Reward-Penalty Scheme for Power Distribution Companies

In this research, we propose three Reward-Penalty algorithms, to improve the reliability of power distribution companies. The significance of this research, lies in encouraging power distribution companies, to maintain, or even improve, customer service and satisfaction, by developing the Performance Regulatory Reward-Penalty models. These models are designed to place little administrative burden, on either the regulators, or the power distribution companies, whilst providing valuable information, which will prevent degradation of service reliability

Principal-agent Incentives, Excess Caution, and Market Inefficiency: Evidence From Utility Regulation

Regulators and firms often use incentive schemes to attract skillful agents and to induce them to put forth effort in pursuit of the principals' goals. Incentive schemes that reward skill and effort, however, may also punish agents for adverse outcomes beyond their control. As a result, such schemes may induce inefficient behavior, as agents try to avoid actions that might make it easier to directly associate a bad outcome with their decisions. In this paper, we study how such caution on the part of individual agents may lead to inefficient market outcomes, focusing on the context of natural gas procurement by regulated public utilities. We posit that a regulated natural gas distribution company may, due to regulatory incentives, engage in excessively cautious behavior by foregoing surplus-increasing gas trades that could be seen ex post as having caused supply curtailments to its customers. We derive testable implications of such behavior and show that the theory is supported empirically in ways that cannot be explained by conventional price risk aversion or other explanations. Furthermore, we demonstrate that the reduction in efficient trade caused by the regulatory mechanism is most severe during periods of relatively high demand and low supply, when the benefits of trade would be greatest.

Institutions, politics, and contracts : the attempt to privatize the water and sanitation utility of Lima, Peru

The main reason Lima failed to implement a concession was geographical: the scarcity of water sources meant high marginal costs, partly for pumping water from deep wells and building adequate storage for dry periods. High extraction costs were compounded by years of neglect; much of the system needed to be replaced. Attracting private investors meant setting prices high enough to recover these high costs and provide a reasonable return on capital. But the government had subsidized costs for years, so a concession would have required a sharp and sudden price increase to cover marginal costs. Moreover, any forward-looking investor would want to slow the pace of future investment by curbing demand through more effective (meter-based) bill collection. And cross-subsidies, which reduce the incentive to conserve water, would also have to be reduced. The ultimate cause of the concession's failure was geographical but the proximate cause was political. Privatizing a utility is politically tricky if it involves higher prices and the controversial ceding of monopoly powers to private parties, especially foreigners. Private participation in water is further hampered by the social importance of water and by the lack of international experience and the technical difficulties in designing privatization reform in the sector. At the same time, water offers fewer benefits than other utlities--few revenues to reward supporters or compensate losers-- and the price increases likely in Peru would especially hurt the urban poor, who were important to the president's support base. After a favorable start, the political equation shifted against privatization. The concession's failure was costly, in access goals not fully met, in adverse effects on health, and in the failure to curb consumption through metering--and hence in continued depletion of the aquifer and its increasing contamination by ocean salt. Peru's institutional weaknesses, especially its lack of an autonomous judiciary, might have limited how much could have been achieved. But considering the net gains from private operation in the much weaker nstitutional settings in Africa, Lima would probably have been better off with a concession.Town Water Supply and Sanitation,Environmental Economics&Policies,Water Supply and Sanitation Governance and Institutions,Water and Industry,Water Conservation

Policy to Encourage Carbon Sequestration in Plantation Forests

Carbon sequestration in plantation forests provides the main means by which New Zealand will meet its international climate change obligations in the first commitment period of the Kyoto Protocol (2008–2012). However, without active policy, forests are unlikely to contribute as much in subsequent commitment periods. This research paper provides the background for examining policy measures for encouraging carbon sequestration in plantation forests in New Zealand. Part I focuses on providing factual information and positive analysis of: key domestic and international regulations; information on New Zealand forests, the forestry industry and forest profitability; discussion of land-use decision making, including the central question of what influences conversion of farmland to forestry; and forest carbon ecology. Part II moves on to normative analysis of policy design. It discusses how including considerations of the value of carbon sequestration and storage changes optimal land-use behaviour, and outlines key issues that need to be addressed when developing a policy to encourage sequestration and storage in a pragmatic way. Finally, the paper identifies a number of key areas where we need more information before we can make well- informed choices about policy design. Future work will endeavour to identify and evaluate policies that would effectively encourage sequestration.climate, forest, carbon sequestration, policy, New Zealand, Kyoto

