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The effect of regulatory scrutiny: Asymmetric cost pass-through in power wholesale and its end

Author Info

  • Frieder Mokinski

    ()

  • Nikolas Wölfing

    ()

Abstract

We find an asymmetric pass-through of European emission allowance (EUA) prices to wholesale electricity prices in Germany and show that this asymmetry disappeared in response to a report on investigations by the competition authority. The asymmetric pricing pattern, however, was not detected at the time of the report, nor had it been part of the investigations. Our results therefore provide evidence for the deterring effect of regulatory monitoring on firms which exhibit non-competitive pricing behavior. We do not find any asymmetric pass-through of EUA prices in recent years. Several robustness checks support our results. Copyright Springer Science+Business Media New York 2014

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File URL: http://hdl.handle.net/10.1007/s11149-013-9233-8
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Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 45 (2014)
Issue (Month): 2 (April)
Pages: 175-193

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Handle: RePEc:kap:regeco:v:45:y:2014:i:2:p:175-193
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100298

Keywords: Asymmetric price adjustment; Regulatory monitoring ; Wholesale electricity markets; Emissions trading; L4; L94; Q41; Q52;

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Find related papers by JEL classification:
  • L4 - Industrial Organization - - Antitrust Issues and Policies
  • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
  • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
  • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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  1. Georg Zachmann & Christian von Hirschhausen, 2007. "First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany," Discussion Papers of DIW Berlin 708, DIW Berlin, German Institute for Economic Research.
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Cited by:

  1. Anderson, Brilé & Bernauer, Thomas, 2016. "How much carbon offsetting and where? Implications of efficiency, effectiveness, and ethicality considerations for public opinion formation," Energy Policy, Elsevier, vol. 94(C), pages 387-395.
  2. Castagneto-Gissey, Giorgio, 2014. "How competitive are EU electricity markets? An assessment of ETS Phase II," Energy Policy, Elsevier, vol. 73(C), pages 278-297.

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