reduction target. The paper investigates mitigation strategies beyond 2020 and the interplay between different decarbonization options. The models present different technology pathways for the decarbonization of Europe, but a common finding across the scenarios and models is the prominent role of energy efficiency and renewable energy sources. In particular, wind power and bioenergy increase considerably beyond current deployment levels. Up to 2030, the transformation strategies are similar across all models and for both levels of emission reduction. However, mitigation becomes more challenging after 2040. With some exceptions, our analysis agrees with the main findings of the “Energy Roadmap 2050” presented by the European Commission. |
| Keywords: | European Decarbonisation, Mitigation Scenarios, Model Comparison, Climate Change, EU Energy Roadmap 2050 |
| JEL: | Q2 Q4 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.15&r=reg |
| By: | Abolhosseini, Shahrouz (Seoul National University); Heshmati, Almas (Sogang University); Altmann, Jörn (Seoul National University) |
| Abstract: | The increased concerns about climate change have made renewable energy sources an important topic of research. Several scholars have applied different methodologies to examine the relationships between energy consumption and economic growth of individual and groups of countries and to analyze the environmental effects of energy policies. Previous studies have analyzed carbon emission savings, using renewable energy usage as an individual source or in combination with traditional sources of energy (e.g., hybrid plants) in connection with lifecycle analysis methods. It is shown that after a certain period, economic growth leads to the promotion of environmental quality. However, econometric modelling critiques have opposed the results of these studies. One reason is that the effectiveness of governance-related parameters has previously been neglected. In this research, we analyze the impact of renewable energy development on carbon emission reduction. We estimate a model to evaluate the effectiveness of renewable energy development, technological innovation, and market regulations in carbon emission reduction. The empirical results are based on a panel data estimation using the EU-15 countries data observed from 1995 to 2010. The elasticities of CO2 emissions are estimated, in order to evaluate the effectiveness of each parameter. The findings show that the effects of a negative climate change could be mitigated by governance-related parameters instead of economic development. |
| Keywords: | renewable energy, technological innovation, environmental tax, carbon emission, economic growth |
| JEL: | D62 H23 N50 O13 O14 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7989&r=reg |
| By: | Taran Fæhn; Elisabeth Thuestad Isaksen (Statistics Norway) |
| Abstract: | Publicly announced GHG mitigation targets and emissions pricing strategies by individual governments may suffer from inherent commitment problems. When emission prices are perceived as short-lived, socially cost-effective upfront investment in climate technologies may be hampered. This paper compares the social abatement cost of a uniform GHG pricing system with two policy options for overcoming such regulatory uncertainty: one with a state guarantee scheme whereby the regulatory risk is borne by the government and one which combines emissions pricing with subsidies for upfront climate technology investments. A technology-rich CGE model is applied that accounts for abatement both within and beyond existing technologies. Our findings suggest a tripling of abatement costs if domestic climate policies fail to stimulate investment in new technological solutions. Since the cost of funding investment subsidies is found to be small, the subsidy scheme performs almost as well as the guarantee scheme. |
| Keywords: | Abatement costs; Climate technologies; Credible commitment; Computable general equilibrium model; Technological change; Technological diffusion; Hybrid modelling |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:768&r=reg |
| By: | Yahya F. Anouti (Division of Economics and Business, Colorado School of Mines); Carol A. Dahl (Division of Economics and Business, Colorado School of Mines) |
| Abstract: | Today, a confluence of factors, such as growing concerns about associated consumption externalities and socioeconomic pressures, is building the momentum towards reducing fossil fuel consumption for road transport and rationalizing prices to reflect direct, indirect and externality costs. While limited country specific work has been done, considering optimal transport fuel prices, (e.g. Parry 2012), we have found no attempts to do so with the breadth and scope of our analysis. Thus in this paper, we make three main contributions. First, we survey policies aimed at reducing transport fuel consumption. Out of these policies, we chose fiscal instruments for our extensive quantitative analysis carried out in a supply and demand framework for 123 countries. Second, we quantify the rationalized cost of transport fuels to reflect the direct costs (production), indirect costs (road maintenance), and negative externalities (climate change, local pollutants, traffic accidents and congestion). Finally, we measure the change in demand, environmental emissions, government revenues and welfare induced by successively phasing in our three cost categories. By rationalizing prices, we estimate that total demand for gasoline could be reduced by 8.5 percent and that of diesel by 5.7 percent. This would lead to not only reduction in associated negative externalities, but also generate an estimated $400 billion in revenues to governments. |
