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Modeling Energy Efficiency as a Supply Resource

Energy efficiency may be an inexpensive way to meet future demand and reduce greenhouse gas emissions, yet little work has been attempted to estimate annual energy efficiency supply functions for electricity planning. The main advantage of using a supply function is that energy efficiency adoption can change as demand changes. Models such as Duke University’s Dynamic Integrated Economy/Energy/Emissions Model (DIEM) have had to rely on simplistic or fixed estimates of future energy efficiency from the literature rather than on estimates from energy efficiency supply curves. This paper attempts to develop a realistic energy efficiency supply curve and to improve on the current energy efficiency modeling. It suggests an alternative approach based on saved-energy cost data from program administrators and explains the methodologies employed to create the supply curve. It illustrates this approach with results from DIEM for various electricity demand scenarios. The analysis suggests that an additional 5%–9% of energy efficiency is deployed for every 10% increase in the cost of electricity. Therefore, DIEM “invested” in energy efficiency up to an inelastic point on the energy efficiency supply curve. By contrast, the U.S. Environmental Protection Agency’s energy efficiency approach assumes that realized energy efficiency is fixed, and has no elasticity, regardless of changes to marginal costs or constraints that affect emissions or economics. 

Authors: Etan Gumerman abd Tibor Vegh

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Climate and Energy

Environmental Economics

Modeling

Working Papers

Resolving the Inherent Uncertainty of Carbon Taxes

This introduction to symposium essays in the Harvard Environmental Law Review describes the role of pricing carbon in contemporary climate change policy (with a summary of experience with carbon tax and cap-and-trade policies around the world) and points out similarities of carbon tax policies and cap-and-trade policies based on the academic literature. But it focuses on how a tax and cap-and-trade schemes differ in terms of their economic and emission outcomes in light of the uncertainty characterizing the markets and economies in which these instruments are used. These differences have potentially important economic, environmental, and political economy implications for U.S. climate change policy. Finally, the article highlights the proposals and key findings of each of the symposium essays, including Increasing Emissions Certainty under a Carbon Tax.

Authors: Joseph E. Aldy, Marc Hafstead, Gilbert E. Metcalf, Brian C. Murray, William A. Pizer, Christina Reichert, and Roberton C. Williams III

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Carbon Tax

Climate and Energy

Environmental Economics

Journal Articles

On Morals, Markets, and Climate Change: Exploring Pope Francis’ Challenge

This article in Law and Contemporary Problems explores the contrast between the movement toward environmental markets, characterized by the emergence of new carbon markets across the globe, and the renewed opposition to markets manifested in the pope’s encyclical and the views of some environmental advocates. It considers the arguments raised by these latter critics, explores alternative views of their concerns, and examines how market-based climate policies could be designed to alleviate these concerns. Others have examined the moral and ethical dimensions of market-based climate policies, but this article contributes to the literature by providing a contemporary examination of the papal encyclical’s prominent questioning of the use of markets to address climate change. It also speaks to issues that more than 190 countries now face under the Paris Agreement and that forty-eight U.S. states face under the Clean Power Plan as they decide what role, if any, market-based instruments will play in their pursuit of the greenhouse gas reductions. And it explores options for designing a market-based instrument to address climate change in ways that could ease some of the moral criticisms, and discusses some of the tradeoffs involved in those design choices. Part 2 reviews how market-based mechanisms are being designed for climate change policy. Part 3 examines the pope’s encyclical and the moral issues it raises regarding carbon markets. Part 4 assesses in more detail the moral objections to using market-based mechanisms for climate change policy and offers counterpoints to these arguments. Part 5 discusses possible ways to reconcile these viewpoints by designing market-based climate policies in ways that resolve or reduce the critics’ concerns and discusses the tradeoffs associated with each approach. Part 6 offers specific insights into the decisions faced and tradeoffs presented by market-based climate policies.

Authors: Jonas J. Monast, Brian C. Murray, and Jonathan B. Wiener

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Climate and Energy

Clean Air Act

Environmental Economics

Journal Articles

A State Policymaker’s Guide to Power Sector Modeling

In a new report, the Bipartisan Policy Center and Nicholas Institute for Environmental Policy Solutions explore the value, use, and limitations of economic modeling of the electricity sector. The report presents a suite of recent analyses by different organizations, showing how economic modeling can be used to simulate possible policy, market, and technology changes as the electricity sector transforms due to growth of domestic natural gas, increased use for electric generation, the rapid progress of renewable technologies, and environmental regulations.

