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on Regulation |
| By: | Jordi Brandts; Francesc Trillas |
| Abstract: | We study the effects on citizens’ opinions of exposing them to opposing views in relation to the public vs private property nature of companies providing a public service. We focus on the issue of private vs public property of water distribution operators. Whether such operators should be publicly or privately owned is a hotly debated topic all over the world. The view of mainstream economic experts is rather agnostic about property. The crucial issue is considered to be the quality of the regulation of operators. However, there is also a broad citizen movement in favor of the opinion that water supply operators should be public property. In an online experiment we compare the effect on citizens’ opinions in Spain of three different texts: a neutral expository one, one which contains only arguments in favor of public operators and a third one which contains both the pro public property view and that of mainstream economic experts. We find that by itself the message of those in favor of public ownership does affect citizens opinion. However, the arguments of expert economists are effective at more than compensating the influence of the pro public companies arguments. This suggests that economists and expert thinking has a role to play in the public debate, beyond the role played in advising politicians or through the decision-making process in regulatory agencies. |
| Keywords: | opposing views, communication, public ownership, online experiments |
| JEL: | C9 D83 D9 Q25 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1453 |
| By: | Julian Radek; Marco Sebastian Breder; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | To ensure sustainable green hydrogen (H2) production, the European Union (EU) has introduced regulatory frameworks, such as the Delegated Act on Renewable Hydrogen. These regulations aim to ensure positive environmental effects through green hydrogen by establishing criteria of additionality, as well as spatial and temporal correlation. However, concerns have arisen among stakeholders regarding the potential barriers these criteria may pose to the growth of the EU hydrogen economy. Our analysis examines the implications of these regulations, analyzing the effects of the criteria on green hydrogen production from a system perspective. By doing that, we can assess the interplay with hydrogen production in European non-EU countries, as well as the role of third country import prices and quantities, while accounting for the EU objective of achieving net zero emissions by 2050. Our findings indicate that the EU hydrogen economy may be substantially affected by restrictive criteria for green hydrogen. Policy makers are therefore advised to carefully assess whether a level playing field can be established and to avoid overly restrictive unilateral measures. |
| Keywords: | Hydrogen economy, Green Hydrogen, Energy market modeling, Regulation |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dui:wpaper:2402 |
| By: | Shaun D. McRae; Frank A. Wolak |
| Abstract: | Recent energy shortfalls in renewables-dominated electricity markets call for a mechanism to ensure demand is met under all system conditions. We demonstrate severe shortcomings of an increasingly popular mechanism—reliability options—caused by its interaction with fixed-price forward contracts for energy. Large generators can trigger the option exercise, weakening the short-term incentive to sell output provided by forward contracts alone. In the longer term, hydro generators sell more forward contracts and store less water, reducing system reliability. We empirically show that Colombian generators respond to these incentives. We analyze a standardized energy contracting approach to long-term resource adequacy that does not create these economic incentives. |
| JEL: | L13 Q40 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32616 |
| By: | Frondel, Manuel |
| Abstract: | Dieser Beitrag nimmt eine Kosten-Nutzen-Abwägung des Ausbaus der Erneuerbaren-Energietechnologien zur Stromerzeugung in Deutschland vor. Im Ergebnis zeigt sich, dass dieser Ausbau die Stromverbraucher seit Einführung des Erneuerbaren-Energien-Gesetz (EEG) im Jahr 2000 knapp 300 Mrd. Euro gekostet hat. Für die kommenden beiden Jahrzehnte stehen zudem Zahlungsverpflichtungen in ähnlicher Größenordnung bereits fest. Mit dem nach Russlands Angriff auf die Ukraine forcierten Erneuerbaren-Ausbau nimmt die Politik aber noch deutlich über diese rund 600 Milliarden hinaus gehende Kosten in Kauf. Eine Kosten-Nutzen-Analyse ist vor diesem Hintergrund unabdingbar, nicht zuletzt auch deshalb, weil weitere Kosten in dreistelliger Milliardenhöhe nicht in den 600 Milliarden enthalten sind, etwa die Kosten für den ohne Erneuerbare-Expansion nicht in so starkem Maße nötigen Netzausbau. Vor diesem Hintergrund sollte beim weiteren Erneuerbaren-Ausbau streng auf Kostendisziplin geachtet werden, indem die Bundesnetzagentur künftig ausschließlich technologieneutrale, statt technologiespezifischer Ausschreibungen für den Erneuerbaren-Ausbau vornimmt. Dadurch kommen zwar nur die kosteneffizientesten regenerativen Technologien zum Zuge, aber es bleiben im Klima- und Transformationsfonds Spielräume für Zukunftsinvestitionen, die das Wachstumspotential der deutschen Volkswirtschaft stärker beflügeln könnten als der Ausbau der erneuerbaren Energien. Im Gegensatz zu den hohen Kosten nimmt sich der Nutzen des Ausbaus der erneuerbaren Energien bescheiden aus. So belief sich der Anteil der Erneuerbaren am Primärenergieverbrauch im Jahr 2022 auf lediglich rund 17 %. Die Treibhausgasneutralität im Jahr 2045 allein mit Erneuerbaren erreichen zu wollen, erscheint bei einem solch geringen Anteil als eine schwer bewältigbare Herausforderung. |
