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on Regulation |
| By: | Adriano Vinca (Fondazione Eni Enrico Mattei (FEEM)); Marianna Rottoli (Fondazione Eni Enrico Mattei (FEEM)); Giacomo Marangoni (Fondazione Eni Enrico Mattei (FEEM)); Massimo Tavoni (Fondazione Eni Enrico Mattei (FEEM) and Politecnico di Milano) |
| Abstract: | The climate targets defined under the Paris agreement of limiting global temperature increase below 1.5 or 2°C require massive deployment of low-carbon options in the energy mix, which is currently dominated by fossil fuels. Scenarios suggest that Carbon Capture and Storage (CCS) might play a central role in this transformation, but CCS deployment is stagnating and doubts remain about its techno-economic feasibility. In this article, we carry out a throughout assessment of the role of CCS electricity for a variety of temperature targets, from 1.5 to above 4°C, with particular attention to the lower end of this range. We collect the latest data on CCS economic and technological future prospects to accurately represent several types of CCS plants in the WITCH energy-economy model, We capture uncertainties by means of extensive sensitivity analysis in parameters regarding plants technical aspects, as well as costs and technological progress. Our research suggests that stringent temperature scenarios constrain fossil fuel CCS based deployment, which is maximum for medium policy targets. On the other hand, Biomass CCS, along with renewables, increases with the temperature stringency. Moreover, the relative importance of cost and performance parameters change with the climate target. Cost uncertainty matters in less stringent policy cases, whereas performance matters for lower temperature targets. |
| Keywords: | Carbon Capture and Storage, Integrated Assessment Model, Climate Mitigation Policies, Electricity Sector, Low-carbon Technology |
| JEL: | O33 Q42 Q43 Q54 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2017.54&r=reg |
| By: | Llobet, Gerard; Padilla, Atilano Jorge |
| Abstract: | This paper examines the optimal capacity choices of conventional power generators after the introduction of renewable production. We start with a basic and generally accepted model of the liberalized wholesale electricity market in which firms have insufficient incentives to invest and we illustrate how the entry of renewable generation tends to aggravate that problem. We show that the incentives to invest in firm capacity (e.g. conventional thermal plants) may be restored by means of a capacity auction mechanism. That mechanism is vulnerable and, hence, may prove ineffective unless governments can credibly commit not to sponsor the entry of new capacity outside the auction mechanism. We explain that such commitment may be particularly difficult in the current political context where energy policy is conditioned by environmental and industrial-policy goals. We finally propose a way to enhance the credibility of capacity auctions by committing to optimally retire idle (conventional) power plants in response to entry outside the auction. |
| Keywords: | Capacity Payments; Conventional Generation; Environmental Goals; Missing-Money Problem; Renewable Energy; Security of Supply |
| JEL: | L51 L94 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12556&r=reg |
| By: | Vincent Bertrand; Sylvain Caurla; Elodie Le Cadre; Philippe Delacote |
| Abstract: | We compute the optimal subsidy level to fuelwood consumption that makes it possible to achieve the French biomass energy consumption target. In this view, we model the competitions and trade-offs between the consumption of fuelwood for heat (FW-H) and the consumption of fuelwood for power generation (FW-E). To do so, we couple a forest sector model with an electricity simulation model and we test different scenarios combining FWH and FW-E that account for contrasted potential rise in carbon price and potential reduction in the number of nuclear plants. We assess the implications of these scenarios on (1) the budgetary costs for the Government, (2) the industrial wood producers’ profits, (3) the costs savings in power sector for the different scenarios tested and (4) the carbon balance. We show that the scenario with the highest carbon price and the lowest number of nuclear plants is the less expensive from a budgetary perspective. Indeed, when associated with a high carbon price, co-firing may increase FW-E demand with lower subsidy level, which enables reducing the cost of reaching the target. However, in this case, FW-E crowds-out part of FW-H which may cause political economy issues. From a carbon balance perspective, a FW-H only scenario better performs than any other scenario that combines FW-H and FW-E due to the relatively low emissions factors of alternative technologies for electricity generation, in particular nuclear energy. |
| Keywords: | Forestry sector, Bioenergy, Biomass-based electricity, Carbon pricing, Nuclear power |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1707&r=reg |
