Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.2.MWEI
M. Weitzman
It is difficult to resolve the global warming free-rider externality problem by negotiating many different quantity targets. By contrast, negotiating a single internationally-binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing agents to internalize the externality. In this contribution I attempt to sketch out, mostly with verbal arguments, the sense in which each agent's extra cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing all other agents to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the paper could be centered on a more formal model, here the tone of the discussion resembles more that of an exploratory think piece directed to policy-makers and the general public.
{"title":"Internalizing the Climate Externality: Can a Uniform Price Commitment Help?","authors":"M. Weitzman","doi":"10.5547/2160-5890.4.2.MWEI","DOIUrl":"https://doi.org/10.5547/2160-5890.4.2.MWEI","url":null,"abstract":"It is difficult to resolve the global warming free-rider externality problem by negotiating many different quantity targets. By contrast, negotiating a single internationally-binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing agents to internalize the externality. In this contribution I attempt to sketch out, mostly with verbal arguments, the sense in which each agent's extra cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing all other agents to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the paper could be centered on a more formal model, here the tone of the discussion resembles more that of an exploratory think piece directed to policy-makers and the general public.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127626609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.2.DNEW
David Newbery and Michael Grubb
The UK Government has carefully designed a Capacity Mechanism to deliver reliable electricity. This paper criticises the determination of the amount to procure, and argues that the amount set for the first auction was excessive, particularly (but not exclusively) in ignoring the contribution from interconnectors. Too little attention was given to either the political economy or the option value aspects. Procuring too little raises fears of 'the lights going out', but over-procurement increases consumer costs; undermines renewables by transferring capped finance to fossil generators; and impedes the Single Market including by weakening the business case for interconnectors. Making more use of the demand-side and potentially available 'latent' capacity lowers risk and increases options allowing more capacity procurement to be deferred. Capacity markets are intended to address problems of 'missing money' in terms of energy-only market incentives to invest; but over-procurement risks exacerbating the underlying problem, whereas addressing market failures and missing markets, and properly accounting for interconnectors, reduces the underlying problem.
{"title":"Security of Supply, the Role of Interconnectors and Option Values : insights from the GB Capacity Auction","authors":"David Newbery and Michael Grubb","doi":"10.5547/2160-5890.4.2.DNEW","DOIUrl":"https://doi.org/10.5547/2160-5890.4.2.DNEW","url":null,"abstract":"The UK Government has carefully designed a Capacity Mechanism to deliver reliable electricity. This paper criticises the determination of the amount to procure, and argues that the amount set for the first auction was excessive, particularly (but not exclusively) in ignoring the contribution from interconnectors. Too little attention was given to either the political economy or the option value aspects. Procuring too little raises fears of 'the lights going out', but over-procurement increases consumer costs; undermines renewables by transferring capped finance to fossil generators; and impedes the Single Market including by weakening the business case for interconnectors. Making more use of the demand-side and potentially available 'latent' capacity lowers risk and increases options allowing more capacity procurement to be deferred. Capacity markets are intended to address problems of 'missing money' in terms of energy-only market incentives to invest; but over-procurement risks exacerbating the underlying problem, whereas addressing market failures and missing markets, and properly accounting for interconnectors, reduces the underlying problem.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"53 57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124658886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.2.GSHR
G. Shrimali, Gabriel Chan, Steffen Jenner, Felix Groba, Joe Indvik
Renewable portfolio standards (RPS) are the most common state-level policies for promoting renewable electricity in the United States. State RPS policies are heterogeneously designed, particularly with respect to their use of flexibility mechanisms that allow obligations to be met with renewable energy generated in other states. However, the renewable energy that is produced within an RPS-enacting state itself is of high political importance, making in-state renewable energy deployment an important evaluation metric for RPS policies. In this paper, we develop a novel dataset of state-level RPS policies and renewable energy deployment. We show that failing to effectively limit comparisons to similarly designed RPS policies may lead to the misperception that more stringent RPS policies do not necessarily lead to higher renewable deployment. We then show that after controlling for specific policy design features, states with more stringent RPS policies tend to have greater in-state renewable energy deployment. Specifically, we find that a 1 percentage point increase in the stringency of an RPS policy is associated with a 0.28-0.29 percentage point increase in the share of in-state renewable electricity capacity. Articulate modeling of policy variety has been largely lacking from past studies and is essential for accurate econometric analysis of heterogeneous energy policies.
