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Impact of environmental regulation and the 2011 earthquake on the Japanese electricity industry

Listed author(s):
  • Shigeharu Okajima

    ()

    (Waseda University)

  • Hiroko Okajima

    (Towson University)

Registered author(s):

    Abstract Environmental regulations may erode competition owing to additional costs of compliance. To investigate the impact of such regulations in the Japanese electricity market, we analyze the effects of the environmental quality threshold set for public sector procurement. Using data on electricity procurement auctions from 2005 to 2012, we employ an endogenous switching regression model. We show that the environmental quality threshold lowers the participation of new power suppliers in auctions but does not increase their winning bids as long as competition is maintained. In fact, compliance with the quality threshold has made new power suppliers competitive in green auctions. By contrast, electricity utilities have suffered increased compliance costs since the Great East Japan Earthquake in 2011 owing to the shutdown of nuclear power plants and increased reliance on fossil fuels.

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    File URL: http://link.springer.com/10.1007/s11149-016-9294-6
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    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 49 (2016)
    Issue (Month): 2 (April)
    Pages: 223-249

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    Handle: RePEc:kap:regeco:v:49:y:2016:i:2:d:10.1007_s11149-016-9294-6
    DOI: 10.1007/s11149-016-9294-6
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    Order Information: Web: http://www.springer.com/economics/industrial+organization/journal/11149/PS2

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    1. Paul Joskow & Jean Tirole, 2006. "Retail electricity competition," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 799-815, December.
    2. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
    3. Anna Creti & Jerome Pouyet & María-Eugenia Sanin, 2013. "The NOME law: implications for the French electricity market," Journal of Regulatory Economics, Springer, vol. 43(2), pages 196-213, April.
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    7. Nils-Henrik M. von der Fehr & Petter Vegard Hansen, 2010. "Electricity Retailing in Norway," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-46.
    8. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    9. Dakshina G. De Silva & Timothy Dunne & Georgia Kosmopoulou, 2003. "An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 295-316, 09.
    10. Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257, August.
    11. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 413-438.
    12. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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