Can planners control competitive generators?

Consider an electricity market populated by competitive agents using thermal generating units. Generation often emits pollution which a planner may wish to constrain through regulation. Furthermore, generators’ ability to transmit energy may be naturally restricted by the grid’s facilities. The existence of both pollution standards and transmission constraints can impose several restrictions upon the joint strategy space of the agents. We propose a dynamic, game-theoretic model capable of analysing coupled constraints equilibria (also known as generalised Nash equilibria). Our equilibria arise as solutions to the planner’s problem of avoiding both network congestion and excessive pollution. The planner can use the coupled constraints’ Lagrange multipliers to compute the charges the players would pay if the constraints were violated. Once the players allow for the charges in their objective functions they will feel compelled to obey the constraints in equilibrium. However, a coupled constraints equilibrium needs to exist and be unique for this modification of the players’ objective functions ..[there was a “to” here, incorrect?].. induce the required behaviour. We extend the three-node dc model with transmission line constraints described in [10] and [2] to utilise a two-period load duration curve, and impose multi-period pollution constraints. We discuss the economic and environmental implications of the game’s solutions as we vary the planner’s preferences.

The invisible polluter: Can regulators save consumer surplus?

Consider an electricity market populated by competitive agents using thermal generating units. Such generation involves the emission of pollutants, on which a regulator might impose constraints. Transmission capacities for sending energy may naturally be restricted by the grid facilities. Both pollution standards and trans mission capacities can impose several constraints upon the joint strategy space of the agents. We propose a coupled constraints equilibrium as a solution to the regulator’s problem of avoiding both congestion and excessive pollution. Using the coupled constraints’ Lagrange multipliers as taxation coefficients the regulator can compel the agents to obey the multiple constraints. However, for this modification of the players’ payoffs to induce the required behaviour a coupled constraints equilibrium needs to exist and must also be unique. A three-node market example with a dc model of the transmission line constraints described in [8] and [2] possesses these properties. We extend it here to utilise a two-period load duration curve and, in result, obtain a two-period game. The implications of the game solutions obtained for several weights, which the regulator can use to vary the level of generators’ responsibilities for the constraints’ satisfaction, for consumer and producer surpluses will be discussed.

Instant Efficient Pollution Abatement under Non-Linear Taxation and Asymmetric Information: The Differential Tax Revisited

This paper analyzes incentives for polluting firms to exchange abatement cost information under the non-linear pollution tax scheme (‘differential tax’) introduced by Kim and Chang [J. Regul. Econom. 5, 1993, 193-197]. It shows that polluting firms have - under mild conditions - an incentive to join a coalition whose members mutually truthfully exchange information as well as commit themselves with respect to their abatement decisions. As a result, the differential tax triggers instantly - i.e. no abatement adaptation is needed – efficient abatement levels without the regulator knowing marginal abatement costs. Consequently, this paper shows that differential taxation results in lower social costs than traditional non-linear taxation which triggers efficient emissions only after a period of non-efficient abatement.Externalities, Pollution taxes, Coalition formation, Non-linear taxation, Asymmetric information, Co-operative game theory

Dynamic Models for International Environmental Agreements

In this paper we develop a model to analyze, in a dynamic framework, how countries join international environmental agreements (IEAs). In the model, where countries suffer from the same environmental damage as a result of the total global emissions, a non-signatory country decides its emissions by maximizing its own welfare, whereas a signatory country decides its emissions by maximizing the aggregate welfare of all signatory countries. Signatory countries are assumed to be able to punish the non-signatories at a cost. When countries decide on their pollution emissions they account for the evolution of the pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations with partial cooperation in an IEA stable over time. It also captures situations where all countries participate in a stable agreement, or situations where no stable agreement is feasible. When more than one possibility coexists, the long-term outcome of the game depends on the initial conditions (i.e. the size of the initial group of signatory countries and the pollution level).International Environmental Agreements, Non-Cooperative Dynamic Game, Coalition Stability

R&D in Cleaner Technology and International Trade

We consider a dynamic three-stage game played by two regulator-firm hierarchies to capture the scale and technological effects of opening markets to international trade. Each firm produces one good sold on the market. Firms can invest in R&D in order to lower their fixed emission/output ratio and are regulated with costly public funds. We take the context of sufficiently high market sizes and investment cost parameters. Opening markets to international trade yields more investment in R&D, more production and a lower emission ratio. When the market size is low enough and the investment cost parameter is high enough, pollution in common market is higher than in autarky. International trade reduces the social welfare.R&D, Cleaner technology, Common market, Social welfare

Applications of Negotiation Theory to Water Issues

The purpose of the paper is to review the applications of non-cooperative bargaining theory to water related issues – which fall in the category of formal models of negotiation. The ultimate aim is that to, on the one hand, identify the conditions under which agreements are likely to emerge, and their characteristics; and, on the other hand, to support policy makers in devising the “rules of the game” that could help obtain a desired result. Despite the fact that allocation of natural resources, especially of trans-boundary nature, has all the characteristics of a negotiation problem, there are not many applications of formal negotiation theory to the issue. Therefore, this paper first discusses the non-cooperative bargaining models applied to water allocation problems found in the literature. Particular attention will be given to those directly modelling the process of negotiation, although some attempts at finding strategies to maintain the efficient allocation solution will also be illustrated. In addition, this paper will focus on Negotiation Support Systems (NSS), developed to support the process of negotiation. This field of research is still relatively new, however, and NSS have not yet found much use in real life negotiation. The paper will conclude by highlighting the key remaining gaps in the literature.Negotiation theory, Water, Agreeements, Stochasticity, Stakeholders

Biodiversity Conservation on Private Lands: Information Problems and Regulatory Choices

This survey paper examines various information insufficiencies in biodiversity conservation and their impact of regulatory choices. We surveyed the literature in the field and identified four major types of informational insufficiencies in making efficient biodiversity conservation decisions: 1) biological uncertainty 2) natural uncertainty 3) individual information, and 4) monitoring problem. The consequences of these four types of information insufficiencies on the choice of regulatory tools are explored. We discuss in this context three types of regulatory tools: land takings, environmental fees/charges, and contracts. The efficiency of each type of regulatory tools is shown dependent on the specific informational constraints that the regulatory faces.Biodiversity conservation, Information, Regulatory tools

Framework for the implementation of urban big screens in the public space

In the last decade, big urban screens have appeared in town squares and on building facades across the UK. The use of these screens brings new potentials and challenges for city regulators, artists, architects, urban designers, producers, broadcasters and advertisers. Dynamic moving images form new architectural material, affecting our perception and the experience of the space around us. A new form of urban space is emerging that is fundamentally different from what we have known, and it seems that we are ill-equipped to deal with and analyse it. We are just beginning to understand the opportunities for public information, art and community engagement. Most of screens at present serve mainly commercial purposes, they do not broadcast information aimed at sharing community content nor do they support public social interactions. We need to see more negotiation between commercial, public and cultural interests. The SCREAM project addresses these new challenges by looking at the physical urban spaces and the potential spaces created by the new technologies

The Pigouvian Tax Rule in the Presence of an Eco-Industry

Pollution abatement goods and services are now largely being delivered by a specialized “eco-industry.” This note reconsiders Pigouvian taxes in this context. We find that the optimal emission tax will depart from the marginal social cost of pollution according to the polluters’ and the environment firms’ relative market power.Pigouvian taxes, Environment industry