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on Regulation |
| By: | Tunç Durmaz (SEE City University of Hong Kong) |
| Abstract: | As renewable energy depends on meteorological shocks and is non-controllable, the overall energy production becomes riskier with the rising renewable share. Although this has led to a renewed interest in storage technologies, not much consideration has been given to energy storage due to precautionary motives. In our study, we look at to what extent a convex marginal utility (prudence) and a convex marginal cost (frugality) can spur precautionary energy storage. We set up a simple theoretical model of energy consumption and production with intermittent renewable sources, dispatchable thermal systems, and energy storage. First, we characterize the optimum and demonstrate how prudence and frugality can lead to higher levels of energy storage. By applying our findings to perfectly competitive markets, we further show that prudence and frugality increase the market energy price through higher demand for energy storage and decrease price volatility. The results present important lessons about the direct and indirect impacts precautionary motives can have on electricity prices and energy generation decisions. |
| Keywords: | Precautionary energy storage, Intermittency, Renewable energy, Prudence, Frugality |
| JEL: | D24 D41 D81 D84 Q41 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2016.07&r=reg |
| By: | Sebastian Rausch (ETH Zurich, Switzerland); Jan Abrell (ETH Zurich, Switzerland) |
| Abstract: | This paper analyzes hybrid emissions trading systems (ETS) under partitioned environmental regulation when firms’ abatement costs and future emissions are uncertain. We show that hybrid policies that introduce bounds on the price or the quantity of abatement provide a way to hedge against differences in marginal abatement costs across partitions. Price bounds are more efficient than abatement bounds as they also use information on firms’ abatement technologies while abatement bounds can only address emissions uncertainty. Using a numerical stochastic optimization model with equilibrium constraints for the European carbon market, we find that introducing hybrid policies in EU ETS reduces expected excess abatement costs of achieving targeted emissions reductions under EU climate policy by up to 89 percent. We also find that under partitioned regulation there is a high likelihood for hybrid policies to yield sizeable ex-post cost reductions. |
| Keywords: | Emissions trading, Partitioned environmental regulation, Uncertainty, Prices, Quantities, EU ETS |
| JEL: | H23 Q54 C63 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:16-233&r=reg |
| By: | Jacques Després (équipe EDDEN - PACTE - Politiques publiques, ACtion politique, TErritoires - Grenoble 2 UPMF - Université Pierre Mendès France - UJF - Université Joseph Fourier - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique, LITEN - Laboratoire d'Innovation pour les Technologies des Energies Nouvelles et les nanomatériaux - Université Grenoble Alpes - Grenoble 2 - CEA, G2ELab - Laboratoire de Génie Electrique de Grenoble - UJF - Université Joseph Fourier - Institut Polytechnique de Grenoble - Grenoble Institute of Technology - CNRS - Centre National de la Recherche Scientifique); Patrick Criqui (équipe EDDEN - PACTE - Politiques publiques, ACtion politique, TErritoires - Grenoble 2 UPMF - Université Pierre Mendès France - UJF - Université Joseph Fourier - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique); Silvana Mima (équipe EDDEN - PACTE - Politiques publiques, ACtion politique, TErritoires - Grenoble 2 UPMF - Université Pierre Mendès France - UJF - Université Joseph Fourier - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique); Nouredine Hadjsaid (G2ELab - Laboratoire de Génie Electrique de Grenoble - UJF - Université Joseph Fourier - Institut Polytechnique de Grenoble - Grenoble Institute of Technology - CNRS - Centre National de la Recherche Scientifique); Isabelle Noirot (CEA/LITEN/DTNM/LT - CEA) |
| Abstract: | Energy systems are changing worldwide, and particularly in Europe, where energy policies promote a more sustainable energy production. Variable Renewable Energy sources (VRE) such as wind or solar are benefiting from these policies, but the long term implications need to be anticipated, through energy scenarios. Long term energy models are used, and VRE integration challenges are a hot topic in energy modelling. An assessment of long term energy models is necessary to understand how they represent the specific constraints of VRE on the rest of the power system. Therefore a new typology is proposed for comparing both long term energy models and power sector models. This comparison shows that, despite all the recent modelling efforts, no long term energy model represents in detail the power sector, with all the impacts of VRE. For example, there is no real representation of the electricity storage operation. Therefore we develop a new power sector module for POLES (Prospective Outlook on Long-term Energy Systems), one of the most technology-detailed long term energy models. We present the first results of this new detailed electricity module. |
| Keywords: | long term energy model,renewable energy |
| Date: | 2014–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01279467&r=reg |
| By: | Sophie Bernard |
| Abstract: | This paper studies the impact of environmental policies when firms can adjust product design as they see fit. In particular, it considers cross relationships between product design dimensions. For example, when products are designed to be more durable, this may add production steps and increase pollutant emissions during production. More generally, changes applied to one dimension can affect the cost or environmental performance of other dimensions. In this theoretical model, a firm interacts with consumers and a regulator. Before the production stage, the firm must choose the levels of three design dimensions: 1) energy performance during production, 2) energy performance during use, and 3) durability. Depending on the assumptions, the dimensions are said to be complementary, neutral, or competitive. The regulator can promote greener designs by applying targeted environmental taxes on emissions during production or consumption. The main results shed light on the consequences of modifying public policies. When some design dimensions are competitive, a targeted emission tax can result in environmental burden shifting, with an overall increase in pollution. This paper also explores the social optimum and the development of second-best policies when some policy instruments are imperfect. Under given conditions, a government would want to regulate and constraint the level of durability. |