| By: | Jack, Kelsey; Jayachandran, Seema; Rao, Sarojini |
| Abstract: | Water use and electricity use, which generate negative environmental externalities, are susceptible to a second externality problem: with household-level billing, each person enjoys private benefits of consumption but shares the cost with other household members. If individual usage is imperfectly observed (as is typical for water and electricity) and family members are imperfectly altruistic toward one another, households overconsume even from their own perspective. We develop this argument and test its prediction that intrahousehold free-riding dampens price sensitivity. We do so in the context of water use in urban Zambia by combining billing records, randomized price variation, and a lab-experimental measure of intrahousehold altruism. We find that more altruistic households are considerably more price sensitive than are less altruistic households. Our results imply that the socially optimal price needs to be set to correct both the environmental externality and also the intrahousehold externality. |
| Keywords: | environmental externalities; intrahousehold decision-making; moral hazard; Pigouvian pricing; water use |
| JEL: | O10 Q5 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12558&r=reg |
| By: | Nolan, Sheila; Devine, Mel; Lynch, Muireann A.; O’Malley, Mark |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp577&r=reg |
| By: | Geir H. M. Bjertnæs (Statistics Norway) |
| Abstract: | A tax on fuel combined with tax-exemptions or subsidies for purchase of fuel-efficient vehicles is implemented in many countries to reduce greenhouse gas emissions and other negative externalities from road traffic. This study, however, shows that a tax on fuel should be combined with heavier taxation of fuel-efficient vehicles to curb externalities from road traffic. The tax on fuel is implemented to curb externalities linked to both consumption of fuel and road use. The heavier tax on fuel-efficient vehicles prevents that motorists avoid the road user charge on fuel by purchasing fuel-efficient vehicles. |
| Keywords: | Transportation; optimal taxation; environmental taxation; global warming |
| JEL: | H2 H21 H23 Q58 R48 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:867&r=reg |
| By: | Crampes, Claude; Salant, David |
| Abstract: | The paper analyzes the determinants of optimal electric capacity and contrasts these with the requirements typically applied in a multi-regional model. We first analyze the relationship between usual reliability criteria such as the value of lost load and the targeted probability of failure, on the one hand, and the conditions that define optimal level of capacity on the other. Secondly, we characterize the social gains from energy trading between two interconnected regions that differ in terms of technologies or demand. Market mechanisms are sufficient to reach the first best allocation, irrespective of the correlation between national demand levels, provided that firms have no market power and fully internalize the value of lost load due to power rationing when supplies are inadequate. Thirdly, we explain the impact of various compensation mechanisms such as capacity payments when producers face a regulatory capacity constraint. |
| Keywords: | Capacity adequacy; Electricity trade; Capacity adequacy; Capacity credits; Cooperation; Value of loss load |
| JEL: | D44 F10 H57 L51 L94 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32308&r=reg |
| By: | Breen, Benjamin; Curtis, John; Hynes, Stephen |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb20170302&r=reg |
| By: | Hongxiu Li (Department of Economics, University of Waterloo); Horatiu Rus (Department of Economics, University of Waterloo) |
| Abstract: | This paper investigates the effect of federal and state level regulatory changes with respect to drinking water quality, water pollution and water quantity in the United States on the level of relevant technological innovation. We construct and use a unique dataset covering major amendments and additions to regulated contaminants lists as stipulated in the legislative acts most relevant to the policy area we study, along with a list of technological patents pertaining to water quality and quantity over a period of more than 30 years. We find in general the impact of water regulation on innovation to be both statistically and economically significant. |
| JEL: | Q31 Q55 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:1801&r=reg |
| By: | Decarolis, Francesco |