| Abstract: | This article weighs up the costs and benefits of the expansion of renewable energy technologies for electricity generation in Germany. According to calculations of the German Ministry of Economic Affairs, this expansion has cost electricity consumers almost 300 billion euros since the introduction of the Renewable Energy Sources Act (EEG) in 2000. Moreover, payment obligations of a similar magnitude are already in place for the next two decades. However, with the accelerated expan¬sion of renewables following Russia's attack on Ukraine, politicians are accepting costs well in excess of this approximately 600 billion. Given the costs already incurred, a cost-benefit analysis is imperative, not least because further costs in the three-digit billion range are not included in the 600 billion figure, such as the costs for grid expansion, which would not be necessary to the same extent without the expansion of renewables. Against this backdrop, strict attention should be paid to cost discipline in the further expansion of renewables by ensuring that the Federal Network Agency only issues technology-neutral rather than technology-specific tenders for the expansion of renewables in future. This means that only the most cost-efficient renewable technologies will be installed. Consequently, there will be budgetary scope for future investments that could boost the growth potential of the German economy more than the expansion of renewable energies. Contrasting with the high costs, the benefits of expanding renewable energies are modest. For example, the share of renewables in primary energy consumption in 2022 was only around 17 %. With such a low share, achieving greenhouse gas neutrality in 2045 with renewables alone appears to be a tremendous challenge. |
| Keywords: | Energiewende, Photovoltaik, Wärmewende |
| JEL: | Q21 I38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwimat:300232 |
| By: | Rong, Rong; Crago, Christine L.; Wang, Rui |
| Keywords: | Resource/Energy Economics And Policy, Environmental Economics And Policy, Institutional And Behavioral Economics |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343734 |
| By: | Montag, Felix; Sagimuldina, Alina; Winter, Christoph |
| Abstract: | The widespread availability of digital technologies has made mandatory price disclosure policies (MPD) a convenient tool for policymakers to increase price transparency and foster competition. The literature has shown that these can increase or decrease prices. We shed light on the circumstances under which MPD lowers prices. We study the introduction of MPD in the German retail fuel market by combining a stylized theoretical model with detailed data on prices, seller characteristics and consumer information. We find that low levels of prior consumer information, a high number of sellers, and complementary information campaigns foster the procompetitive effects of MPD. |
| Keywords: | Mandatory price disclosure, consumer information, retail fuel market |
| JEL: | D83 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:300263 |
| By: | Jerry Anunrojwong; Santiago R. Balseiro; Omar Besbes; Bolun Xu |
| Abstract: | Electric power systems are undergoing a major transformation as they integrate intermittent renewable energy sources, and batteries to smooth out variations in renewable energy production. As privately-owned batteries grow from their role as marginal "price-takers" to significant players in the market, a natural question arises: How do batteries operate in electricity markets, and how does the strategic behavior of decentralized batteries distort decisions compared to centralized batteries? We propose an analytically tractable model that captures salient features of the highly complex electricity market. We derive in closed form the resulting battery behavior and generation cost in three operating regimes: (i) no battery, (ii) centralized battery, and (ii) decentralized profit-maximizing battery. We establish that a decentralized battery distorts its discharge decisions in three ways. First, there is quantity withholding, i.e., discharging less than centrally optimal. Second, there is a shift in participation from day-ahead to real-time, i.e., postponing some of its discharge from day-ahead to real-time. Third, there is reduction in real-time responsiveness, or discharging less in response to smoothing real-time demand than centrally optimal. We quantify each of the three forms of distortions in terms of market fundamentals. To illustrate our results, we calibrate our model to Los Angeles and Houston and show that the loss from incentive misalignment could be consequential. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.18685 |
| By: | Sen, Anupama (Smith School of Enterprise and the Environment, University of Oxford); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Brandstätt, Christine (Department of Economics, Copenhagen Business School) |