| Keywords: | green design, environmental policies, durability, |
| JEL: | L10 O13 Q53 Q55 Q58 |
| Date: | 2016–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2016s-09&r=reg |
| By: | Amigues, Jean-Pierre; Moreaux, Michel |
| Abstract: | To prevent climate change, three options are currently considered: improve the energy conversion efficiency of primary energy sources, develop carbon free alternatives to polluting fossil fuels, abate potential emissions before they are released inside the atmosphere. We study the optimal mix and timing of these three mitigation options in a stylized dynamic model. Useful energy can come from two sources: a non-renewable fossil fuel resource and a carbon free renewable resource. The extraction cost of the non-renewable resource is an increasing function of past cumulated extraction. The conversion efficiency rates of crude energy into useful energy are open to choice but higher conversion performances are also more costly to achieve. In addition the economy can choose to abate some fraction of its potential emissions and an higher abatement rate incurs higher costs. The society objective is to maintain below some mandated level, or carbon cap, the atmospheric carbon concentration. In the interesting case where the economy would be actually constrained by the cap, at least temporarily, we show the following. The optimal path is a sequence of four time regimes: a ’pre-ceiling’ regime before the economy is actually constrained by the cap, a ’ceiling’ regime at the cap, a ’post-ceiling’ regime below the cap and a final regime of exclusive exploitation of renewable resources. If the abatement option has ever to be used, it should be around the beginning time of the ceiling regime, first at an increasing rate and next at a decreasing rate. The efficiency performance from any source steadily improves with the exception of a time phase under the ceiling regime when it is constant. Renewables take progressively a larger share of the energy mix but their exploitation may be delayed significantly. Carbon emissions drop down continuously although not sufficiently to prevent carbon accumulation up to the cap during the pre-ceiling regime. |
| Keywords: | energy efficiency; carbon pollution; non-renewable resources; renewable resources; abatement |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30211&r=reg |
| By: | Shawkat Hammoudeh; Amine Lahiani; Duc Khuong Nguyen; Ricardo M. Sousa |
| Date: | 2016–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-82&r=reg |
| By: | Edoardo Croci; Aldo Ravazzi Douvan |
| Abstract: | Urban road pricing schemes have been designed in order to reduce externalities generated by traffic. Main impacts regard: time loss due to congestion, local pollution, noise; contribution to climate change caused by emissions of GHGs, pavement costs and road damages, increase in accidents risks, extra-fuel consumption, decrease in quality of life. Moreover road pricing schemes generate public revenues. The paper performs a comparative evaluation of the three main experiences of urban road pricing in Europe: London (in operations since 2003), Stockholm (in operations since 2007, after a period of trial in 2006) and Milan (in operations since 2008, with a shift from pollution to congestion charge in 2012). Since their launch, the schemes have been adjusted in terms of amount of charge, area of application and other features. The schemes have been able to reduce negative externalities generated by traffic, such as accidents, congestion and emissions, up to different levels. A comparative analysis of the three schemes is provided. Determinants of differences in the effectiveness of the schemes are evaluated with a particular focus on elasticity of use of private vehicles to charge. The results can be useful to design well targeted congestion charge schemes and to assess their efficacy. |
| Keywords: | Urban road pricing, Travel demand elasticity, Sustainable mobility |
| JEL: | H23 R41 R48 Q51 D12 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp85&r=reg |
| By: | Liam Wren-Lewis |
| Abstract: | This paper uses contract theory to suggest simple contract designs that could be used by the Global Fund. Using a basic model of procurement, we lay out five alternative options and consider when each is likely to be most appropriate. The rest of the paper then discusses how one can build a realworld contract from these theoretical foundations, and how these contracts should be adapted to different contexts when the basic assumptions do not hold. Finally, we provide a synthesis of these various results with the aim of guiding policy makers as to when and how ‘results-based’ incentive contracts can be used in practice. |
| Keywords: | Contracts, Global Fund, contract theory, theory of incentives. |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:425&r=reg |
| By: | Amigues, Jean-Pierre; Moreaux, Michel |
| Abstract: | We study an economy producing energy services from a polluting fossil fuel and a carbon free renewable resource under a constraint on the admissible atmospheric carbon concentration, equivalently under a constraint on the admissible temperature. The transformation rates of natural primary resources energy into useful energy are costly endogenous variables. Choosing higher efficiency rates requires to bring into operation more sophisticated energy transformation devices, that is more costly ones. We show that, independently of technical progress, along a perfect foresight equilibrium path which is Pareto optimal, the transformation rate of any exploited resource should increase throughout time, excepted within the period during which the carbon constraint is binding, a phenomenon we call the ’ceiling paradox’. |
| Keywords: | energy efficiency; carbon pollution; non-renewable resources;renewable resources. |
| JEL: | Q00 Q32 Q43 Q54 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30209&r=reg |
| By: | Gwenaël Piaser |
| Date: | 2016–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-49&r=reg |