| Abstract: | This paper analyzes the process of centralization of public procurement in Europe, with an emphasis on the Italian case. It illustrates the main normative and regulatory reforms that took place between 2000 and 2016 at both EU and Italian levels. It then empirically evaluates the potential distortions induced by the most recent wave of centralization reforms. Using procurement data on all Italian public contracts awarded between 2015 and 2017, it finds that administrations expecting to lose their ability to contract independently game the centralization requirements in three ways. In the short run, they anticipate their purchases to avoid delegating to a central body. In the longer run, they both manipulate contract values, breaking down purchases into smaller lots of amounts below the thresholds driving centralization requirements, and, when given the option, aggregate into the smallest types of centralized purchasing bodies. These three distortions partially offset the potential benefits of the centralization reforms. |
| Keywords: | Centralization; Procurement; Public Contracts |
| JEL: | D44 H57 K23 L22 L74 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12567&r=reg |
| By: | Devine, Mel; Farrell, Niall; Lee, William T |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb20170205&r=reg |
| By: | Rabindra Nepal; Nirash Paija |
| Abstract: | This study examines the inter relationships between energy consumption, output and carbon emissions in a mountainous economy using an augmented Vector Autoregression model. Time-series data over the period 1975-2013 is studied applying a multivariate framework using population and gross fixed capital formation as additional variables for Nepal. We control for the presence of structural breaks, autoregressive conditional heterosdeacticity and serial correlation in our analysis. Testing for Granger causality between integrated variables based on asymptotic theory reveals a long-run unidirectional Granger causality running from GDP to energy consumption, and a unidirectional Granger causality running from carbon emissions to GDP. The results indicate that energy consumption does not lead to economic growth while income leads to energy consumption. We suggest that the government of Nepal can adopt energy conservation policies and energy efficiency improvements to narrow the energy supply-demand gap. However, environmental policies aimed at reducing air pollution may have adverse effects on the growth of the Nepalese economy, which calls for a gradual approach towards decarbonisation. Our results remain robust to different estimators and contributes to an emerging literature on the nexus relationships between energy consumption, income and carbon emissions in developing economies. |
| Keywords: | economic growth, granger causality, energy consumption, carbon emissions |
| JEL: | C32 O55 Q20 Q43 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2018-03&r=reg |
| By: | Alabi Oluwafisayo (International Public Policy Institute, University of Strathclyde); Martin Smith (St Andrews Centre for Advanced Materials, University of St Andrews); John Irvine (Barelett School of Environment, University College London); Karen Turner (International Public Policy Institute, University of Strathclyde) |
| Abstract: | A core theme of the UK Government’s new Industrial Strategy is exploiting opportunities for domestic supply chain development. This extends to a special ‘Automotive Sector Deal’ that focuses on the shift to low emissions vehicles (LEVs). Here attention is on electric vehicle and battery production and innovation. In this paper, we argue that a more straightforward gain in terms of framing policy around potential economic benefits may be made through supply chain activity to support refuelling of battery/hydrogen vehicles. We set this in the context of LEV refuelling supply chains potentially replicating the strength of domestic upstream linkages observed in the UK electricity and/or gas industries. We use input-output multiplier analysis to deconstruct and assess the structure of these supply chains relative to that of more import-intensive petrol and diesel supply. A crucial multiplier result is that for every £1million of spending on electricity (or gas), 8 full-time equivalent jobs are supported throughout the UK. This compares to less than 3 in the case of petrol/diesel supply. Moreover, the importance of service industries becomes apparent, with 67% of indirect and induced supply chain employment to support electricity generation being located in services industries. The comparable figure for GDP is 42%. |
| Keywords: | electric vehicles, input-output model, multipliers, value-added multiplier, employment multiplier, supply chain development |
| JEL: | C67 Q42 Q43 Q48 R48 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1801&r=reg |
| By: | Alain Jean-Marie (NEO - Network Engineering and Operations - CRISAM - Inria Sophia Antipolis - Méditerranée - Inria - Institut National de Recherche en Informatique et en Automatique, UCA - Université Côte d'Azur); Mabel Tidball (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Fernando Ordóñez (DII - Departamento de Ingenieria Industrial [Santiago] - USACH - Universidad de Santiago de Chile [Santiago]); Victor Bucarey López (DII - Departamento de Ingenieria Industrial [Santiago] - USACH - Universidad de Santiago de Chile [Santiago]) |