{"title":"Evaluating Renewable Portfolio Standards for In-State Renewable Deployment: Accounting for Policy Heterogeneity","authors":"G. Shrimali, Gabriel Chan, Steffen Jenner, Felix Groba, Joe Indvik","doi":"10.5547/2160-5890.4.2.GSHR","DOIUrl":"https://doi.org/10.5547/2160-5890.4.2.GSHR","url":null,"abstract":"Renewable portfolio standards (RPS) are the most common state-level policies for promoting renewable electricity in the United States. State RPS policies are heterogeneously designed, particularly with respect to their use of flexibility mechanisms that allow obligations to be met with renewable energy generated in other states. However, the renewable energy that is produced within an RPS-enacting state itself is of high political importance, making in-state renewable energy deployment an important evaluation metric for RPS policies. In this paper, we develop a novel dataset of state-level RPS policies and renewable energy deployment. We show that failing to effectively limit comparisons to similarly designed RPS policies may lead to the misperception that more stringent RPS policies do not necessarily lead to higher renewable deployment. We then show that after controlling for specific policy design features, states with more stringent RPS policies tend to have greater in-state renewable energy deployment. Specifically, we find that a 1 percentage point increase in the stringency of an RPS policy is associated with a 0.28-0.29 percentage point increase in the share of in-state renewable electricity capacity. Articulate modeling of policy variety has been largely lacking from past studies and is essential for accurate econometric analysis of heterogeneous energy policies.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"138 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132675280","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.1.PJOS
P. Joskow
{"title":"The Shale Gas Revolution:Introduction","authors":"P. Joskow","doi":"10.5547/2160-5890.4.1.PJOS","DOIUrl":"https://doi.org/10.5547/2160-5890.4.1.PJOS","url":null,"abstract":"","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115924564","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.2.MALL
Maura Brown
This paper presents the first comprehensive estimates of the impact of U.S. biofuel subsidies on greenhouse gas emissions. Although U.S. support for biofuels is large and growing, the associated impact on greenhouse gas emissions remains unclear. The effect of biofuel subsidies on emissions is determined by the relative magnitudes of countervailing substitution and price effects. Regulators typically ignore the price effect of biofuel policies, and therefore do not fully account for market and climate impacts. We develop an economic simulation model of U.S. energy markets to estimate the impact of biofuel subsidies on greenhouse gas emissions from 2005 through 2009. The model represents end-use consumption of oil, natural gas, coal and electricity in four sectors. We find that the subsidies for ethanol increased greenhouse gas emissions, while those for biodiesel have an ambiguous effect. Thus, ethanol subsidies create a green paradox. Although ethanol has lower lifecycle greenhouse gas emissions than gasoline, the subsidies lower the market price of blended fuel, which increases overall fuel consumption and increase total greenhouse gas emissions. These findings question the suitability of using ethanol subsidies to achieve climate goals and highlight the importance of accounting for the price effect of biofuel policies.
