Stefano Clò

Emissions Trading and the Polluter-Pays Principle: Do Polluters Pay under Grandfathering?

Emissions trading is becoming increasingly popular in environmental law. Allowances to trade emissions can either be auctioned off or handed out free of charge by means of grandfathering. Although grandfathering is frequently used in emissions trading schemes, it is a popular view in the economic and legal literature that grandfathering is inconsistent with the polluter-pays principle. We come to a different, more nuanced view. The question of whether polluters pay under grandfathering depends on how the polluter-pays principle is interpreted. We present a taxonomy of interpretations. Based on an efficiency interpretation of the principle, consistency is demonstrated by emphasizing the economic impact of the opportunity costs of gratis allowances and the lump sum nature of the subsidy that is inherent to grandfathering. Inconsistency can only be claimed based on an equity interpretation of the polluter-pays principle. Allocating allowances free of charge means that polluting firms receive a capital gift making their shareholders richer, which may be perceived as unfair. We draw two conclusions. First, contrary to what some have claimed, grandfathering is compatible with an efficiency interpretation of the polluter-pays principle. Second, only auctioning is consistent with an extended form of this principle. Auctioning ensures not only that pollution costs are internalized (efficiency), but also that producers buy their allowances before they pass on those costs to consumers (equity).

Public Enterprises in the Market for Corporate Control: Recent Worldwide Evidence

This paper analyzes deals involving private and public enterprises, i.e. State-Owned Enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations of SOEs, public enterprises acquiring private ones (public-private deals), private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirer and target are SOEs). We study whether the pre-deal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr (Bureau Van Dijk), which provides information on completed deals worldwide and Orbis, a firm-level dataset (also implemented by BvD). Some results of previous literature on M&As performed by private firms (˜the inefficiency management hypothesis) are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquirers, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of government ownership in the contemporary global economy.

Publicization versus Privatization: Recent Worldwide Evidence

This paper analyzes deals involving private and State-owned enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations, publicizations, private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirers and targets are SOEs). We study whether the pre-deal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr, which provides information on completed deals worldwide and Orbis, a firm-level dataset. The empirical analysis suggests the following. Some results of previous literature on M&As performed by private firms (‘the inefficiency management hypothesis’) are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquires, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of ownership.

Policy Options to Support the Carbon Price within the European Emissions Trading System: Framework for a Comparative Analysis

This paper develops a methodology aimed at assisting policymakers in selecting the optimal policy option to support the carbon price within the ETS. We consider different policy proposals that can support the carbon price either by intervening on the ETS cap (-30%, set-aside, carbon central bank, long-term reduction targets) or directly on the carbon price (national and EU price floor). In detail, each proposal is examined according to six criteria that allow us to capture and compare their economic, regulatory and procedural implications, so as to determine which options would not only be feasible but also most effective. We conclude that the introduction of a price stabilization mechanism allowing for a reversible adjustment of the ETS cap according to clear, pre-defined rules by an independent authority such as a carbon central bank would be the most effective option to reduce not only the current shortcomings of the ETS but also reinforce the mechanism to avoid similar problems in the future. The establishment of a EU-wide price floor would represent a second-best solution. The worst options appear to be those involving an overall increase in target reduction to 30% and a price floor in its national version, as currently implemented in UK. Finally, we conclude that the setting of post-2020 targets is not a mutually exclusive option, and could be adopted in any case to increase the regulatory certainty of the system.

Italian state-owned enterprises after decades of reforms: Still public?

The present paper analyzes the top ten Italian state-owned enterprises (SOEs) over the period 2004-2013, after both their corporate organization and their markets have been deeply reformed. We question whether SOEs’ strategies are more profit or public oriented. The authors find that, on average, the management and performance of the Italian SOEs has improved and it holds the comparison with private and public European industry peers. Still, remarkable divergences persist among Italian in terms of performance and orientation towards markets or public values, largely depending on the intensity of the reforms they went through. Listed SOEs operating in liberalized markets are largely profitable and distribute dividends. They have expanded their business internationally, though cross-border MA they provide universal services, they often incur in economic losses, which are partly covered by taxpayers.

