Price Incentives Research Articles

Motivating towards energy efficiency in small and medium enterprises

Industry is responsible for about 50% of world energy consumption and therefore for a big impact concerning greenhouse gas emissions and climate change. An important strategy to achieve the target of energy policies in Europe, of reducing the energy consumption by 20% by 2020, must consider reducing energy consumption in industry. When talking about industry, it must be remembered that small and medium-sized enterprises are a central part of economies worldwide, comprising 99% of enterprises and providing about 60% of employment. Increasing their energy efficiency represents considerable value for economies, societies and the enterprises themselves. Together with cost savings, energy efficiency can deliver other benefits that can help those companies grow and develop, for example by improving productivity, profitability and competitiveness and product quality. By reducing reliance on energy imports, and lowering environmental impacts, it increases value, not only to business, but also to society. Despite the benefits resulting from energy efficiency measures, their implementation in companies is not an easy task, due to existing barriers that must be identified in order to define motivation strategies that can fight those obstacles. A project, aiming to identify the situation in medium-sized enterprises and to provide them the necessary conditions to adopt energy efficiency improvements, was developed in Portugal. It enabled to conclude about best practices and technological solutions that answer the energy efficiency problems and to identify the main barriers that prevent that adoption, and measures that can contribute to overcome them. The research within the sectors studied showed that changing individual energy behaviors requires strategies that address both internal and external influences on behavior change and not simply new technologies, price incentives or information campaigns.

Residential demand response scheme based on adaptive consumption level pricing

Demand response aims to change the energy consumption patterns of normal customers in response to changes in price rate or incentive offers. This process reduces peak loads and in turn potentially lowers the energy cost for customers. In this study, we propose a new demand response scheme on the basis of an adaptive consumption level pricing scheme. On the one hand, this strategy encourages customers to manage their energy consumption and consequently lower their energy bill. On the other hand, it allows utilities to manage the aggregate consumption and predict load requirement. Unlike other pricing schemes, such as block tariff and time-of-use, the proposed pricing scheme can lower the energy bill of about 73% of customers, assuming that the total utility revenue is the same for all pricing schemes. On the basis of the currently available schemes in the literature, we find that the proposed method has significant advantages over other schemes in terms of fairness in charging customers.

Indirect Load Control for Energy Storage Systems Using Incentive Pricing under Time-of-Use Tariff

Indirect load control (ILC) is a method by which the customer determines load reduction of electricity by using a price signal. One of the ILCs is a time-of-use (TOU) tariff, which is the most commonly used time-varying retail pricing. Under the TOU tariff, the customer can reduce the energy cost through an energy storage system (ESS). However, because this tariff is fixed for several months, the ESS operation does not truly reflect the wholesale market price, which could widely fluctuate. To overcome this limitation, this paper proposes an incentive pricing method in which the load-serving entity (LSE) gives the incentive pricing signal to the customers with ESSs. Because the ESS charging schedule is determined by the customer through ILC, a bilevel optimization problem that includes the customer optimization problem is utilized to determine the incentive pricing signal. Further, the bilevel optimization problem is reformulated into a one-level problem to be solved by an interior point method. In the proposed incentive scheme: (1) the social welfare increases and (2) the increased social welfare can be equitably divided between the LSE and the customer; and (3) the proposed incentive scheme leads the customer to voluntarily follow the pricing signal.

Risk Assessment of Distribution Networks Considering the Charging-Discharging Behaviors of Electric Vehicles

Electric vehicles (EVs) have received wide attention due to their higher energy efficiency and lower emissions. However, the random charging and discharging behaviors of substantial numbers of EVs may lead to safety risk problems in a distribution network. Reasonable price incentives can guide EVs through orderly charging and discharging, and further provide a feasible solution to reduce the operational risk of the distribution network. Considering three typical electricity prices, EV charging/discharging load models are built. Then, a Probabilistic Load Flow (PLF) method using cumulants and Gram-Charlier series is proposed to obtain the power flow of the distribution network including massive numbers of EVs. In terms of the risk indexes of node voltage and line flow, the operational risk of the distribution network can be estimated in detail. From the simulations of an IEEE-33 bus system and an IEEE 69-bus system, the demonstrated results show that reasonable charging and discharging prices are conducive to reducing the peak-valley difference, and consequently the risks of the distribution network can be decreased to a certain extent.

