ISBN: 379081539X
TITLE: Technology, Innovation and Policy
AUTHOR: Ostertag
TOC:

Brief contents
Subject and research questions 3
1 The debate on no-regret potentials - origin, context, issues 5
1.1 The origin: climate change and policy responses 5
1.2 The relevance of no-regret potentials beyond climate policy 10
1.3 Key issues in the debate on no-regret potentials 11
1.4 Focus and structure of the thesis 15
2 The issues of the no-regret controversy 21
2.1 Definition of "no-regret" potentials 21
2.2 Characterisation of the conflicting views 28
Preliminary remarks 37
3 The standard theory of market failure 43
3.1 Outline of theoretical concepts 44
3.2 Existing evidence on market failures related to energy saving measures 60
3.3 Conclusions on the standard theory of market failure 65
Annex to Chapter 3 71
4 Transaction cost economics 77
4.1 Transaction costs and market failure 78
4.2 Outline of transaction cost economics 80
4.3 Review of empirical transaction cost research 88
4.4 Conclusions about transaction costs 93
Annex to Chapter 4: Key questions based on the TCE approach 96
5 Investment appraisal 101
5.1 Standard theory of investment 101
5.2 Real option values 111
5.3 Review of investment appraisal methods in "no-regret" studies 124
5.4 Conclusions on investment appraisal 135
Annex to Chapter 5 140
6 Complementary perspectives on the no-regret potential 145
6.1 Dynamic aspects of market failure 145
6.2 Implications for policy evaluation 156
6.3 Synopsis of further linkages between principal theoretical elements 168
6.4 Conclusions on complementary aspects 171
Annex to Chapter 6: Key questions concerning complementary perspectives 173
7 Theoretical conclusions - A typology of no-regret potentials 177
7.1 Synopsis of phenomena and causes of no-regret potentials 179
7.2 Conclusions for the empirical re-assessment of no-regret potentials 185
Preliminary methodological remarks 189
8 Case study of electric motors 195
8.1 Review of an engineering study about electric motors 198
8.2 Re-evaluation at the level of phenomena of no-regret potentials 207
8.3 Re-evaluation at the level of causes 229
8.4 Policy initiatives for the promotion of HEMs 233
8.5 Summary of the re-evaluation results 240
Annex to Chapter 8 243
9 Case study of "Contracting" 253
9.1 Contracting from the perspective of the no-regret advocates 255
9.2 Re-evaluation of "first level" phenomena and Causes 266
9.3 Contracting as an autonomous solution (2nd level) 283
9.4 Summary and policy implications of the re-evaluation results 308
Annex to Chapter 9 318
10 Generalisation of case study results 327
10.1 Discussion of the case study findings 327
10.2 Possibilities for aggregation by means of the Panta Rhei model 334
10.3 Conclusion on the aggregation of no-regret potentials 353
Annex to Chapter 10: Key features of the model "Panta Rhei" 355
General conclusions 361
Annex 371
List of abbreviations 373
List of tables 375
List of figures 379
References 381
Table of contents
Subject and research questions 3
1 The debate on no-regret potentials - origin, context, issues 5
1.1 The origin: climate change and policy responses 5
1.1.1 International and supranational policy responses 7
1.1.2 German climate policy background 9
1.2 The relevance of no-regret potentials beyond climate policy 10
1.3 Key issues in the debate on no-regret potentials 11
1.4 Focus and structure of the thesis 15
2 The issues of the no-regret controversy 21
2.1 Definition of "no-regret" potentials 21
2.1.1 The micro-level of costs and benefits 22
2.1.2 The level of energy system analysis 23
2.1.3 The level of the national economy 26
2.2 Characterisation of the conflicting views 28
2.2.1 No-regret potentials within the framework of the transformation curve 28
2.2.2 No-regret potentials within the framework of isoquants 29
Preliminary remarks 37
3 The standard theory of market failure 43
3.1 Outline of theoretical concepts 44
3.1.1 Externalities 44
3.1.2 Decreasing average costs and market concentration 48
3.1.3 Information deficiencies 52
3.1.3.1 Quality ignorance and information asymmetries 53
3.1.3.2 Market solutions to information asymmetries 55
3.1.3.3 Ignorance of utility and prices 57
3.1.3.4 Uncertainty 59
3.2 Existing evidence on market failures related to energy saving measures 60
3.2.1 Existing evidence on external effects related to energy saving measures 60