The Impact of Solar Penetration on Solar and Gas Market Value: An Application to the Italian Power Market

We assess the impact of solar penetration in the Italian wholesale electricity market on the market value of solar with respect to gas sources, measured as the ratio between the relative price they respectively earn and the average daily electricity price (value factor). We find that, on average, an increase of solar generation has a negative impact on the price earned by solar producers, thus causing a marginal departure from the grid parity condition. The relation between solar production and its market value is not constant over the years, while it depends on the degree of solar penetration. It is positive for very low levels of solar production while, as production increases, its marginal impact on the solar market value decreases and eventually becomes negative. An opposite relation is found when looking at the Gas market value. As solar displaces gas mainly during the peak-price hours, an initial solar penetration reduces the gas market value. However, as the solar share further increases, gas producers adapt their biding strategies. They switch production from the peak to the off-peak hours, where they exploit their temporary market power to increase the off-peak price. As a result, the relative price earned by gas producers is higher than the average daily price, increasing their market value with respect to renewable sources.

Assessing the EU ETS Effectiveness in Reaching the Kyoto Target: An Analysis of the Cap Stringency

The purpose of this article is to contribute with new insight to the widespread debate aimed at assessing the Emissions Trading Scheme (ETS) effectiveness in promoting emissions reduction. A theoretical benchmark consistent with the Polluter Pays Principle is determined to assess the ETS cap stringency and to evaluate if emissions tradable permits have been over-allocated by national and European authorities. This assessment clarifies how the emissions reduction burden deriving from the Kyoto Protocol ratification has been divided between ETS and non-ETS sectors. This analysis highlights to which extent Member States effectively rely on the ETS to comply with their Kyoto commitment and which inefficiencies emerge under permits over-allocation: namely cross-subsidization from non-ETS to ETS sectors, national subsidy to the ETS sectors and distortion of competition.

How do research intensive systems emerge in less developed areas? The case of mechatronics in the Italian southern region Apulia

Regional innovation systems (RISs) are increasingly emerging in less developed areas. Based on the case study of the mechatronic cluster in the Italian southern region, Apulia, this paper analyses how institutions have managed to promote the establishment of a RIS in disadvantaged areas. Through a longitudinal analysis over more than half a century, the Apulian case study shows that the creation of this RIS in less developed areas is the result of a dynamic process characterised by a multi-level governance, initially promoted by the central government through a top-down logic, and then integrated by action of local actors through a bottom-up approach. A key role is played by the regionalisation of innovation policies and by the strategic action of regional public institutions to promote the interaction among enterprises and universities. Our analysis highlights that several ingredients should simultaneously occur for a regional innovation policy to be effective. Any regional innovation strategy significantly lacking one of these core pre-conditions and ingredients is risky. Policy-makers should carefully study the opportunities and challenges arising from local contexts before embarking in ambitious place-based innovation strategies.

Public Enterprises in a Global Perspective in the Last Decade

The issue of public enterprises, especially those operating on an international scale, is gaining increasing attention. This paper evaluates the performance of contemporary public enterprises. We first identify public enterprises according the OECD approach, when the control of the public owner is greater than 50% (Christianen 2011, Kowalski et al. 2013), and we analyze about 1,000 listed companies (private and public) extracted from the Forbes Global 2000 - which lists the largest companies in the world - considering some performance indicators (ROS, ROA, ROE); size indicators, and their sector and country of origin. Next, we move to analyze the behavior of public and private enterprises which are active in the market for corporate control (mergers and acquisitions, M&As). In this second step, we adopt a more flexible definition of public enterprise, as we consider to be public every firm where the top shareholder is a public institution. According to Musacchio and Lazzarini (2014), this approach allows to take into account different types of contemporary public enterprises. By combining data and information reported by Orbis and Zephyr (BVD) we select only the M&As for which it is possible to determine the proprietary nature of the acquirer in the year before the deal, and where pre-deal economic data on firm performance are simultaneously available for both the acquirer and the acquired company. Our final sample is composed of 25,322 deals, of which 2,488 are performed by a public acquirer. Both the analysis of the performance of large companies on a global scale, and the analysis of M&A deals, confirm that public enterprises are currently active in the global market arena, and they show a comparable performance with private ones, and even higher in some specific sectors. The concerns about market distortions determined by contemporary public enterprises do not seem to be supported by the empirical evidence.