It is meant to be a guide for state policymakers who have both the benefit and challenge of unpacking modeling results and figuring out how best to learn from diverse findings. It provides them with both an understanding of how to best utilize economic models and interpret their results as well as explores key modeling structures often being deployed to model carbon regulations such as the Clean Power Plan and input assumptions that impact power sector modeling results.

Authors: Blair Beasley, David Hoppock, Jennifer Macedonia, Martin Ross, and Tracy Terry

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Climate and Energy

Clean Air Act

Environmental Economics

State Policy

Reports

Blue Carbon Financing of Mangrove Conservation in the Abidijan Convention Region: A Feasibility Study

Coastal vegetated ecosystems such as mangrove forests, seagrass meadows, and salt marshes have long benefited coastal communities and fisheries, and in recent years have been recognized internationally for their significant capacity to sequester and store carbon (“blue carbon”)—at rates that surpass those of tropical forests. Yet these ecosystems are being converted rapidly. Current annual mangrove deforestation has been estimated to emit 240 million tons of carbon dioxide. For this reason, financing mechanisms to pay those tropical countries that have significant blue carbon resources to reduce greenhouse gas (GHG) emissions from deforestation have been explored as a means to fund mangrove conservation. This report by the United Nations Environment Programme, the Abidjan Convention Secretariat, and GRID-Arendal explores the potential of international carbon finance mechanisms to help fund mangrove conservation along the coast of West, Central, and Southern Africa that is covered by the Abidjan Convention—from the southern border of Mauritania to the northern border of Angola—and the scale of economic benefits that this conservation might provide for communities and countries in the region, including benefits not always recognized in traditional assessments or valuations. This report aims to increase knowledge about blue carbon stocks in West, Central, and Southern Africa and the steps that interested communities and countries in the region could take to secure international payments for their conservation and avoided GHG emissions.

Authors: John Virdin, Tibor Vegh, Connie Y. Kot, Jesse Cleary, Patrick N. Halpin, Christopher Gordon, Marie-Christine Cormier-Salem, and Adelina Mensah

Filters

Blue Carbon

Blue Economy

Climate and Energy

Ocean and Coastal Policy

Environmental Economics

Reports

Unconventional Oil and Gas Spills: Risks, Mitigation Priorities and States Reporting Requirements

An analysis led by the Nicholas Institute for Environmental Policy Solutions, which appears in the journal Environmental Science & Technology, concludes that making state spill data more uniform and accessible could provide stakeholders with important information on where to target efforts for locating and preventing future spills. However, reporting requirements differ across states, requiring considerable effort to make the data usable for analysis. 
 
By examining state-level spill data, it finds that 2 to 16 percent of hydraulically fractured oil and gas wells across Colorado, New Mexico, North Dakota and Pennsylvania spill hydrocarbons, chemical-laden water, hydraulic fracturing fluids and other substances each year. The study characterizes spills associated with unconventional oil and gas development at 31,481 wells hydraulically fractured or "fracked" in the four states between 2005 and 2014, identifying 6,648 spills in the 10-year period. Across all states, the first three years of a well's life, when drilling and hydraulic fracturing occurred and production volumes were highest, had the greatest risk of a spill. It found a significant portion of spills (from 26 percent in Colorado to 53 percent in North Dakota) occur at wells that experienced more than one spill, which suggests that wells where spills have already occurred merit closer attention.
 
Authors: Lauren A. Patterson, Katherine E. Konschnik, Hannah Wiseman, Joseph Fargione, Kelly O. Maloney, Joseph Kiesecker, Jean-Philippe Nicot, Sharon Baruch-Mordo, Sally Entrekin, Anne Trainor, and James E. Saiers

Filters

Hydraulic Fracturing and Water Use

Climate and Energy

Water Policy

State Policy

Journal Articles

Potential Pathways: Future of the Electricity Sector in the Southeast—Workshop Summary, October 5, 2016, Durham, North Carolina

The electricity sector is rapidly changing due to the shale gas revolution, a precipitous decline in coal generation, steep declines in the cost of solar generation, the proliferation of smart grid technologies, and a suite of new environmental regulations. On October 5, 2016, Duke University’s Nicholas Institute for Environmental Policy Solutions and the Duke University Energy Initiative co-hosted a one-day workshop that brought together experts on the electricity sector in the Southeast—including representatives of electric utilities, other market participants, nonprofit organizations, and energy and environmental agencies—to discuss factors affecting the region’s electricity sector. The main topics were future demand uncertainty, the ways that technology innovation could affect business models and regulatory structures, and the role of nuclear energy in the Southeast’s electricity future. This proceedings describes the main ideas that emerged from the workshop. It concludes with issues ripe for future research.