3.2.2 Existing evidence on market failure following decreasing average costs 62
3.2.3 Existing evidence on information deficiencies related to energy saving measures 63
3.3 Conclusions on the standard theory of market failure 65
Annex to Chapter 3 71
A.1 Key questions related to market failure 71
A.1.1 Key questions related to externalities as a reason for market failure 7 1
A.1.2 Key questions related to market failure following decreasing average costs 72
A.1.3 Key questions on information deficiencies related to energy saving measures 72
A.1.3.1 Key questions related to asymmetric quality information 72
A.1.3.2 Key questions related to ignorance of utility and prices 74
A.1.3.3 Key questions related to the uncertainty of energy saving measures 75
A.2 Microeconomic background 76
4 Transaction cost economics 77
4.1 Transaction costs and market failure 78
4.2 Outline of transaction cost economics 80
4.2.1 Outline of the quantitative approach 81
4.2.2 Outline of the heuristic approach 82
4.2.2.1 Asset specificity 84
4.2.2.2 Uncertainty and opportunism 86
4.2.2.3 Frequency 87
4.3 Review of empirical transaction cost research 88
4.3.1 Exemplary empirical TCE research 88
4.3.2 Existing heuristic evidence of transaction costs related to energy saving measures 90
4.3.3 Existing quantitative evidence of transaction costs related to energy saving measures 91
4.4 Conclusions about transaction costs 93
Annex to Chapter 4: Key questions based on the TCE approach 96
A.1 Key questions from a market failure perspective 96
A.2 Key questions from a heuristic perspective 96
A.3 Key questions from a quantitative perspective 98
5 Investment appraisal 101
5.1 Standard theory of investment 101
5.1.1 Data for investment appraisal 102
5.1.2 Net present value and internal rate of return 104
5.1.3 Choosing the appropriate discount rate: the Capital Asset Pricing Model 105
5.1.4 Shortcomings of the standard concepts 109
5.2 Real option values 111
5.2.1 Outline of the theoretical concept 112
5.2.2 Alternative modes of operationalisation 118
5.2.3 Strengths and potential biases in real option valuation 122
5.3 Review of investment appraisal methods in "no-regret" studies 124
5.3.1 Underlying data on revenues and expenditures 125
5.3.2 Conventional investment appraisal criteria in no-regret studies 127
5.3.3 Evaluation of energy saving measures as real options 131
5.4 Conclusions on investment appraisal 135
Annex to Chapter 5 140
A.1 Key questions on investment evaluation 140
A.1.1 Verify and re-estimate data on cash flows 140
A.1.2 Re-assessment based on conventional investment criteria 141
A.1.3 Assessing the no-regret potential on the basis of real option theory 142
A.2 Treatment of taxes and depreciation in cash flow estimates 143
6 Complementary perspectives on the no-regret potential 145
6.1 Dynamic aspects of market failure 145
6.1.1 Results from preceding chapters 146
6.1.2 Complementary insights from the theory of diffusion 148
6.1.3 Existing evidence on dynamic market failures related to energy saving measures 153
6.2 Implications for policy evaluation 156
6.2.1 Evaluation of policy benefits and costs 157
6.2.2 Effectiveness of policy instruments 160
6.2.3 Review of policy evaluations related to the no-regret potential 163
6.3 Synopsis of further linkages between principal theoretical elements 168
6.4 Conclusions on complementary aspects 171
Annex to Chapter 6: Key questions concerning complementary perspectives 173
A.1 Key questions related to dynamic market failure 173
A.2 Key questions related to policy evaluation 175
7 Theoretical conclusions - A typology of no-regret potentials 177
7.1 Synopsis of phenomena and causes of no-regret potentials 179
7.2 Conclusions for the empirical re-assessment of no-regret potentials 185
Preliminary methodological remarks 189
8 Case study of electric motors 195
8.1 Review of an engineering study about electric motors 198
8.1.1 Motor electricity consumption patterns and determinants 198
8.1.2 Technical energy saving potentials 201
8.1.3 Economic energy saving potentials 201
8.1.4 Summary with respect to our typology 205
8.2 Re-evaluation at the level of phenomena of no-regret potentials 207
8.2.1 Verification and reestimation of the data on cash-flows 207
8.2.2 Investment appraisal criteria 209
8.2.2.1 Re-assessment of the conventional NPV 210
