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on Regulation |
| By: | Severin Borenstein; James Bushnell; Frank A. Wolak; Matthew Zaragoza-Watkins |
| Abstract: | We analyze the demand for emissions allowances and the supply of allowances and abatement opportunities in California's 2013-2020 cap and trade market for greenhouse gases (GHG). We estimate a cointegrated vector autoregression for the main drivers of greenhouse gas emissions using annual data from 1990 to 2011. We use these estimates to forecast businss-as-usual (BAU) emissions during California's program and the impact of the state's other GHG reduction programs. We then consider additional price-responsive and price-inelastic activities that will affect the supply/demand balance in the allowance market. We show that there is significant uncertainty in the BAU emissions levels due to uncertainty in economic growth and other factors. Our analysis also suggests that most of the planned abatement will not be very sensitive to the price of allowances, creating a steep abatement supply curve. The combination of BAU emissions uncertainty and inelastic abatement supply implies a high probability that the price of allowances in California will either be at the price floor, or high enough to trigger a safety valve mechanism called the Allowance Price Containment Reserve (APCR). We estimate a low probability that the price would end up in an intermediate range between the price floor and the APCR. The analysis suggests that cap-and-trade markets, as they have been established in California, the EU and elsewhere may be more likely to experience price volatility and extreme low or high prices than is generally recognized. |
| JEL: | Q5 Q52 Q54 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20999&r=reg |
| By: | Karsten Neuhoff; Sophia Ruester; Sebastian Schwenen |
| Abstract: | We revisit key elements of European power market design with respect to both short term operation and longer-term investment and re-investment choices. For short term markets, the European policy debate focuses on the definition of common interfaces, like for example gate closure time. We argue that that this is insufficient if the market design is to accommodate for the different needs of renewable and conventional generation assets and different flexibility options. The market design needs to ensure resources are pooled over larger geographic areas, the full flexibility of different assets can be realized with complex bids and scarce network resources are efficiently used. For investment and re-investment choices we argue that different technology groups like wind and solar versus fossil fuel based generation may warrant different treatment – reflecting different level of publicly accessible information, requirements for grid infrastructure, types of strategic choices relevant for the sector and share of capital cost in overall generation costs. We discuss opportunities for such a differentiated treatment and implications for electricity consumers. |
| Keywords: | Power market design, regulation, investment framework |
| JEL: | L11 L94 G32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1456&r=reg |
| By: | Coria, Jessica (Department of Economics. School of Business, Economics and Law. University of Gothenburg); Jaraite, Jurate (CERE) |
| Abstract: | In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-á-vis downstream regulation by means of emission trading. |
| Keywords: | Carbon dioxide emissions; Carbon tax; Emissions Trading; EU ETS; Firm-level data; Sweden |
| JEL: | D23 H23 Q52 Q58 |
| Date: | 2015–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2015_002&r=reg |
| By: | Vesterberg, Mattias (CERE); B. Krishnamurthy, Chandra Kiran (CERE); Bayrak, Oben (CERE) |
| Abstract: | Using a unique and highly detailed data set of energy consumption at the appliance-level for 390 Swedish households, seemingly unrelated regression (SUR)-based end-use specific load curves are estimated. The estimated load curves are then used to explore possible restrictions on load shifting (e.g. the office hours schedule) as well as the cost implications of different load shift patterns. The cost implications of shifting load from “expensive” to “cheap” hours, using aggregate spot price data, is computed to be very small; roughly 2-5% daily cost reduction from shifting load up to seven hours ahead, indicating small incentives for households (and suppliers) to adopt dynamic pricing of electricity. In addition, end-use-specific income elasticites are also estimated, for the first time for Sweden, using again a SUR framework. The estimated income elasticties are large and significant, varying from a high of 0.8-1.25 for heating to a low of 0.2-0.5 for lighting. Aggregate income elasticity is also high, varying from 0.5 to 0.81. Our results have important implications for Swedish energy policy, in particular for the Swedish government’s stated goal of realtime pricing. |
| Keywords: | Direct Metering; Residential Electricity Demand; Real time electricity pricing |
| JEL: | C30 D12 Q41 Q48 |
| Date: | 2014–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2014_016&r=reg |
| By: | Mahieu, Pierre-Alexandre (LEMNA); Donfouet, Hermann Pythagore Pierre (CREM); Kriström, Bengt (CERE) |