Beyond ‘Dieselgate’: Implications of unaccounted and future air pollutant emissions and energy use for cars in the United Kingdom

The ‘Dieselgate’ emissions scandal has highlighted long standing concerns that the performance gap between ‘real world’ and'official’ energy use and pollutant emissions of cars is increasing to a level that renders ‘official’ certification ratings virtually ineffective while misleading consumers and damaging human health of the wider population. This paper aims to explore the scale and timing of historic and future impacts on energy use and emissions of the UK car market. To achieve this aim it applies a bespoke disaggregated model of the transport-energy-environment system to explore the impacts of retrospective and future policy scenarios on the UK car market, trade-offs between greenhouse gas and air quality emissions, and fuel use and associated tax revenues. The results suggest that the impacts on human health of ‘real world’ excess NOX emissions in the UK are significant. Future ‘low diesel’ policies can have significant air quality benefits while showing few (if any) carbon disbenefits, suggesting future car pricing incentives may need to be rebalanced taking more account of effects of local air pollution. Car pricing incentives are however unlikely to transform the car market without additional market changes, industry push, infrastructure investment and policy pull aimed at cleaner, lower carbon vehicles.

Estimating the Supply Response of Maize in South Africa: A Nerlovian Partial Adjustment Model Approach

ABSTRACTMaize is the most important crop in South Africa, being both the major feed grain for livestock and the primary staple food crop for the majority of the population. Farmers’ production decisions regarding maize and their response to policy incentives are critical for national food security and regional trade. The aim of the study was to estimate the supply response of the South African maize sector to price and non-price incentives. A Nerlovian partial adjustment model was applied to historical time series data of area under maize cultivation, measured in hectares spanning from 1980-2012 to determine the supply response. Results indicate a short-run price elasticity of 0.24 and a long-run price elasticity of 0.36, signifying that maize farmers are less sensitive to price changes than non-price incentives. The results confirm that non-price incentives such as rainfall and technology seem to have more effect on maize supply than price incentives in South Africa. Given the findings, the study recommends policies and programmes that focus more on non- price incentives, such as technology and infrastructure development, investment in irrigation and research services, as a means of stabilising maize production in South Africa.

Salvaging the European Carbon Market

Thanks to the ets, the largest carbon market in the world has been created. Whilst pursuing ambitious objectives, this market has been subject to a considerable number of imperfections. The success of the ets is dependent upon a progressive reduction of the individual emissions allocated by the Member State to the various installations, which implies first and foremost a sparing allocation of allowances with the aim of encouraging undertakings to invest in less polluting technologies. However, since the outset, the carbon market has suffered from an over-abundance of allowances granted by the Member States. Due to the unsatisfactory nature of the temporary freeze of allowances, the eu lawmaker sought to re-establish an incentive price signal by adopting decision (eu) 2015/1814 of 6 October 2015, which created the msr that will become operational in 2019.

Does environmental certification in coffee promote "business as usual"? A case study from the Western Ghats, India.

Conservation initiatives are designed to address threats to forests and biodiversity, often through partnerships with natural-resource users who are incentivized to change their land-use and livelihood practices to avoid further biodiversity loss. In particular, direct incentives programmes that provide monetary benefits are commended for being effective in achieving conservation across short timescales. In biodiversity-rich areas, outside protected areas, such as coffee agroforestry systems, direct incentives, such as certification schemes, are used to motivate coffee producers to maintain native tree species, natural vegetation, restrict wildlife hunting, and conserve soil and water, in addition to encouraging welfare of workers. However, despite these claims, there is a lack of strong evidence of the on-ground impact of such schemes. To assess the conservation importance of certification, we describe a case study in the Western Ghats biodiversity hotspot of India, in which coffee growers are provided price incentives to adopt Rainforest Alliance certification standards. We analyse the conservation and social outcomes of this programme by studying peoples' experiences of participating in certification. Despite high compliance and effective implementation, we find a strong case for the endorsement of 'business as usual' with no changes in farm management as a result of certification. We find that such 'business as usual' participation in certification creates grounds for diminishing credibility and local support for conservation efforts. Working towards locally relevant conservation interventions, rather than implementing global blueprints, may lead to more meaningful biodiversity conservation and increased community support for conservation initiatives in coffee landscapes.