| Abstract: | EU electricity infrastructure will need to undergo significant expansion to meet future demand for green energy, as member countries seek to meet their 2050 net zero targets. Meeting these targets requires the development of cross-border transmission networks, as high shares of offshore renewables need to be integrated in energy “hubs” and into mainland markets. However, the current liberalised national, but integrated, energy markets present challenges to the efficient development of the hubs. In the emerging offshore multi-vector renewable system, a simple allocation of the investment costs of a “hub” among its beneficiaries is not necessarily proportionately aligned with the benefits drawn from it. This challenge is exacerbated by the allocation of property rights to operate regulated natural monopolies of national Transmissions System Operators (TSOs), creating a fragmented ownership structure. We propose a solution based on the logic of collective action – namely, that a subset of EU member states have the shared incentive to cooperate on the joint development of assets. We then outline a Joint Venture framework that decouples the decision to invest from the decision on the allocation of costs and benefits across beneficiaries, enabling essential investments to proceed. This model also exhibits favourable dynamic properties for gradual development of hubs. |
| Keywords: | Cost allocation; decarbonisation; electricity; networks; climate; energy; security |
| JEL: | L50 L51 L94 Q40 Q48 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_010 |
| By: | Duy Pham, Son (University of Aberdeen Business School, Dunbar Street, Aberdeen, UK); Do, Hung Xuan (School of Economics and Finance, Massey University, New Zealand); Nepal, Rabindra (Faculty of Business and Law, School of Business, University of Wollongong, Australia); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | The tail risks can exhibit different and important features than average measures of risk in interconnected electricity markets. This paper examines the interconnectedness of tail risks within the regionally interconnected Australian National Electricity Market. We use the Conditional Autoregressive Value-at-Risk (CAViaR) and time-varying parameter vector autoregression (TVP-VAR) connectedness approach. Analysing historical data between 01 January 2006 and 04 February 2024. The results show significant levels of connectedness for both negative and positive tail risks, highlighting the dynamic and interdependent nature of these markets. Notably, we identify asymmetries in the transmission of tail risks and their key drivers, including oil market volatility and global geopolitical risks. Our findings show that some regions play a pivotal role in the risk dynamics across the regions of the network and the influence of energy source diversity on risk profiles. The study underscores the complexity of managing the expected increase in tail risks in interconnected electricity markets, emphasizing the need for adaptive, forward-thinking strategies tailored to evolving global and local conditions. |
| Keywords: | Electricity markets; Tail risk; TVP-VAR connectedness; Australia; CAViaR |
| JEL: | D40 L94 Q43 |
| Date: | 2024–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_009 |
| By: | Donald S. Kenkel; Alan D. Mathios; Grace N. Phillips; Revathy Suryanarayana; Hua Wang; Sen Zeng |
| Abstract: | Australia had adopted a novel approach to e-cigarette policy by requiring a physician’s prescription to lawfully obtain nicotine e-cigarettes. We conducted an online discrete choice experiment to gauge how adult Australian smokers made hypothetical choices between cigarettes, prescription e-cigarettes, non-prescription e-cigarettes, and quitting. We estimate a mixed logit model, which allows us to predict the market shares under different policy scenarios. The mixed logit model also provides estimates of consumer willingness to pay for the benefits from the prescription status of e-cigarettes and the costs of illegal e-cigarette markets. We estimate that the average utility loss from an illegal retail market is worth AU$7.90 per pack-equivalent. We use the corresponding estimates of the compensating variations in income to conduct cost-benefit analyses of possible reforms to Australian e-cigarette regulation. In aggregate, we estimate that the benefits of allowing but not requiring prescriptions of e-cigarettes are AU$1.8 billion per year. Our paper provides a novel contribution to research on e-cigarette regulation and provides a case-study for the policy implementation in Australia. Our paper is also part of our research agenda to explore and develop methods to conduct policy analysis and cost-benefit analysis of regulatory policies that might create illegal markets. |
| JEL: | I12 I18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32654 |
| By: | Nathan H. Miller |
| Abstract: | This article addresses developments in the literature on The Rise of Market Power. First, it summarizes research about the result of De Loecker 2020 that the sales-weighted average markup has increased in the United States. Second, it summarizes and evaluates a set of industry studies that examine market power over long time horizons in specific settings. A theme that emerges from these industry studies is that technological advancements matter a great deal for the evolution of economic outcomes. By contrast, the studies do not point to weak antitrust enforcement as contributing to greater market power. The article concludes by outlining directions for future research. |
| JEL: | D40 L10 L40 L60 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32627 |
| By: | Paulo Ramos; Thomas G. Wollmann |