{"title":"The Green Paradox of U.S. Biofuel Subsidies: Impact on Greenhouse Gas Emissions","authors":"Maura Brown","doi":"10.5547/2160-5890.4.2.MALL","DOIUrl":"https://doi.org/10.5547/2160-5890.4.2.MALL","url":null,"abstract":"This paper presents the first comprehensive estimates of the impact of U.S. biofuel subsidies on greenhouse gas emissions. Although U.S. support for biofuels is large and growing, the associated impact on greenhouse gas emissions remains unclear. The effect of biofuel subsidies on emissions is determined by the relative magnitudes of countervailing substitution and price effects. Regulators typically ignore the price effect of biofuel policies, and therefore do not fully account for market and climate impacts. We develop an economic simulation model of U.S. energy markets to estimate the impact of biofuel subsidies on greenhouse gas emissions from 2005 through 2009. The model represents end-use consumption of oil, natural gas, coal and electricity in four sectors. We find that the subsidies for ethanol increased greenhouse gas emissions, while those for biodiesel have an ambiguous effect. Thus, ethanol subsidies create a green paradox. Although ethanol has lower lifecycle greenhouse gas emissions than gasoline, the subsidies lower the market price of blended fuel, which increases overall fuel consumption and increase total greenhouse gas emissions. These findings question the suitability of using ethanol subsidies to achieve climate goals and highlight the importance of accounting for the price effect of biofuel policies.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121407670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Economics and Politics of Shale Gas in Europe","authors":"Chi Kong Chyong and David M. Reiner","doi":"10.5547/2160-5890.4.1.CCHY","DOIUrl":"https://doi.org/10.5547/2160-5890.4.1.CCHY","url":null,"abstract":"This is the author accepted manuscript. The final version is available from the IAEE via http://dx.doi.org/10.5547/2160-5890.4.1.cchy","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133230292","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.3.2.PDEA
P. Deane, J. Fitzgerald, L. M. Valeri, A. Tuohy, D. Walsh
a. Energy Policy and Modelling Group, Environmental Research Institute, University College Cork b. Economic and Social Research Institute, Dublin c. Department of Economics, Trinity College Dublin d. Electric Power Research Institute, Knoxville, TN e. Corresponding author: Economic and Social Research Institute; Whitaker Square, Sir John Rogerson’s Quay; Dublin 2; Ireland. laura.malaguzzivaleri@esri.ie; tel. +353 1 863 2000.
{"title":"Irish and British Electricity Prices: What Recent History Implies for Future Prices","authors":"P. Deane, J. Fitzgerald, L. M. Valeri, A. Tuohy, D. Walsh","doi":"10.5547/2160-5890.3.2.PDEA","DOIUrl":"https://doi.org/10.5547/2160-5890.3.2.PDEA","url":null,"abstract":"a. Energy Policy and Modelling Group, Environmental Research Institute, University College Cork b. Economic and Social Research Institute, Dublin c. Department of Economics, Trinity College Dublin d. Electric Power Research Institute, Knoxville, TN e. Corresponding author: Economic and Social Research Institute; Whitaker Square, Sir John Rogerson’s Quay; Dublin 2; Ireland. laura.malaguzzivaleri@esri.ie; tel. +353 1 863 2000.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131891611","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.2.JSTI
J. Stiglitz
The fundamental issues presented by climate change are first, that the global environment is a global public good and second, the question of how to share the burden of providing a better climate. Everyone would like to "free ride" on the efforts of others, but there is disagreement over who is free riding. The Kyoto approach, based on dividing up emission rights, has an inherent problem in that such rights could easily reach a monetary value of over a trillion dollars a year. The approach suggested here avoids any attempt at a grand solution to the fair allocation of these rights. A low-carbon economy could be achieved through the imposition of a moderate carbon price, which would raise substantial revenue and allow a reduction in other taxes, thereby keeping the deadweight loss small. Countries should be given flexibility in how they meet their obligations - whether through a carbon tax, a system of cap and trade, or even possibly certain regulatory mechanisms. But a fully voluntary agreement likely cannot include countries that export a significant amount of fossil fuel. A green fund financed by allocating say 20% of carbon revenues collected in developed countries could be used to implement "differentiated responsibilities."
{"title":"Overcoming the Copenhagen Failure with Flexible Commitments","authors":"J. Stiglitz","doi":"10.5547/2160-5890.4.2.JSTI","DOIUrl":"https://doi.org/10.5547/2160-5890.4.2.JSTI","url":null,"abstract":"The fundamental issues presented by climate change are first, that the global environment is a global public good and second, the question of how to share the burden of providing a better climate. Everyone would like to \"free ride\" on the efforts of others, but there is disagreement over who is free riding. The Kyoto approach, based on dividing up emission rights, has an inherent problem in that such rights could easily reach a monetary value of over a trillion dollars a year. The approach suggested here avoids any attempt at a grand solution to the fair allocation of these rights. A low-carbon economy could be achieved through the imposition of a moderate carbon price, which would raise substantial revenue and allow a reduction in other taxes, thereby keeping the deadweight loss small. Countries should be given flexibility in how they meet their obligations - whether through a carbon tax, a system of cap and trade, or even possibly certain regulatory mechanisms. But a fully voluntary agreement likely cannot include countries that export a significant amount of fossil fuel. A green fund financed by allocating say 20% of carbon revenues collected in developed countries could be used to implement \"differentiated responsibilities.\"","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114420699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-06-01DOI: 10.5547/2160-5890.4.1.RBAR
R. Baron, P. Bernstein, W. Montgomery, Sugandha D. Tuladhar
New technologies have transformed the U.S. from an importer of natural gas to a potential exporter. The commercialization of new exploration and production (E&P) technologies (hydraulic fracturing “fracking”, horizontal drilling, and 3D seismic) have created the opportunity to economically develop natural gas from shale formations on a very large scale. This new source of domestically produced natural gas has resulted in more abundant supplies and lower natural gas prices than were thought possible ten years ago when it was anticipated that the U.S. would need to import liquefied natural gas (LNG) to meet demand. Instead the U.S. is now in a position to export LNG and compete in the global LNG market.
