Conference Agenda

In this paper, we model a differential game played `a la Stackelberg between a regulator and a polluting firm in a stock pollution context. The regulator can be a single body deciding on the emission standard and the probability of inspection overtime as functions of the pollution stock. Alternatively, the regulator can delegate the inspection activities to a local agency that maximizes revenues coming from fines net of inspection costs. Although the objective of the agency departs from social welfare, decentralization can be welfare improving, crucially depending on the type of strategic interaction between the local agency and the polluting firm, as well as on the firm anticipating the effects of current pollution decisions on future regulatory policy. Up to our kowledge, this is the first paper dealing with hierarchical regulation in a stock pollution context.

Decarbonizing industries to mitigate climate change requires technological change. Innovation by suppliers can play a crucial role in the technological transition, particularly when suppliers have expertise in zero-emission technologies.

In this paper, I study the effect of environmental regulation in a downstream industry on the innovation outcomes of suppliers in the context of the European CO2 emission standard for passenger cars. I construct a novel data set that links administrative data on car manufacturer compliance to supplier patent data using information on automotive supply chains. To identify the causal effect of changes in the stringency of the emission standard, I leverage the heterogeneous exposure of automotive suppliers to changes in the composition of the European car market in the aftermath of the 2015 Volkswagen diesel scandal. Exposure to more stringent environmental regulation increases innovation for zero-emission vehicle technologies among existing suppliers. In addition, the likelihood that car manufacturers form new supply chain links to firms with expertise in technologies to reduce vehicle emissions increases in response to more stringent environmental regulation.

These results suggest that environmental regulation induces economically significant technology spillovers to the regulated firms.

In this paper we discuss the design of hedging products for electricity to unlock industrial investments in load shifting capacity. These investments enable flexible electricity consumption and play a crucial role for integrating intermittent renewable energy sources. We build a theoretical microeconomic model of investment under uncertainty to examine the investment decision of risk-averse firms under different types of electricity procurement. Specifically, we compare the widely used baseload hedge with a renewable energy profile (REP) hedge - a long-term contract based on generation from a portfolio of renewable installations. We show that under the REP hedge, greater investments in flexibility are incentivized compared to alternative procurement types. The main mechanism is the adaptation of investment decisions to high price volatility, to which the best response is to increase the available flexibility capacity. Numerical simulations further show that while low-cost load-shifting investments are adopted regardless of the hedging product, the REP hedge is essential for unlocking the full potential of load shifting, including higher-cost technologies.

Countries worldwide have government programs that compensate landowners for damages from wildlife to crops, livestock, and property. As with other types of public insurance programs, when enforcement budgets are limited, this provides the opportunity for claimants to submit fraudulent reports which ultimately result in an inefficient use of funds. Wildlife damages tend to be spatially correlated, and in some circumstances neighbors or others who have suffered damages at a similar point in time will have better information than the authorities on the legitimacy of claims. With this idea in mind, this study uses theory and experiments to examine the potential for a new peer reporting mechanism (PRM), wherein peers vote on who to target for audit. We build theory models to compare the PRM with both random audits, and a competitive audit mechanism that assigns audit probabilities by a relative comparison of damage reports. Experimental findings confirm the PRM’s effectiveness in reducing overreporting, notably in the absence of explicit incentives for signaling to the authority the most noncompliant, and even when signaling itself is financially costly.