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on Regulation |
| By: | Alberto Cavaliere; Mario Maggi; Francesca Stroffolini |
| Abstract: | We analyze rehabilitation investments in a regulated water industry with perfectly inelastic demand. We compare alternative organizational solutions for local provision (municipalization, corporatization and privatization), though subject to a common regulatory mechanism. We can then assess the effects of incentive regulation in public firms and find that even benvolent politicians always stick to the price-cap, in order to save on distortionary taxation. However, incentives to invest result to be excessive only in private firms, as the cost of capital is accounted differently by public and private undertakings. We also provide a theory of mixed firms, based on strategic interaction between politicians and managers, which contributes to endogenously explain partial privatization and minority participation by private stockholders. In this last case incentives to invest appear to be driven just by governance and ownership reasons. |
| Keywords: | price-cap regulation, mixed firms, partial privatization, water networks, inelastic demand, natural monopoly |
| JEL: | H42 L32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp80&r=reg |
| By: | Anne Schopp; William Acworth; Daniel Huppmann; Karsten Neuhoff |
| Abstract: | We examine under which conditions a cap-and-trade mechanism can deliver a dynamically efficient abatement pathway and contribute to a robust investment framework. For this we develop a numerical dynamic partial-equilibrium model that includes differentiated objective functions of different market participants for holding emission allowances based on their banking strategy. If the surplus of allowances is large, as currently observed in the European Union Emissions Trading System, the equilibrium market outcome can deviate from an efficient abatement pathway and performance of the policy is reduced against a set of key criteria (dynamic efficiency, price credibility, price consistency, and robustness to shocks). The model is applied to assess design options of quantity and price based market stability reserves as discussed in Europe. Both price and quantity based mechanisms can improve the performance of the EU ETS against key criteria. |
| Keywords: | Computational Model, Emissions trading, Environmental Regulation, Market stability reserve |
| JEL: | D84 G18 Q48 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1483&r=reg |
| By: | Peitz, M.; Schütt, F. (Tilburg University, TILEC) |
| Abstract: | Under strict net neutrality Internet service providers (ISPs) are required to carry<br/>data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, allowing the ISP to introduce bandwidth tiering and charge for prioritized delivery can implement the<br/>efficient allocation. |
| Keywords: | Net neutrality; network congestion; telecommunications,; uality of service |
| JEL: | L12 L51 L86 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutil:081fba8e-4966-4f4e-b114-18452b2f91c1&r=reg |
| By: | Anna Thum-Thysen; Erik Canton |
| Abstract: | This paper analyses the impact of regulation on product sector mark-ups across the EU and confirms that less strict regulation tends to foster competition and reduce mark-up rates. The results also show that mark-ups in most EU countries and sectors have been declining over the last 15 years as a result of competition-friendly reforms. The paper also casts light on which areas of regulation are most important for mark-ups in individual sectors. |
| JEL: | D40 E31 L51 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0547&r=reg |
| By: | Nadia Ameli; Nicola Brandt |
| Abstract: | Energy efficiency and renewable energy technologies provide important opportunities to reduce greenhouse gas emissions. However, households fail to take up many clean energy investments that are cost-effective. This paper reviews different explanations for apparent underinvestment in energy efficiency that have been put forward in the literature. While investments in renewable energy technologies are typically not (yet) profitable, many of its drivers are similar to those that determine energy efficiency investments, and the two types of investment are therefore assessed jointly. The paper also provides new evidence regarding barriers to investment in energy efficiency based on the OECD Survey on Household Environmental Behaviour and Attitudes. Finally, policy solutions that would help overcome some of these barriers are also presented.<P>Quels sont les obstacles à l'investissement des ménages dans la rénovation énergétique et les énergies renouvelables ?