{"title":"Macroeconomic Impacts of LNG Exports from the United States","authors":"R. Baron, P. Bernstein, W. Montgomery, Sugandha D. Tuladhar","doi":"10.5547/2160-5890.4.1.RBAR","DOIUrl":"https://doi.org/10.5547/2160-5890.4.1.RBAR","url":null,"abstract":"New technologies have transformed the U.S. from an importer of natural gas to a potential exporter. The commercialization of new exploration and production (E&P) technologies (hydraulic fracturing “fracking”, horizontal drilling, and 3D seismic) have created the opportunity to economically develop natural gas from shale formations on a very large scale. This new source of domestically produced natural gas has resulted in more abundant supplies and lower natural gas prices than were thought possible ten years ago when it was anticipated that the U.S. would need to import liquefied natural gas (LNG) to meet demand. Instead the U.S. is now in a position to export LNG and compete in the global LNG market.","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124290570","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-02-22DOI: 10.5547/2160-5890.4.1.EPHI
E. Phimister, Esperanza Vera‑Toscano, D. Roberts
Reducing the proportion of households defined as energy poor is an increasingly important policy objective. This paper uses longitudinal data to examine the level and dynamics of energy poverty in Spain, comparing the results to the level and dynamics of income poverty. Two alternative measures of energy poverty are used in the analysis—one based on energy expenditure, the other reflecting an individual’s perceptions of difficulty in heating their home, paying utility bills and housing condition. The proportion of those in income poverty and also in energy poverty is relatively low suggesting a need for specific as opposed to general measures to address the latter. In relation to the dynamics of energy poverty, at the aggregate level there is a substantially greater movement out of expenditure-based energy poverty relative to subjective energy poverty and income poverty while the rate of re-entry into poverty was highest for the subjective energy poverty measure. The analysis also provides evidence of duration dependence in energy poverty. The results show clearly how mitigating expenditure behaviour reduces the level and alters the dynamics of expenditure-based energy poverty compared to subjective energy poverty. The implications for designing, targeting and monitoring energy policy are consid-
{"title":"The Dynamics of Energy Poverty: Evidence from Spain","authors":"E. Phimister, Esperanza Vera‑Toscano, D. Roberts","doi":"10.5547/2160-5890.4.1.EPHI","DOIUrl":"https://doi.org/10.5547/2160-5890.4.1.EPHI","url":null,"abstract":"Reducing the proportion of households defined as energy poor is an increasingly important policy objective. This paper uses longitudinal data to examine the level and dynamics of energy poverty in Spain, comparing the results to the level and dynamics of income poverty. Two alternative measures of energy poverty are used in the analysis—one based on energy expenditure, the other reflecting an individual’s perceptions of difficulty in heating their home, paying utility bills and housing condition. The proportion of those in income poverty and also in energy poverty is relatively low suggesting a need for specific as opposed to general measures to address the latter. In relation to the dynamics of energy poverty, at the aggregate level there is a substantially greater movement out of expenditure-based energy poverty relative to subjective energy poverty and income poverty while the rate of re-entry into poverty was highest for the subjective energy poverty measure. The analysis also provides evidence of duration dependence in energy poverty. The results show clearly how mitigating expenditure behaviour reduces the level and alters the dynamics of expenditure-based energy poverty compared to subjective energy poverty. The implications for designing, targeting and monitoring energy policy are consid-","PeriodicalId":385400,"journal":{"name":"Economics of Energy and Environmental Policy","volume":"58 7","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-02-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113978640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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