Water Misallocation and Environmental Externalities in Electricity Generation

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dc.contributor.author BILLETTE DE VILLEMEUR, Etienne
dc.contributor.author VINELLA, Annalisa
dc.date.accessioned 2008-07-29T13:14:09Z
dc.date.available 2008-07-29T13:14:09Z
dc.date.issued 2008
dc.identifier.issn 1028-3625
dc.identifier.uri http://hdl.handle.net/1814/9127
dc.description Florence School of Regulation en
dc.description.abstract We explore the interactions between environmental externalities and intertemporal market power in electricity generation industries where thermal operators imperfectly compete with operators using scarce water stored in dams. Relying upon a two-period model, we show that, in countries where demand peaks at the first (resp.ly, second) period after water renewal, dynamic market power worsens (resp.ly, ameliorates) resource allocation and environmental health. We then address policy issues. We show that, in general, second best is not decentralized by means of standard tools such as price cap. We argue that the hydraulic process requires specific regulation. We put forward a quantity-based version of the contracts for price difference increasingly used in power pools, to be adopted jointly with either a flexible form of taxation or an intertemporal price cap. en
dc.language.iso en en
dc.relation.ispartofseries EUI RSCAS en
dc.relation.ispartofseries 2008/27 en
dc.relation.ispartofseries Florence School of Regulation en
dc.subject power generation en
dc.subject water allocation en
dc.subject externalities en
dc.subject price cap en
dc.subject contracts for water difference en
dc.title Water Misallocation and Environmental Externalities in Electricity Generation en
dc.type Working Paper en
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