Policy to Encourage Carbon Sequestration in Plantation Forests

Carbon sequestration in plantation forests provides the main means by which New Zealand will meet its international climate change obligations in the first commitment period of the Kyoto Protocol (2008-2012). However, without active policy, forests are unlikely to contribute as much in subsequent commitment periods. This research paper provides the background for examining policy measures for encouraging carbon sequestration in plantation forests in New Zealand. Part I focuses on providing factual information and positive analysis of: key domestic and international regulations; information on New Zealand forests, the forestry industry and forest profitability; discussion of land-use decision making, including the central question of what influences conversion of farmland to forestry; and forest carbon ecology. Part II moves on to normative analysis of policy design. It discusses how including considerations of the value of carbon sequestration and storage changes optimal land-use behaviour, and outlines key issues that need to be addressed when developing a policy to encourage sequestration and storage in a pragmatic way. Finally, the paper identifies a number of key areas where we need more information before we can make well-informed choices about policy design. Future work will endeavour to identify and evaluate policies that would effectively encourage sequestration.climate, forest, carbon sequestration, policy, New Zealand, Kyoto

The Challenges of Governance Structure, Trade Disputes and Natural Environment to China's Growth

Viewing the Chinese economy as a speeding car, there are three types of development that could crash the car: (1) a hardware failure, which is the breakdown of an economic mechanism (analogous to the collapse of the chassis of the car), e.g. a banking crisis; (2) a software failure, which is a flaw in governance that creates social disorders (analogous to a fight among the people inside the car), e.g. the state not being able to meet the rising social expectations about its performance because many of the key regulatory institutions are absent or ineffective; and (3) a power supply failure, which is the loss of economic viability (analogous to the car running out of gas or having its ignition key pulled out) e.g. an environmental collapse or an export collapse. The fact that China has recently declared that its most important task is to build a Harmonious Society (described as a democratic society under the rule of law and living in harmony with nature) suggests that improvements in governance and protection of the environment are among the most serious challenges to achieving sustainable development. The greatest inadequacy of the Harmonious Society vision is the absence of an objective to build a harmonious world because a harmonious society cannot endure in China unless there is also a harmonious world, and vice-versa. The large amount of structural adjustments in the developed countries generated by rapid globalization and technological innovations has made the international atmosphere ripe for trade protectionism; and environmental degradation has made conflict over the global environmental commons more likely. China's quest for a harmonious society requires it to help provide global public goods, particularly the strengthening of the multilateral free trade system, and the protection of the global environmental commons. Specifically, China should work actively for the success of the Doha Round and for an international research consortium to develop clean coal technology.China, harmonious society, governance issues, mass incidents, environmental protection, water crisis, trade imbalances, protectionism

Tax Law Asymmetries and Income Shifting : Evidence From Japanese Capital Keiretsu

When positive and negative income are treated asymmetrically under a corporate income tax (CIT) without allowance for group taxation, a group of affi liated corporations may engage in tax avoidance by shifting income from profi table to unprofi table subsidiaries for the sole purpose of minimising the sum of tax liabilities of the group members. The aim of this paper is to offer systematic evidence on the behavioural response to a tax penalty that arises from doing business in multiple entities, in order to provide justifi cation for group tax systems such as consolidated fi ling and loss transfer. The setting for our investigation is the Japanese CIT before the introduction of a group tax system. We develop a theoretical model of a corporate group that predicts a difference in profi t reporting behaviour between subsidiaries above and below 100 million yen in paid-in capital due to the progressive feature of the Japanese CIT. We test the implications of the model with a company-level data on subsidiaries based on survey that covers over 1,700 corporate groups headed by large corporations. The sample consists of 33,340 subsidiary-time pairs from 1988, 1990, and 1992. We fi nd evidence consistent with a hypothesis that corporate groups shift income among group members. The fi nding underscores the importance of accounting for the group behaviour in the design of CIT.

Smart grid optimized operation driven by reinforcement learning

This thesis focuses on the development of a reinforcement learning model for the operation and demand response control of a smart grid. First, a generic problem is formulated to define the demand response control. Then a study case is proposed with different locations of distributed energy resources and flexible components for reducing the cost associated with its grid con- sumption and safety management. The potential application of different deep reinforcement learning models with different activation functions and network shapes, among them, will be compared and analysed for the grid operation. The goal is to find a deep reinforcement learning model to optimize the demand side of energy management of a smart grid, that achieves better results than other existing approaches. Finally, a new policy for deep reinforcement learning algorithms will be proposed. This will provide a tool to guide the energy management of elec- trical distribution grids with high penetration of renewable energy sources