| Keywords: | transport policy, energy demand, subsidy, externalities, gasoline, diesel |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201401&r=reg |
| By: | Peter Heindl |
| Abstract: | Fuel poverty measurement consists of two independent parts: firstly, the definition of an adequate fuel poverty line, and secondly, techniques to measure fuel poverty. This paper reviews options for the definition of fuel poverty lines and techniques for fuel poverty measurement. Based on household data from Germany, figures that would result from different fuel poverty lines are derived. Different fuel poverty lines yield highly different results with respect to which households are identified as fuel poor. Thus, the choice of the fuel poverty line matters decisively for the resulting assessment. Options for fuel poverty measurement and subgroup comparison are discussed. |
| Keywords: | Fuel poverty, energy poverty, poverty measurement, Energiearmut, Germany |
| JEL: | I32 Q28 Q48 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp632&r=reg |
| By: | Anna Alberini (AREC, University of Maryland, Centre for Energy Policy and Economics (CEPE), ETH Zürich, and Fondazione Eni Enrico Mattei); Markus Bareit (CEPE, ETH Zürich); Massimo Filippini (CEPE, ETH Zürich, and University of Lugano) |
| Abstract: | To correct market failures due to the presence of negative externalities associated with energy consumption, governments have adopted a variety of policies, including taxes, subsidies, regulations and standards, and information-based policies. For example, labels that clearly convey energy consumption rates, associated costs, and emissions of conventional pollutants and CO2, have been devised and used in the last two decades in several countries. In 2003, Switzerland introduced a system of fuel economy labels, based on grades ranging from A to G, where is A best and G is worst, to assist consumers in making decisions that improve the fleet’s fuel economy and lower emissions. We use a dataset documenting all passenger cars approved for sale in Switzerland each year from 2000 to 2011 to answer three key research questions. First, what is the willingness to pay for fuel economy? Second, do Swiss drivers—or Swiss auto importers on their behalf—appear to do a one-to-one tradeoff between car purchase price and savings on fuel costs over the lifetime of the car? Third, does the label have an additional effect on price, all else the same, above and beyond that of fuel efficiency alone? Hedonic pricing regressions that exploit the variation in fuel economy across make-models, and over time within make-models, suggest that there is a (modest) capitalization of fuel economy into car prices. The diesel premium, however, exceeds the future fuel cost savings made possible by diesel cars, even at zero discount rates. An alternate calculation suggests that the fuel economy premium is consistent with a very low discount rate (2.5%). We use a sharp regression discontinuity design (RDD) based on the mechanism used by the Swiss Federal Office of Energy to assign cars to the fuel economy label to see if the label has an independent effect on price, above and beyond that of the fuel economy. The RDD approach estimates the effect to be 6-11%. To broaden the fuel economy range over which we assess the effect of the A label, we also deploy matching estimators, and find that the effect of an A label on car price is approximately 5%. |
| Keywords: | Fuel Economy, CO2 Emissions, Passenger Vehicles, Hedonic Pricing Model, Matching Estimator, Regression Discontinuity Design, Fuel Efficiency Premium, Discounted Future Fuel Costs |
| JEL: | Q48 Q53 Q54 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.16&r=reg |
| By: | Gani Aldashev (Center for Research in the Economics of Development, University of Namur and ECARES, ULB); Giorgio Zanarone (Colegio Universitario de Estudios Financieros (CUNEF)) |
| Abstract: | We model the State as a self-enforcing agreement over the use of force. A principal contracts with an agent, and a powerful ruler enforces their contracts through a mix of monetary fines and coercion. If the ruler fails to enforce, or if he uses his power to expropriate, all parties revert to low production forever after. Our model has two important implications. First, a better coercion technology moves the optimal system from private ordering, where contracts are enforced by the threat of termination, to the State, where they are enforced by the threat of coercion. This is consistent with the historical correlation between improvements in coercion and the transition from the Law Merchant enforcement system to the State. Second, contract enforcement and non-expropriation are complementary inputs in the State, in the sense that improvements in the enforcement technology increase the agents effort only if the ruler has limited expropriation power, so that the rulers incentive constraint on contractual enforcement is binding. This result relates to the Acemoglu and Johnson (2005) finding that constraints on rulers have affected the development of nations more than improvements in contractual enforcement. Using their data we find that, consistent with our model, contractual enforcement does affect development, but only when the rulers expropriation power is sufficiently constrained. |
| Keywords: | Enforcement, Punishment, Coercive power, Relational contracts, State |
| JEL: | D23 K42 P37 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nam:wpaper:1403&r=reg |