Author: Danielle A. Arostegui

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Climate and Energy

Environmental Economics

Energy Sector

Proceedings

The Uncertain Future of Nuclear Power in the Southeast: Implications of an Aging Fleet for Electricity Sector Planning and Emissions

Nuclear power provides about one-quarter of the electricity in the Southeast and the majority of the region’s non-fossil generation. Beginning around 2030, nuclear plants in the Southeast, as in the rest of the country, will start to reach the end of their initial operating license extensions to 60 years, at which point they must receive an additional license extension or retire. How many nuclear units will seek and receive a second license extension is unknown. Replacing existing nuclear capacity with new nuclear capacity requires approximately 10 to 15 years. If a high percentage of nuclear units in the Southeast do retire at 60 years, it is unlikely that the units can simultaneously be replaced with new units given the long lead times and limited applications for new nuclear plants at the Nuclear Regulatory Commission. Given these circumstances, southeastern states may want to start planning for the potential loss of their largest carbon-free generation source now. This policy brief explores how the potential loss of existing nuclear power plants in the Southeast interacts with region’s other electricity sector challenges—among them, increasing natural gas dependence, demand uncertainty, and emerging technology—and it proposes steps states can take to address these challenges.

Authors: David Hoppock and Sarah Adair

Filters

Climate and Energy

Environmental Economics

Energy Sector

Policy Briefs

Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide

To estimate the social cost of carbon dioxide for use in regulatory impact analyses, the federal government should use a new framework that would strengthen the scientific basis, provide greater transparency, and improve characterization of the uncertainties of the estimates, says a new report by the National Academies of Sciences, Engineering, and Medicine. The report also identifies a number of near- and longer-term improvements that should be made for calculating the social cost of carbon. The social cost of carbon (SC-CO2) is an estimate, in dollars, of the net damages incurred by society from a 1 metric ton increase in carbon dioxide emissions in a given year. The SC-CO2 is intended to be a comprehensive estimate of the net damages from carbon emissions—that is, the net costs and benefits associated with climate change impacts such as changes in net agricultural productivity, risks to human health, and damage from such events as floods.  As required by executive orders and a court ruling, government agencies use the SC-CO2 when analyzing the impacts of various regulations, including standards for vehicle emissions and fuel economy, regulation of emissions from power plants, and energy efficiency standards for appliances. 

Authors: Maureen L. Cropper, Richard G. Newell, Myles Allen, Maximilian Auffhammer, Chris E. Forest, Inez Y. Fung,  James K. Hammitt, Henry D. Jacoby, Robert E. Kopp, William Pizer, Steven K. Rose, Richard Schmalensee, and John P. Weyant

Filters

Carbon Tax

Climate and Energy

Environmental Economics

Journal Articles

Revisiting the NAAQS Program for Regulating Greenhouse Gas Emissions under the Clean Air Act

The future is uncertain for the regulation of greenhouse gases from power plants, including the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan, which covers existing plants. The rule is under review in the D.C. Circuit Court of Appeals, and the Supreme Court has indicated its interest in hearing the case. Moreover, during his presidential campaign, president-elect Donald Trump promised to “scrap” the Clean Power Plan. If the rule is overturned or is severely weakened, whether through litigation or executive action, stakeholders are likely to litigate to seek to force the EPA to use other authorities under the Clean Air Act to regulate greenhouse gas emissions.

This working paper examines the opportunities and challenges associated with regulation of greenhouse gases under the National Ambient Air Quality Standards (NAAQS) program, drawing a comparison with the Clean Power Plan’s approach under a different section of the Clean Air Act. The paper offers no opinion on the Clean Power Plan litigation, nor does it advocate for the Clean Power Plan or the NAAQS approach. Its focus is on understanding how the NAAQS program might incorporate greenhouse gases in in the event that the EPA pursues that approach.

Authors: Christina Reichert, Franz Litz, Jonas Monast, Tim Profeta, and Sarah Adair

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Climate and Energy

Clean Air Act

Environmental Economics

State Policy

Working Papers

Pages