Small price incentives increase women's access to land titles in Tanzania

We present results from a field experiment using price incentives to address two obstacles to women's access to formal land ownership. First, the price of formal land titles is often prohibitive, restricting access for both men and women. Second, when formal titles are issued, men are recorded as the sole owners of household land in the vast majority of cases. In theory, these problems may be in tension: requirements to grant women equal ownership may reduce the overall household demand for titling. In practice, we find no such trade-off: when residents of low-income, unplanned settlements in Dar es Salaam were offered price discounts for formal land titles, demand rose significantly. Price elasticity of demand was unchanged when price discounts were conditional on registering a woman as (co-)owner of household land. Furthermore, conditional price discounts achieved near gender parity in land ownership.

Traceability and transaction governance: a transaction cost analysis in seafood supply chain

ABSTRACTAlmost all Vietnamese seafood companies use paper-based traceability systems. Small-scale characteristics of the fisheries industry have affected the way in which seafood firms manage transactions in their supply chains. The implementation of traceability systems leads to an increase in asset specificity (71%), a decrease in transaction uncertainty (60%) and low variation in the frequency of transactions (7%). The introduction of traceability has also increased transaction costs (information costs, negotiating costs, system management costs and control supplier activity costs). Price incentives, purchasing and production rule enforcement and liability serve as proxies for the vertical relationship, which has shown an increase in variation.

Optimization of energy generation using landfill biogas

Municipal solid waste landfills (MSWL) generate large quantities of landfill gas (LFG) that can be converted to renewable energy. But, the economics of such operation are not adequately attractive and in most of the MSWL, worldwide, the LFG is flared to the atmosphere unused, contributing to the global warming. In this study, a Linear Programming (LP) Model was developed and used to evaluate the economic return of LFG power generation from a landfill − HAGAL MSWL, aiming to improve the economic viability and the ways to maximize the economic benefits resulting from the conversion of LFG to electricity. The analysis indicated that as compared to a continuous power generation, the adoption of an intermittent power generation regime, in which the LFG is stored to limit the operation of the energy center to the hours of the day when the power demand reach its peak, the economic return is significantly higher by 20%. Due to a price incentive offered to electricity producers through a form of Time Load Tariff (TLT), in which the sale price of power fluctuates during the day of the week and season, it was demonstrated that the return on investment (ROI) justified the additional cost incurred for the storage of the LFG. The LP optimization model was found to be a useful tool for the evaluation and maximization of the ROI of power generation from a largely un-tapped renewable source which is readily available and abundant.

Exploring the Obstacles to Implementing Economic Mechanisms to Stimulate Antibiotic Research and Development: A Multi-Actor and System-Level Analysis.

This Article examines the potential stakeholder-related obstacles hindering the implementation of mechanisms to re-ignite the development of novel antibiotics. Proposed economic models and incentives to drive such development include: Public Funding of Research and Development ("R&D"), Tax Incentives, Milestone Prizes, End Payments, Intellectual Property ("IP") and Exclusivity Extensions, Pricing and Reimbursement Incentives, Product Development Partnerships ("PDPs"), and the Options Market for Antibiotics model. Drawing on personal experience and understanding of the antibiotic field, as well as stakeholder consultation and numerous expert meetings within the DRIVE-AB project and Uppsala Health Summit 2015, the Authors identify obstacles attributable to the following actors: Universities and Research Institutes, Small and Medium-sized Enterprises ("SMEs"), Large Pharmaceutical Companies, Marketing Approval Regulators, Payors, Healthcare Providers, National Healthcare Authorities, Patients, and Supranational Institutions. The analysis also proposes a characterization and ranking of the difficulty associated with implementing the reviewed mechanisms. Public Funding of R&D, Pricing and Reimbursement Incentives, and PDPs are mechanisms expected to meet highly systemic barriers (i.e., obstacles across the entire antibiotic value chain), imposing greater implementation challenges in that they require convincing and involving several motivationally diverse actors in order to have much effect.

