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Carbon Market Lessons and Global Policy Outlook

Although markets for trading carbon emission credits to reduce greenhouse gas emissions have stalled in United States federal policy-making, carbon markets are emerging at the state level within the U.S. and around the world, teaching us more about what does and doesn't work. Authors discuss in a Policy Forum piece in Science key lessons from a decade of experience with carbon markets.

Author(s): Richard Newell, William Pizer, Daniel Raimi

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Journal Articles

Biogas in the United States: An Assessment of Market Potential in a Carbon-Constrained Future

Using biogas as a fossil fuel substitute can mitigate the buildup of greenhouse gases in the atmosphere. Therefore, biogas is an attractive renewable energy source in a carbon-constrained future. Although pipeline-quality biogas can augment the natural gas market supply, its long-term potential has been little studied. This report aims to answer the question of whether, and under what conditions, a substantial, decentralized domestic biogas market could develop in the United States by 2040. It finds that (1) biogas could be expanded to supply perhaps 3–5% of the total natural gas market at projected prices of $5–6/MMBtu, (2) the largest potential biogas is thermal gasification of agriculture and forest residues and biomass, (3) using biogas for electricity generation may be more profitable than supplying it to the pipeline, and (4) because market signals have not spurred widespread adoption of biogas, policy incentives are necessary to increase its use.

Author(s): Brian C. Murray, Christopher S. Galik, and Tibor Vegh

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Low Carbon Technologies

Environmental Economics

Climate Change Policy

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Modeling

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Greenhouse Gas Mitigation Opportunities for California Agriculture: Review of the Economics

Although about three-quarters of California farm revenue derives from crop production, crops—mainly tree, vine, and vegetable crops—account for only about one-quarter of GHG emissions. Some studies indicate minimal yield loss from reducing nitrogen fertilizer use, and simulation results show significant percentage reductions in GHG emissions for payments of $20/MTCO2e. The economics of reducing emissions from enteric fermentation has been little studied. Manure management to reduce GHG emissions (mainly methane) can be as simple as covering manure lagoons and flaring methane. The more complex option of using manure-generated methane gas to replace fossil fuels has been investigated often. Most case studies and simulations suggest this option is costly. Its economic feasibility depends on specific local conditions, but there is no evidence of large-scale feasibility in California without large subsidies. 

Author(s): Hyunok Lee and Daniel Sumner

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Ecology: Protect the Deep Sea

Formal governance structures and funds need to be put in place by 2020 to create networks of sea-floor reserves that maintain and restore biodiversity and functioning of deep-sea ecosystems, writes the Nicholas Institute for Environmental Policy Solutions Linwood Pendleton and colleagues in a comment piece in the journal Nature

More than one million square kilometres of the sea below 200 metres in depth are being ploughed by trawlers, and the next decade will see expansion of oil, gas and mineral extraction into deeper waters. At risk are ecosystems that contain thousands of undiscovered organisms, that contribute to the health and productivity of the ocean, that challenge our ideas of the extremes at which life can exist, and that are habitat and nursery for fisheries. Some threatened species have lifespans of hundreds of thousands of years or live in habitats that take millennia to form. The 2015 U.N. General Assembly should develop a new body to protect deep sea biodiversity, or extend the mandate of the International Seabed Authority (ISA) beyond mining to protect the deep-sea from a wider range of regulated commercial industrial activities, the authors suggest. The ISA could then apply the Convention on Biological Diversity targets for protecting and restoring 10% of the oceans, including the deep sea, by 2020. This conservation activity would require around $30 million per annum, which could be raised by taxing extractions from the deep sea, Pendleton and his co-authors propose.

Author (s): Edward B. Barbier, David Moreno-Mateos, Alex D. Rogers, James Aronson, Linwood Pendleton, Roberto Danovaro, Lea-Anne Henry, Telmo Morato, Jeff Ardron, Cindy L. Van Dover

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Journal Articles

Economics of Forest Carbon Sequestration as a Climate Change Mitigation Strategy

Forest ecosystems remove carbon dioxide from the atmosphere and convert it to organic carbon stored in terrestrial pools of biomass, soil, and residues. This process lowers atmospheric carbon dioxide concentrations, thereby mitigating a contributor to future climate-change threats. This article in the journal Encyclopedia of Energy, Natural Resource and Environmental Economics explores the economics of incentive-based approaches to managing forests and changing land use to store more carbon, such as those that are part of ongoing policy efforts throughout the world. It shows how incentives for carbon sequestration change the optimal time to harvest a timber stand, thereby working the intensive supply margin, increasing the amount of carbon stored in forests over time. It also shows how carbon compensation can attract land into forests from less carbon-sequestering land uses such as crop agriculture, thereby increasing carbon storage on the extensive margin. It provides examples from empirical studies of carbon sequestration from afforestation, forest management, and reduced emissions from deforestation. 

