The effect of regulatory scrutiny Asymmetric cost

Authors: Frieder Mokinski Nikolas M Wölfing

Publish Date: 2013/10/15

Volume: 45, Issue: 2, Pages: 175-193

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Abstract

We find an asymmetric passthrough 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 noncompetitive pricing behavior We do not find any asymmetric passthrough of EUA prices in recent years Several robustness checks support our resultsWe are grateful for valuable comments from Anna Créti the participants of the EAERE annual conference 2013 the editor and an anonymous referee We thank AnnaLena Huthmacher for valuable research assistance Funding was provided from the project “CFI—Climate Change Financial Markets and Innovation” chaired by Dr Paschen von Flotow Sustainable Business Institute—SBI and supported by the German Ministry for Education and Research The paper benefited from the discussion with Dr Paschen von Flotow and Prof Dr Dirk Schiereck Technical University Darmstadt All remaining errors are those of the authors

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