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Incentive regulation, productivity growth and environmental effects: the case of electricity networks in Great Britain

Electricity grid Financial incentive mechanisms Environmental impacts Economic growth Productivity Great Britain

This paper analyses the productivity growth of electricity transmission and distribution networks in Great Britain and how changes in incentive mechanisms have influenced the measured total factor productivity (TFP). It also examines the effects of quality of service and environmental targets on measured productivity growth. It is increasingly important that productivity measures adjust for the increasing regulatory pressure to reduce the wider societal impacts of the electricity sector and improve the quality of service. Failure to do so may mean that productivity growth may look slower than it actually is.

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Productivity Institute Working Paper 12