Workshop “Economic Modelling, Energy Markets and Decarbonation”
October 12th, 2022
Université Paris Dauphine - PSL // Room A707
Formulaire de demande d'inscription
Aude Pommeret (University of Savoie-Mont-Blanc)
Title: Confronting the carbon pricing gap: Second best climate policy", co-écrit avec Francesco Ricci ( CEE-M, U. Montpellier), et Katheline Schubert (PSE, U. Paris 1).
Confronted with political opposition to the implementation of efficient direct carbon pricing, climate policy relies on alternative policy interventions, such as subsidies to renewables. This paper uses a dynamic macroeconomic model under a carbon budget to study climate policies constrained to keeping a constant level of the carbon tax. We find that it is possible to implement the optimal trajectory by combing an increasing tax on electricity consumption with a feed-in-premium paid to electricity produced from renewable sources. Otherwise, when the climate policy relies on the second instrument only, the subsidy to renewables should be so large to foster rapid build up of specialized capital, that it would imply large investment costs and financial burden on the public budget, unless the carbon tax level could be initially set at a high level. Unfortunately, the two solutions with no or low welfare losses raise concerns on their political acceptability too.
Bert Willems (Tilburg University)
Title: Bidding and Investment in Wholesale Electricity Markets: Pay-as-Bid versus Uniform-Price Auctions
Abstract: We compare two auction formats for wholesale electricity markets: uniform-price and pay-as-bid auctions, and study short-run bidding and long-run investment incentives. We develop a monopolistic competition model with a continuum of generation technologies from base-load to peak-load, and uncertain, elastic demand. Pay-as-bid auctions are shown to be inefficient because consumers' willingness to pay exceeds the marginal costs and producers' long-run investment incentives are distorted. The total installed capacity is the same, but the generation mix relies too little on baseload technologies. Consumer surplus is lower with pay-as-bid auctions, while under uniform-price auctions, consumer surplus is at the efficient level.
Stéphane Villeneuve (TSE)
Title: Gaussian Agency problems with memory and Linear Contracts
Abstract: Can a principal still offer optimal dynamic contracts that are linear in end-of-period outcomes even when the agent controls a process that exhibits memory?
We provide a positive answer by extending the model of Holmstrom-Milgrom (1987) to general Gaussian settings where the output dynamics are not necessarily semi-martingales or Markov processes. We introduce a rich class of principal-agent models that encompasses dynamic agency models with memory. From the mathematical point of view, we develop a methodology to deal with the possible non-Markovianity and non-semimartingality of the control problem, which can no longer be directly solved by means of the usual Hamilton-Jacobi-Bellman equation. Our main contribution is to show that, for one-dimensional models, this setting always allows for optimal linear contracts in end-of-period observable outcomes with a deterministic optimal level of effort. In higher dimension, we show that linear contracts are still optimal when the effort cost function is radial and we quantify the gap between linear contracts and optimal contracts for more general quadratic costs of efforts.
René Aïd (Université Paris Dauphine - PSL, LEDA)
Title: A model of optimal incentives for renewable investments.
Abstract : We analyze the optimal regulatory incentives to foster the development of non-emissive electricity generation when the demand for power is served either by a monopoly or by two competing firms. The regulator wishes to encourage renewable investments to limit carbon emissions, while simultaneously reducing intermittency of the total energy production. We provide the expression of the optimal contract for each market structure. We show how the market structure affects the complexity of the optimal incentive mechanism. A joint work with Annika Kemper and Nizar Touzi.
6 pm Buffet dinner