Publications

    Acting in Time on Energy Policy. Brookings Institution Press, 2009. Publisher's VersionAbstract

    Energy policy is on everyone’s mind these days. The U.S. presidential campaign focused on energy independence and exploration (“Drill, baby, drill!”), climate change, alternative fuels, even nuclear energy. But there is a serious problem endemic to America’s energy challenges. Policymakers tend to do just enough to satisfy political demands but not enough to solve the real problems, and they wait too long to act. The resulting policies are overly reactive, enacted once damage is already done, and they are too often incomplete, incoherent, and ineffectual. Given the gravity of current economic, geopolitical, and environmental concerns, this is more unacceptable than ever. This important volume details this problem, making clear the unfortunate results of such short-sighted thinking, and it proposes measures to overcome this counterproductive tendency.

    All of the contributors to Acting in Time on Energy Policy are affiliated with Harvard University and rank among America’s pre-eminent energy policy analysts. They tackle important questions as they pertain to specific areas of energy policy: Why are these components of energy policy so important? How would “acting in time”—i.e. not waiting until politics demands action—make a difference? What should our policy actually be? We need to get energy policy right this time—Gallagher and her colleagues help lead the way.

    Stoft, Steven. Carbonomics: How to Fix the Climate and Charge it to OPEC, 2008. Publisher's VersionAbstract

    Carbonomics is a 270 page book that covers national and international energy policy from an economic perspective. Part 1 dismisses several popular myths including the view that any implementation of the Kyoto Protocol would wreck the economy, and that peak oil will herald an international economic collapse. In Part 2, global energy markets are shown to induce a "global rebound effect" such that every gallon of oil conserved or replaced by alternative fuels induces the use of an estimated 0.26 additional gallons by the rest of the world through a world-oil-price effect. 

    Part 3 proposes an "untax" as the central national energy policy. This would tax carbon and refund all the revenues on an equal-per-person basis. This is shown to be superior, because of distributional considerations, to using a carbon tax to pay down some other tax. The key assumption in this argument is that using a poll tax to pay down other taxes is generally rejected because of its distributional consequences. Second, a separate carbon tax rate on oil is proposed, so that the carbon tax can accommodate oil price fluctuations. A feebate for fuel efficient autos is also proposed. The suggested design would help the Big Three automakers by rewarding progress rather than absolute performance. 

    Part 4 argues that developing countries will never accept meaningful emission caps and that the Kyoto Protocol should be replaced by global carbon pricing. Enforcement and international fairness mechanisms are proposed. The fairness mechanism is designed to avoid perverse incentives and to provide an incentive for useful emission reduction measures that are not covered by carbon pricing. The fairness mechanism provides for transfer payments from countries with high emissions per capita to those with low emissions per capita. This leaves China at the neutral point because its emissions are almost exactly average. 

    The concept of an oil consumers' cartel is discussed throughout. First it is noted that any effective international climate organization will be, in effect, such a cartel. Second estimates of a cartel's impact are backed out of the results of economic models, such as the DOE's model of the impacts of the Kyoto Protocol. Next it is shown that climate policies could save a large fraction of their cost in reduced payments to oil exporting countries. For the first decade or two of a substantial climate policy, this fraction may be greater than 100 percent. Finally, Carbonomics proposes that this benefit be acknowledged during international climate negations. After all, China will soon be as "addicted to oil" as is the United States, so this provides the two countries with a powerful financial incentive for cooperation. 

    The first eight chapters are available from SSRN.

    for the of California, California Air Resources Board State. Climate Change Proposed Scoping Plan, 2008.Abstract

    On September 27, 2006, Governor Schwarzenegger signed Assembly Bill 32, the Global Warming Solutions Act of 2006 (Núñez, Chapter 488, Statutes of 2006). The event marked a watershed moment in California’s history. By requiring in law a reduction of greenhouse gas (GHG) emissions to 1990 levels by 2020, California set the stage for its transition to a sustainable, clean energy future. This historic step also helped put climate change on the national agenda, and has spurred action by many other states.