<BR>La rénovation énergétique et les énergies renouvelables constituent un important moyen de réduire les émissions de gaz à effet de serre. Or, les ménages n’engagent pas un grand nombre d’investissements dans les énergies propres qui seraient rentables. Le présent document passe en revue différents arguments présentés dans les travaux publiés pour expliquer le sous-investissement constaté dans l’efficacité énergétique. Même si les investissements dans les technologies d'énergie renouvelable ne sont, généralement pas (encore) rentables, bon nombre de ses pilotes sont similaires à celles qui déterminent les investissements d'efficacité énergétique, et les deux types d'investissement sont donc évalués conjointement. Il présente aussi de nouveaux éléments sur les obstacles à l’investissement dans ce domaine, provenant de l’enquête de l'OCDE sur la politique de l’environnement et le comportement individuel. Enfin, il expose des solutions que les pouvoirs publics pourraient mettre en oeuvre pour aider à surmonter certains de ces obstacles. |
| Keywords: | market failure, behavioural failures, energy efficiency gap, défaillances de marché, défaillances comportementales |
| JEL: | Q38 Q41 |
| Date: | 2015–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1222-en&r=reg |
| By: | Philippe Quirion (CNRS and CIRED) |
| Abstract: | While most developed and emergent countries support renewable energies in the power sector, they do so in a different manner. The three main existing support systems are feed-in-tariffs, feed-in-premiums and tradable renewable quotas. We provide a survey of the literature which compares these support systems. We conclude that tradable renewable quotas suffer from many weaknesses compared to the other two: bad reaction to uncertainty, important risk for funders which increases investment cost, higher transaction costs. Both feed-in-tariffs and premiums have pros and cons and there is little evidence that the transition from the former to the latter, currently occurring in Germany and France, is justified. Finally, beyond the choice between tariff and premium, many concrete choices are at least as important such as the way to finance the support and the differentiation between market segments, necessary to limit the rents but potentially a source of inefficiency. |
| Keywords: | renewable energy, windpower, photovoltaic, subsidy |
| JEL: | H23 Q28 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2015.08&r=reg |
| By: | Pernille Parmer (Department of Economics, Norwegian University of Science and Technology) |
| Abstract: | Many Norwegian local governments are affected by hydropower production. A law passed in 1917 mandates that hydropower plants sell up to 10 percent of their power basis to local governments affected by the production. Historically, this concession power was meant to ensure the small rural local governments supply of electricity, in competition of the larger cities. Today, many local governments resell their concession power when prices are high and generate large revenues. However, the actual transferred concession power is restricted to general electricity consumption in the community. As a result, local governments with a positive gap between potential concession power and general electricity consumption have reduced incentives to save electricity. In other words, the concession power system has adverse effects on incentives for energy eciency. In this study, a simple two-period model to study energy efficiency is developed, and the model's predictions are supported by empirical findings. The results underline how misspecifed and outdated laws can reduce incentives for energy economizing projects. |
| Keywords: | Electricity comsumption, energy efficiency incentives, public sector, hydropower, laws |
| JEL: | D78 H11 H27 H71 Q2 Q4 Q5 |
| Date: | 2014–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:nst:samfok:16014&r=reg |
| By: | Molyneaux, Lynette; Brown, Colin; Foster, John; Wagner, Liam |
| Abstract: | Measuring energy security or resilience in energy is, in the main, confined to indicators which are used for comparative purposes or to show trends rather than provide empirical evidence of resilience to unpredicted crises. In this paper, the electricity systems of the individual states within the United States of America are analysed for their response to the 1973-1982 and the 2003-2012 oil price shocks. Empirical evidence is sought for elements which are present in systems that experience reduced volatility from the energy shocks in the form of lower prices. Spare capacity is found to be a reliable indicator of reduced prices through both periods whilst renewable energy is found to be an indicator of reduced prices especially in 1973-1982. |
| Keywords: | Resilience metrics; Energy Security; Electricity; Renewable Energy |
| JEL: | Q40 Q48 |
| Date: | 2015–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64568&r=reg |