Author (s): Brian Murray 

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Deep Sea Minerals and the Green Economy

Deep sea minerals are one of several potential non-renewable resource prospects that offer an opportunity for both resource-endowed countries and the global community to apply transformative policies to ensure future resource development. Mining companies are preparing to explore and extract minerals from the Pacific's seabed with the first commercial sea-floor massive sulphide mining venture on track to start in Papua New Guinea in 2014. In chapter eight, "Deep Sea Minerals and the Green Economy," authors explore five policy design principles that could be considered when evaluating potential development. 

Author (s): Elaine Baker, Yannick Beaudoin, and Linwood Pendleton

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Science

Oceans & Coasts

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Marine

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International

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Sustainable Economic Development and Deep Sea Mining

Ensuring that deep sea mining will have a positive impact on Pacific Island communities requires supporting not only the economic capital upon which sustainable and resilient economies are built, but also the social and environmental capital. In chapter four, "Sustainable Economic Development and Deep Sea Mining," authors explore the potential benefits and costs of deep sea mining to the economic and environmental capital of coastal and small island developing states in the region. The chapter also looks at traditional and emerging ways to determine the economic, environmental, and social costs and benefits of mining. 

Author(s): Linwood Pendleton, Anne Solgaard, Porter Hoagland, Paula Holland, Nick Hanley and Nils Jobstvogt

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The Clean Air Act and Power Sector Carbon Standards: Basics of Section 111(d)

In his Climate Action Plan released June 2013, President Obama called on the U.S. Environmental Protection Agency to finalize regulations controlling carbon dioxide emissions from new and existing fossil fuel­–fired power plants. The EPA recently proposed CO2 emission limits for new power plants and is preparing to fulfill its Clean Air Act mandate to issue regulations for existing power plants. These regulations will affect thousands of electricity-generating units, which contribute nearly 40% of CO2 emissions nationwide. This policy brief offers an overview of the substantive and procedural requirements for existing-source regulations and explains the regulatory timeline outlined by the president.

Author (s): Jeremy M. Tarr

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Clean Air Act

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Policy Briefs

Least-Risk Planning for Electric Utilities

In an environment of significant uncertainty about fuel prices, environmental regulations, and energy demand growth, traditional utility planning leads to investment decisions that create considerable risks, according to a report co-authored by the Nicholas Institute for Environmental Policy Solutions.

The paper describes how a minimax regret analysis could supplement current planning techniques, which typically weigh cost. By considering risk across a broad range of scenarios facing the industry, minimax regret analysis may help utilities better avoid decisions that reduce their flexibility to respond to changing market conditions. As a result, utilities can avoid regrettable investment decisions and negative effects for ratepayers while better measuring diversity in their portfolio—ensuring no one energy resource is relied on too heavily.

Author (s): Patrick Bean, David Hoppock 

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Policy and Design

State Utility Regulation

Quality

Environmental Economics

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Working Papers

Determining Benefits and Costs for Future Generations

The authors write in Science that economic project analysis, the rate at which future benefits and costs are discounted relative to current values, often determines whether a project passes the benefit-cost test. This is especially true of projects with long time horizons, such as those to reduce greenhouse gas (GHG) emissions. Whether the benefits of climate policies, which can last for centuries, outweigh the costs, many of which are borne today, is especially sensitive to the rate at which future benefits are discounted. This is also true of other policies, e.g., affecting nuclear waste disposal or the construction of long-lived infrastructure.

Author (s): K. Arrow, M. Cropper, C. Gollier, B. Groom, G. Heal, R. Newell, W. Nordhaus, R. Pindyck, W. Pizer, P. Portney, T. Sterner, M. Weitzman

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