8.2.2.2 Assessment of the sequential NPV 216
8.2.3 (Re-) Evaluation of transaction costs 224
8.2.4 Interim results regarding the level of phenomena 228
8.3 Re-evaluation at the level of causes 229
8.3.1 Market failure related to information deficiencies 230
8.3.2 Diffusion failure 233
8.4 Policy initiatives for the promotion of HEMs 233
8.4.1 Policy design and effectiveness 234
8.4.2 Policy costs 236
8.5 Summary of the re-evaluation results 240
Annex to Chapter 8 243
A.1 Case study on motor use in firm B 243
A.1.1 Characteristics of motor stock in firm B 243
A.1.2 Summary of interview topics 243
A.2 Features of case study data base Ostertag, Landwehr, Thomas et al. 1998 244
A.2.1 List of interviewees for the market study 244
A.2.2 Summary of interview topics for the market study 245
A.3 Decision trees for the sequential NPV of optimal motor choice 247
9 Case study of "Contracting" 253
9.1 Contracting from the perspective of the no-regret advocates 255
9.1.1 Economic energy saving potential of residential heat contracting 258
9.1.2 Interpretation with respect to our typology 262
9.2 Re-evaluation of "first level" phenomena and causes 266
9.2.1 Verification of investment appraisal 266
9.2.2 Re-evaluation of transaction costs 272
9.2.3 Re-evaluation of 1st level causes of market failure 277
9.2.3.1 Evidence for causes of Type I and Type II 277
9.2.3.2 Evidence for causes of Type III 281
9.2.3.3 Evidence for causes of Type V 282
9.2.3.4 Conclusions about the 1st level causes of market failure 283
9.3 Contracting as an autonomous solution (2nd level) 283
9.3.1 Effectiveness of contracting 284
9.3.1.l Contracting as a remedy to X-inefficiencies 284
9.3.1.2 Contracting as a remedy to the ignorance of Utility 285
9.3.1.3 Contracting as a remedy to interferences with diffusion mechanisms 286
9.3.1.4 Contracting as a remedy to excessive capital costs 287
9.3.2 Transaction costs and cost-efficiency of contracting 290
9.3.2.1 Comparative heuristic aspects of transaction costs under contracting 290
9.3.2.2 Quantitative aspects of transaction costs under contracting 294
9.3.2.3 Impact of contracting on profitability beyond transaction costs 297
9.3.3 Evidence and remedies for causes of market failure at the 2nd level 301
9.3.3.1 Market failure related to standard energy service contracts 301
9.3.3.2 Information asymmetries on the quality of the contractor 302
9.3.3.3 Information asymmetries on the ex-post behaviour of contracting clients 304
9.3.3.4 Reinforcements of contracting as an autonomous solution 306
9.4 Summary and policy implications of the re-evaluation results 308
Annex to Chapter 9 318
A.1 Definition and critique of performance contracting 318
A.2 The energy saving potential of heat contracting in residential buildings (re-estimation) 320
A.3 Economic aspects of rental housing legislation 321
A.4 List of contracting projects for secondary analysis 323
A.5 List of interview candidates 323
A.6 Summary of interview topics 324
A.6.1 Topics of interviews with technical experts 324
A.6.2 Topics of interviews with contracting professionals 324
A.6.3 Topics of interviews in individual contracting projects 326
10 Generalisation of case study results 327
10.1 Discussion of the case study findings 327
10.1.1 Synopsis of results 328
10.1.2 Policy implications 331
10.1.3 From case studies towards more general results 332
10.2 Possibilities for aggregation by means of the Panta Rhei model 334
10.2.1 General characteristics and key equations 336
10.2.1.1 Energy demand in households 338
10.2.1.2 Energy demand in production 339
10.2.1.3 Capital stock turnover 340
10.2.2 "Cause"-based aggregated estimation of no-regret potentials 342
10.2.2.1 Price distortions of non-energy inputs to energy saving measures 344
10.2.2.2 X-inefficiencies on the side of the adopter 346
10.2.2.3 Mismatch of governance structures 346
10.2.3 Explicit technology choice 348
10.3 Conclusion on the aggregation of no-regret potentials 353
Annex to Chapter 10: Key features of the model "Panta Rhei" 355
A.1 Energy demand and related regression equations 355
A.1.1 Energy demand in households 356
A.1.2 Energy demand in production 358
A.2 Prices, demand and production 359
General conclusions 361
Annex 371
List of abbreviations 373
List of tables 375
List of figures 379
References 381
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