| By: | Joisa Dutra (Centre for Regulation, FGV, Rio de Janeiro, Brazil); Flavio M. Menezes (School of Economics, The University of Queensland) |
| Date: | 2015–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:545&r=reg |
| By: | Winkler, Kay |
| Abstract: | New Zealands strategy to deploy ultra-fast next generation access networks (NGA) on the basis of fibre to the home (FTTH) to the majority of the population by 2019 involves specific public private partnerships for dedicated roll-out areas that are supported with substantial financial aid by the Crown. This article explores in which way this strategy can be effective and whether it is able to accelerate consumer demand for NGA. Several empirical studies relating to the deployment and uptake of broadband technology consistently reveal factors which are decisive for the diffusion of broadband technologies in developed countries. From the supply-side perspective, the regulatory environment, associated incentives to deploy new infrastructure, and government stimuli can be seen as important determinants. However, the diffusion of a new technology in a given market requires consumer acceptance. The consumer uptake of ultra-fast broadband (UFB) access will depend on the increase in speed in relation to the existing access technology, and the existence of applications requiring this increase. Taking these factors into account, some potential problems with New Zealands roll-out plan can be identified. It seems conceivable that the driving factor for fast broadband uptake in New Zealand is, under the current set of applications, the migration from low bandwidth broadband to higher bandwidths required for video streaming, but not necessarily to ultra-fast broadband. In that sense, a diminishing marginal return of speed may be assumed. Further, the regulatory environment might cause adverse effects for competing broadband networks that are not subsidized, such as the recently rolled out VDSL network and 4G mobile networks. Moreover, the incentives of retail service providers to offer fibre based internet products are not clear cut. Because of vertical separation they are not invested in network deployment. An empirical analysis of recent UFB uptake data could show whether these assumptions are valid. |
| Keywords: | , |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcsr:4347&r=reg |
| By: | Nathalie Oriol (University of Nice Sophia Antipolis, France; GREDEG CNRS); Alexandra Rufini (University of Nice Sophia Antipolis, France; GREDEG CNRS); Dominique Torre (University of Nice Sophia Antipolis, France; GREDEG CNRS) |
| Abstract: | European financial markets experiment a strong competition between historical players and new trading platforms, including the controversial dark pools. Our theoretical setting analyzes the interaction between heterogeneous investors and trading services providers in presence of market externalities. We compare different forms of organization of the market, each in presence of an off-exchange and an incumbent facing a two-sided activity (issuers and investors): a consolidated exchange with the incumbent only, and fragmented exchanges with several platforms, including lit and dark pools, in competition for order ows. By capturing investors from off-exchange, dark trading may enhance market externalities and market stakeholders' welfare. |
| Keywords: | microstructure, dark pools, Over-The-Counter market, liquidity, market externalities, two-sided markets |
| JEL: | G10 D62 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-21&r=reg |
| By: | Saglam, Ismail |
| Abstract: | We study the regulation of a manager-controlled monopoly with unknown costs, borrowing from the earlier work of Baron and Myerson (BM)(1982), where the monopoly is controlled by the owner. Our regulatory environment involves the case where the regulator can tax the owner as well as the case where she cannot. We show that the optimal price schedule in our model generally lies below the one in the BM model. In addition, if the compensation parameter is sufficiently small, the optimal price can be as low as the marginal cost, provided that the regulator cannot tax the owner of the monopoly. We also examine how the size of the managerial compensation affects the welfare of the owner of the monopoly as well as the social welfare. Moreover, we show that in settings where the owner of a manager-controlled monopoly cannot be taxed, the owner prefers to separate management from ownership, provided that the marginal cost of production is sufficiently large. However, the owner always prefers to manage the monopoly herself when the marginal cost of production is sufficiently small. |
| Keywords: | Monopoly; Regulation; Firm Ownership; Firm Control |
| JEL: | D82 L51 |
| Date: | 2015–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64366&r=reg |