Chapter I. Introduction
Chapter 6. Summary and Conclusion
So far w e have review ed the Japanese operating case of Top-runner system and som e fundam ental problem s of Top-runner system in the view of theoretical perspectives. The theoretical m odels review ed in this study show that the Top-runner system having characteristics of yardstick com petition has a w eakness in allow ing tacit collusion am ong regulated com panies to prevent investm ents in energy efficiency im provem ent. W e found also that an appropriate com pensation schem e can reduce the possibility of collusion am ong regulated com panies even under Top-runner system . Therefore, the follow ing should be paid attention in case of the introduction of Top-R unner system .
First, w hen selecting the products regulated by Top-R unner system , w e need to select the products w hich has less possibility of tacit collusion. Especially, in the m arket w here a sm all num ber of com panies are participating and their m arket shares are high, collusion m ay easily occur. Therefore, w hen w e include these products under Top-Runner schem e, w e should try to reduce the possibility of collusion by preparing various supplem entary m easures.
Second, in an atm osphere w here bilateral Free Trade
A greem ents are increasing, Top-runner system m ay cause international trade disputes. A s m easurem ent m ethod of energy efficiency and efficiency goals are different in various country, Top-runner system can be regarded as a new trade barrier. In this view , it m ay be a desirable option to apply the Top-runner schem e firstly to the products for w hich dom estic com panies have the highest m arket share. In addition, it is necessary to m ake an effort so that the m easurem ent m ethods of energy efficiency, the efficiency goals m ay m easure up to the international standards.
Third, an absolute energy efficiency evaluation schem e can help deter the tacit collusion am ong com panies. In case that targeted com panies m utually collude to restrain energy efficiency technology developm ent, the absolute efficiency index w ill decline. Thus, provided that absolute efficiency standards such as "energy efficiency grade system " currently in force in K orea are com plem ented, the possibility of collusion can be reduced.
Fourth, if appropriate com pensation schem es com plem ent the Top-runner system , the possibility of collusion am ong regulated com panies can be reduced. Thanks to a theoretical inquiry into Top-runner system , w e can find that the possibility of tacit collusion am ong regulated com panies m ay be reduced through a proper rew ard schem e. H ow ever, it is necessary to discuss in m ore detail how to design an appropriate
com pensation schem e. For exam ple, even though incentive schem es w hich com pensates the com panies producing top-runner product can reduce the possibility of collusion, it can lead to som e equity problem s. If com panies recover their additional investm ent cost for energy efficiency im provem ent by raising their product prices, consum er surplus w ill be reduced. If so, the indirect com pensation plans providing additional incentive for consum ers w ho purchase Top-R unner products can be m ore desirable.
Therefore, incentive schem es should be designed in consideration of the dem and conditions and the com petitive structure in the m arket. If the products concerned are relatively hom ogeneous and their prices are the m ost im portant source of the com panies' com petitive advantage, the regulated com panies w ill have difficulty in recovering the cost of investing in energy efficiency im provem ent by increasing prices. In this case, the direct com pensation to the com panies m ay be m ore effective.
B ut, if the products are sufficiently differentiated, the com panies can som ew hat control the prices of their products and they can relatively easily pass their cost onto consum ers. In this case, com pensation to consum ers w ill be m ore effective than direct com pensation to producers.
Fifth, several theoretical m odels give an alarm that Top-R unner system m ay create the hold-up problem and shrink industry-specific investm ents. Therefore, governm ent should get
rid of any concern about the hold-up problem through the legislation on essential regulatory values such as target products and target periods. In addition, governm ent should provide support to R& D w hich influences energy efficiency of the w hole industry in order to prevent the decrease of industry-specific investm ents.
Last but not least, it is consum ers that select products in the m arket. In order that energy efficiency m ay be an im portant criterion for consum er choice, econom ic benefits for consum ers should be high enough for them to buy top-runner products, H ow ever, if consum ers are deprived of their avoided energy cost accrued by using energy efficient products because of distorted energy prices, they are reluctant to purchase the energy efficient products. Therefore, above all, m ore should be done first to m ake conditions to let consum ers realize that energy efficiency is an im portant factor in selecting products through clear energy price signal. In the end, the rationalization of energy prices has a close correlation w ith the effectiveness of energy efficiency im provem ent policies. Therefore, in advance of the introduction of Top-runner system , the governm ent should be aw are of the im portance of the change of consum er behavior through the price signal and should m ake an effort to create a favorable environm ent in w hich the price signal w orks properly.