| Abstract: | We consider a discrete time, infinite horizon dynamic game of groundwater extraction. A Water Agency charges an extraction cost to water users, and controls the marginal extraction cost so that it depends linearly on total water extraction (through a parameter n) and on rainfall (through parameter m). The water users are selfish and myopic, and the goal of the agency is to give them incentives them so as to, at the same time, improve their total welfare and improve the long-term level of the resource. We look at this problem in several situations for a linear-quadratic model. In the first situation, the parameters n and m are considered to be fixed over time, and the Agency selects the value that maximizes the total discounted welfare of agents. We analyze this solution, from the economic and environmental point of view, as a function of model parameters, including the discount factor that is used. A first result shows that when Water Agency is patient (discount factor tends to 1) optimal marginal extraction cost asks for strategic interactions between agents. In a second situation, we look at the dynamic Stackelberg game where the Agency decides at each time what cost parameter they must announce in order to maximize the welfare function. We present the sensitivity analysis of the solution for a small time horizon, and present a numerical scheme for the infinite-horizon problem. |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01649665&r=reg |
| By: | Lamp, Stefan |
| Abstract: | This paper tests for the effect of weather on solar technology adoption, taking advantage of the fact that sunshine is a direct input factor for solar electricity production. I find that a one standard deviation increase in monthly sunshine hours above the long-term average leads to an approximate 6.2 % growth in the residential solar market over a six-month period. I consider a range of potential mechanisms and find strong evidence for projection bias and salience as key drivers of my results. My findings show that there is an asymmetric response to positive and negative sunshine deviations from the long-term mean and that counties with a high vote share for the green party are particularly affected by these biases. |
| Keywords: | projection bias; salience; technology diffusion; solar technology; energy policy |
| JEL: | D12 D91 Q42 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32349&r=reg |
| By: | Hansman, Christopher; Hjort, Jonas; León, Gianmarco |
| Abstract: | Industrial regulations are typically designed with a particular policy objective and set of firms in mind. When input-output linkages connect firms across sectors, such "piecemeal" regulations may worsen externalities elsewhere in the economy. Using daily administrative and survey data, we show that in Peru's industrial fishing sector, the world's largest, air pollution from downstream (fishmeal) manufacturing plants caused 55,000 additional respiratory hospital admissions per year as a consequence of the introduction of individual property rights (over fish) upstream. The upstream regulatory change removed suppliers' incentive to "race" for the resource and enabled market share to move from inefficient to efficient downstream firms. As a result, the reform spread downstream production out across time, as predicted by a conceptual framework of vertically connected sectors. We show evidence consistent with the hypothesis that longer periods of moderate air polluting production can be worse for health than concentrating a similar amount of production in shorter periods. Our findings demonstrate the risks of piecemeal regulatory design in interlinked economies. |
| Keywords: | air pollution; Coasian solutions; externalities; Industrial regulations |
| JEL: | D2 I1 L5 O1 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12584&r=reg |
| By: | Eva Lyubich (UC Berkeley); Joseph S. Shapiro (Cowles Foundation, Yale University); Reed Walker (University of California, Berkeley, IZA, & NBER) |
| Abstract: | This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly de ned industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments. |
| JEL: | F18 H23 Q56 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:3017&r=reg |
| By: | Gutiérrez-Hita, Carlos; Vicente-Pérez, José |
| Abstract: | In this paper we present a mixed duopoly model of supply function competition under uncertainty with product differentiation. We find that, regardless the nature of product heterogeneity, the best response of the private firm always arises as strategic complement. Contrary to this, state-owned firm's best response arises either as strategic complement or substitute depending on the product heterogeneity. As a result of the ex post realization of the demand uncertainty, different equilibria are reached. |
| Keywords: | Supply Function Equilibria; Mixed oligopoly; Differentiated products. |
| JEL: | D43 H42 L13 |
| Date: | 2018–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83792&r=reg |
| By: | ; Valentin Bertsch, Jutta Geldermann, Tobias Lühn; |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb20170304&r=reg |