| Abstract: | This paper uses an aggregative games framework to predict consumer welfare when market structure is endogenously determined. Our main results characterize mergers whose synergies reduce consumer welfare by inducing rivals to exit. The conditions under which such mergers arise are broad, regardless of whether we consider quantity competition among homogeneous products or price competition among multi-product firms facing multinomial logit demand. Calibrated models based on commonly used parameter values indicate that the synergies required to avoid consumer harm can be much higher than those implied by traditional merger analysis. Neither subsequent entry nor follow-on mergers necessarily mitigate the problem. |
| JEL: | D43 G34 K21 L13 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32630 |
| By: | Patrick Rey; Yossi Spiegel; Konrad O. Stahl |
| Abstract: | We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving. |
| Keywords: | predation, accommodation, entry, legal rules, Markov perfect equilibrium |
| JEL: | D43 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11172 |
| By: | OECD |
| Abstract: | Standards in competition policy, such as the consumer welfare standard or the protecting competition standard, are the subject of considerable debate. This paper considers the relative advantages and disadvantages of alternative standards by first identifying their desirable attributes and then assessing several candidate standards against them. It was prepared as a background note for discussions on “Consumer Welfare Standards - Advantages and Disadvantages compared to Alternative Standards” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:295-en |
| By: | OECD |
| Abstract: | This background note reviews the relationship between competition and innovation in both directions. This is, how competition can help boosting innovation and how innovation can shape competition. It focuses on the theoretical perspective to try to understand whether competition is indeed a driver of innovation and how it interacts with other drivers. It was prepared as a background note for discussions on “The Relationship between Competition and Innovation” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:294-en |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “The Optimal Design, Organisation and Powers of Competition Authorities” taking place at the December 2023 session of the OECD Competition Committee’s Working Party No. 3 on Co-operation and Enforcement. |
| Date: | 2023–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:304-en |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Ex-post Assessment of Merger Remedies” taking place at the 2023 Global Forum on Competition on 7-8 December 2023, |
| Date: | 2023–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:302-en |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Out-of-market efficiencies in competition enforcement” taking place at the December 2023 session of the OECD Competition Committee. |
| Date: | 2023–11–03 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:305-en |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Competition and Professional Sports” taking place at the December 2023 session of the OECD Competition Committee’s Working Party No. 2 on Competition and Regulation. |
| Date: | 2023–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:300-en |
| By: | OECD |
| Abstract: | This paper reviews how competition authorities have incorporated innovation as part of their assessment in enforcement cases. It explores scenarios that have considered innovation from a static perspective, mostly analysing current and potential competition in well-identified product markets (incentives-based approach), as well as scenarios that have considered innovation from a dynamic perspective, often defining innovation markets (impact-based approach). It also looks at cases that have considered increases in innovation as potential justifications for decreases in competition. This note reviews how these different approaches have shaped market definition, the theories of harm considered, and even the design of remedies and commitments. |
| Date: | 2023–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:301-en |
| By: | OECD |
| Abstract: | Companies increasingly use algorithms to set prices and create or enhance new products and services. While algorithms can result in many efficiency-enhancing and pro-competitive effects, they can also be used by firms to restrict competition. Competition authorities should be aware of these risks, know how to investigate them and identify any possible harm to consumers, as well as consider how to address this harm. This background note considers these important issues. It was prepared for discussions on “Algorithmic Competition” taking place at the June 2023 OECD Competition Committee. |
| Date: | 2023–05–10 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:296-en |
| By: | OECD |
| Abstract: | This paper discusses the main benefits of an effective communication strategy and the tools available to competition authorities to communicate the benefits of competition. It was prepared as a background note for discussions on “Assessing and Communicating the Benefits of Competition Interventions” taking place at the June 2023 session of the OECD Competition Committee’s Working Party No. 2 on Competition and Regulation. |
| Date: | 2023–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:297-en |