| Abstract: | Many countries are facing a dilemma over whether to extend the lives of their old reactors or make costly capital investments on Renewable Energy (RE). This paper explores the determinants of Willingness-To-Pay (WTP) for RE in France by means of a contingent valuation question that was included in a large web survey organized by the OECD. The main contribution of our paper is to test whether people living close to a reactor are sensitive to the age of the reactor. We find that the age of the reactor has a positive effect on WTP for RE. |
| Keywords: | Contingent valuation; nuclear power plant; renewable energy |
| JEL: | C82 I10 Q21 |
| Date: | 2014–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2014_014&r=reg |
| By: | Lundgren, Tommy (CERE); Zhang, Shanshan (CERE); Zhou, Wenchao (Centre for Regional Science) |
| Abstract: | This paper assesses energy efficiency in Swedish industry. Using unique firm-level panel data covering the years 2001-2008, the efficiency estimates are obtained for firms in 14 industrial sectors by using data envelopment analysis (DEA). The analysis accounts for multi-output technologies where undesirable outputs are produced alongside with the desirable output. The results show that there was potential to improve energy efficiency in all the sectors and relatively large energy inefficiencies existed in small energy-use industries in the sample period. Also, we assess how the EU ETS, the carbon dioxide (CO2) tax and the energy tax affect energy efficiency by conducting a second-stage regression analysis. To obtain consistent estimates for the regression model, we apply a modified, input-oriented version of the double bootstrap procedure of Simar and Wilson (Journal of Econometrics 136(1):31-64, 2007). The results of the regression analysis reveal that the EU ETS and the CO2 tax did not have significant influences on energy efficiency in the sample period. However, the energy tax had a positive relation with the energy efficiency. |
| Keywords: | energy efficiency; EU ETS; data envelopment analysis; double bootstrap |
| JEL: | D22 D24 L60 Q41 |
| Date: | 2015–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2015_003&r=reg |
| By: | Vladimir Udalov (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | This paper investigates an intergenerational conflict arising from renewable energy support (RES). Using a simple polito-economic overlapping generations (OLG) model, it can be shown that old individuals unambiguously lose from renewable energy support and therefore vote for its minimum level. In contrast, young individuals benefit from positive environmental and consumption effects and, therefore, vote for a higher level of renewable energy support. The voting outcome is determined through a political process, whereby political parties converge to platforms that maximize the aggregate welfare of the electorate. Depending on the size of the exogenous parameters, the level of RES varies between the voting preferences of younger and older individuals. As a result, this model offers a good starting point for possible medium to long-term policy recommendations in order to increase the accepted level of RES. |
| Keywords: | overlapping generations, generational conflict, environmental policy, renewable energy, voting |
| JEL: | Q54 Q29 D60 D90 H23 D72 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei202&r=reg |
| By: | Martin Pollrich (Humboldt-Universitaet zu Berlin, Department of Economics); Robert Schmidt (Humboldt-Universitaet zu Berlin, Department of Economics) |
| Abstract: | A unilateral policy intervention by a country (such as the introduction of an emission price) can induce firms to relocate to other countries. We analyze a dynamic game where a regulator offers contracts to avert relocation of a firm in each of two periods. The firm can undertake a location-specific investment (e.g., in abatement capital). Contracts can be written on some contractible productive activity (e.g., emissions), but the firm's investment is not contractible. A moral hazard problem arises under short-term contracting that makes it impossible to implement outcomes with positive transfers in the second period. The regulator resorts to high-powered incentives in the first period. The firm then overinvests and a lock-in effect prevents relocation in both periods. Paradoxically, the distortion in the first-period contract can be so severe that higher transfers are needed to avert relocationccompared to a (hypothetical) situation without the investment opportunity. Creation Date: 2014-9 |
| Keywords: | moral hazard, contract theory, limited commitment, firrm mobility, abatement capital |
| JEL: | D82 D86 L51 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:bdp:wpaper:2014004&r=reg |
| By: | Anne Neumann; Sophia Rüster; Christian von Hirschhausen |
| Abstract: | Long-term contracts are an important element of all economic activity and, thus, critical for understanding modern economic structures. The natural gas industry provides particular insights into the functioning and dynamics of long-term contracts and industry structures, in a sector that is globally important. This Data Documentation provides a survey of the literature on long-term contracts in the natural gas sector, as seen from an institutional and industrial economics perspective; we also add suggestions for further research. The core of the documentation is a detailed database of 426 long-term contracts struck between sellers and buyers between 1965 and 2014. Though not comprehensive, the database covers a large share of contracts, both for pipeline gas and liquefied natural gas (LNG). |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwddc:dd77&r=reg |