Contractual Farming Arrangements, Quality Control, Incentives, and Distribution Failure in Kenya's Smallholder Horticulture: A Multivariate Probit Analysis

ABSTRACTWith the rapid growth of horticultural value chains, the use of contractual farming arrangements, strategies of quality control (farm audits/crop rejections), pricing incentives, and distribution efficiencies (crop collection arrangements) are increasingly breaking market barriers, for example, private standards, certification, traceability, and supply reliability in developing countries. Cognizant of market access, farm produce value, sustainable production, and reduction of postharvest losses, this paper investigated whether farm size, schooling, producer price, farm visits, and social capital networks condition these strategies. The results show that use of written contracts is conditioned by farm sizes, more extension, and number of producer groups (PGs) while farm certification is positively predicted by farm sizes, more extension, number of sellers in the village and seasons with the same buyer. However, certification is less responsive to producer prices. Crop rejections are predicted to be less depending on a farmer's education, number of PGs, and the producer price but are more likely to increase the more the number of sellers. Further, the results show that a forward pricing incentive is highly correlated with higher producer prices, more extension, and number of seasons with the same buyer. Finally, uncollected produce at harvest is likely to decrease with farm sizes, more education and extension, higher producer price, number of PGs, and seasons with the same buyer but is more likely to increase the higher the number of sellers. Implications are made. [EconLit citations: L14; Q13].

Cost-Optimal Consumption-Aware Electric Water Heating Via Thermal Storage Under Time-of-Use Pricing

Time-of-use electricity pricing is touted as one of the solutions toward optimal load distribution in the future of smart grid. However, the benefits of such an approach are limited as human electricity usage can often be described as inelastic in nature, or not sensitive to pricing in economic theory. Water heating constitutes one of the largest components of such usage. This paper proposes technology to enable residential water heating to be converted from an inelastic to an elastic demand, which would respond to pricing incentives. This is accomplished by utilizing consumer hot water use patterns combined with thermal storage to calculate a user-specific temperature profile. Results demonstrated that such an approach could not only reduce electrical water heating costs significantly and allow for realization of large-scale grid benefits, but also improve customer experience as thermal storage capability would enable more hot water to be delivered at times of peak consumption.

Buffer capital in microfinance institutions

The objective of the study is to examine the drivers of the buffer capital held by microfinance institutions, with particular emphasis on competition and its asset side effects, specifically loan portfolio quality and lending approaches. We also investigate whether competition and its asset side effects depend on whether the microfinance institution collects deposits or not or whether the institution is better capitalized or not. Except for deposit-taking MFI subsample, findings provide supportive evidence for the competition's pricing and monitoring incentive effects. Loan portfolio quality and MFI size are negatively related to buffer capital. Moral hazard in microcredit markets is likely to affect equity levels held by microfinance institutions. At the lower quantile (undercapitalized MFIs), market concentration is associated with larger buffer capital. Findings are robust to alternative measures of buffer capital and competition.

Optimal contracting structure between cellulosic biorefineries and farmers to reduce the impact of biomass supply variation: game theoretic analysis

AbstractThere is considerable year‐to‐year variability in the supply of cellulosic biomass used in the production of cellulosic biofuels, yet strategies to mitigate these variations in biofuel development are not well understood. Biorefineries and farmers venturing into the cellulosic biofuel industry will require biomass supply and contracting strategies that can minimize the impact of these large variations. Some studies have proposed biomass pre‐treatment and storage to address biomass supply variations. Other studies have used transportation modeling approaches to manage supply variations and select the optimal location of a cellulosic biorefinery. However, storage, pre‐treatment, and similar engineering approaches lead to higher costs and have other limitations such as additional infrastructural requirements. There is a gap in understanding how contracting strategies between biorefineries and the biomass suppliers (farmers) can reduce the risks with biomass supply variations. In this study, the contracting structure between biorefineries and biomass suppliers is studied under different market structures for the US Corn Belt. A theoretical framework is then developed to use contracting strategies for mitigating the impact of biomass supply variations. First, the trade‐offs between intricately linked components of biomass cost, such as biomass transport, biomass price (incentive) to suppliers, variation in biomass supply, biorefinery size, and alternative feedstock availability are examined. Next, an optimal contracting structure is developed between biorefineries and biomass suppliers using game theoretic analysis. Results show that both the impact of biomass supply variations and the overall biomass cost can be significantly reduced through the use of the optimal contracting strategy between biorefineries and suppliers. © 2016 Society of Chemical Industry and John Wiley & Sons, Ltd

Costs, returns and profitability of soybean cultivation in India: Trends and prospects

Soybean has emerged as a leading oilseed crop in India which accounts for 55.6 per cent of area under kharif oilseeds and 38 per cent of area under total oilseeds during TE 2012–13, 42.5 per cent of total oilseeds production, and contributing to 28.6 percent of the total vegetable oils production in the country. Input use, cost, returns and profitability of soybean cultivation for major soybean growing states was analysed by using CACP data. The results revealed that farmers use higher than recommended seed rate and lower than advised fertilizers and manures, impacting the yield realisation by the farmers. The operational cost of soybean cultivation has increased gradually indicates that soybean cultivation is turning capital intensive. Growth in real cost of cultivation of soybean outpaced the growth in real returns from soybean in all major states. The decrease in price realised was faster than the real cost of production, indicating declining profitability of soybean cultivation, though started improving recently. The inverse relationship in cost of production and productivity of soybean was observed in major growing states. As the productivity of crop is the major factor in reducing the relative cost of production government should focus on the non-price incentives to increase the productivity and also to reduce the cost of cultivation, apart from price incentives.

Factors and barriers affecting the purchase of electric vehicles in the Italian market

Market orientation is an essential requirement to implement a total quality management approach in a production system, and in turn to improve the quality of products. This is especially true for the automotive industry where customers' preferences change relatively quickly over time, and purchase trends are recently affected by the introduction of electric vehicles. In this paper, an electric vehicle market analysis concerning with the study of automotive customers' needs is examined. The main economic, qualitative/technical, and environmental/practical factors, incentives, and barriers that influence Italian customers' motivations, when purchasing a vehicle are evaluated after a survey. This study also attempts to ascertain which factors could encourage the adoption of electric vehicles. The majority of respondents agreed that purchase price, tax and monetary incentives, fuel price, fuel consumption, reliability, safety in case of collision, and greenhouse gas emissions are the main factors considered before purchasing a new vehicle.

The Government Incentive Regulation Model and Pricing Mechanism in Power Transmission and Distribution Market

The power transmission and distribution (T&D) market’s natural monopoly and individual information have been the impediment to improving the energy efficiency in the whole T&D market. In order to improve the whole social welfare, T&D market should be controlled by government. An incentive regulation model with the target of maximizing social welfare has been studied. A list of contracts with transferring payment and quantity of T&D are given to motivate the corporation to reveal the true technical parameter and input the optimal investment. The corporate revenue, optimal investment, and effort are proved to depend on its own technical parameter. The part of incentive regulation model ends with the optimal pricing mechanism of T&D market. At the end of this paper, we give a numerical example to explain our research and confirm its function graphically.

Testing the existence of transfer pricing in Vietnam

Transfer pricing or the manipulation of transfer prices is to set the price of intra-firm transactions different from market prices in order to shift incomes from high-tax locations to low-tax ones. Hence, a multinational corporation can decrease its global tax burden. The study applies the model of transfer pricing incentive of Swenson (2001) by employing generalised method of moments (GMMs) to examine the effect of income tax rate and tariff rates on the setting of transfer prices in ten commodity groups of multinationals operating in Vietnam during the period of 2008-2013. The study concludes a positive correlation between changes of transfer pricing incentives and changes of reported transfer prices. Furthermore, the findings also show that increases in Vietnamese income tax rate lead to decreases in income tax rate in the headquartered country of parent firms, or Vietnamese tariff rate. Additionally, the level of reported transfer prices of imports from the parent firm to its affiliates in Vietnam will increase the majority of investigated commodity groups (except motor vehicles).