    The California Air Resources Board (ARB or Board) is the lead agency for implementing AB 32, which set the major milestones for establishing the program. ARB met the first milestones in 2007: developing a list of discrete early actions to begin reducing greenhouse gas emissions, assembling an inventory of historic emissions, establishing greenhouse gas emission reporting requirements, and setting the 2020 emissions limit.

    ARB must develop a Scoping Plan outlining the State’s strategy to achieve the 2020 greenhouse gas emissions limit. This Scoping Plan, developed by ARB in coordination with the Climate Action Team (CAT), proposes a comprehensive set of actions designed to reduce overall greenhouse gas emissions in California, improve our environment, reduce our dependence on oil, diversify our energy sources, save energy, create new jobs, and enhance public health.

    This “Approved Scoping Plan” was adopted by the Board at its December 11, 2008 meeting. The measures in this Scoping Plan will be developed over the next two years and be in place by 2012

    Stavins, Robert, and Joseph E. Aldy. Designing the Post-Kyoto Climate Regime: Lessons from the Harvard Project on International Climate Agreements, 2008. Publisher's VersionAbstract

    Excerpt from the Executive Summary:

    A way forward is needed for the post-2012 period to address the threat of global climate change. The Harvard Project on International Climate Agreements is an international, multi-year, multi-disciplinary effort to help identify the key design elements of a scientifically sound, economically rational, and politically pragmatic post-2012 international policy architecture. Leading thinkers from academia, private industry, government, and non-governmental organizations around the world have contributed and will continue to contribute to this effort. The foundation for the Project is a book published in September 2007 by Cambridge University Press, Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World (Aldy and Stavins 2007). From that starting point, the Harvard Project on International Climate Agreements aims to help forge a broad-based consensus on a potential successor to the Kyoto Protocol. The Project includes 28 research teams operating in Europe, the United States, China, India, Japan, and Australia. 

    The work of the Project is being carried out in three stages. The first stage featured meetings with key domestic and international policy constituencies to discuss considerations regarding potential successors to Kyoto. The second stage focused on policy analysis and economic modeling to develop a small set of promising policy frameworks and key design elements. In the third stage, Project researchers are exploring key design principles and alternative international policy architectures with domestic and international audiences, including the new administration and Congress in the United States. This interim report identifies some of the key principles, promising policy architectures, and guidelines for essential design elements that have begun to emerge, building upon lessons learned from the 28 research initiatives.

     

    Zachmann, Georg, and Christian von Hirschhausen. “First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany.” In, 2007.Abstract

    Zachmann, Georg and Christian von Hirschhausen. First Evidence of Asymmetric Cost Pass-through of EU Emissions Allowances: Examining Wholesale Electricity Prices in Germany. March 2007. Paper, 8 pages.

     

     

    This paper applies the literature on asymmetric price transmission to the emerging commodity market for EU emissions allowances (EUA). We utilize an error correction model and an autoregressive distributed lag model to measure the relationship between CO2 price changes and the development of wholesale electricity prices. Using data from the German market for electricity and EUAs, we find that the rising prices of EUAs have a stronger impact on wholesale electricity prices than falling prices -- the first empirical evidence of asymmetric cost pass-through for these new allowances.

     

    of Institute, University California Energy. “A New Design Tool for Visualizing the Energy Implications of California's Climates.” In, 2007. Publisher's VersionAbstract
    In California there are 16 different climate zones, as defined in the California Energy Code (Title24). The code requires slightly different types of buildings in each zone. These different building code requirements make it important for people who are designing, building, or maintaining these buildings to understand the unique attributes of their climate and how it will influence the design and performance of their buildings. In this UCEI project we developed a simple, free, easy-to-use, graphic-based computer program called Climate Consultant 3, and we have posted it on the State of California’s Flex Your Power web site and on the UCLA Energy Design Tools web site. Our objective is to make it freely accessible to architects, builders, contractors, and homeowners, etc., to help them understand their local climate and how it impacts their building’s energy consumption.
    Hochstetter, Sandra. “The Changing Landscape for Retail Procurement: from Restructured to Re-Regulated, and from Regulated to Government-Controlled.” In, 2007.Abstract

    The Year 2007 has brought new legislative and regulatory challenges for all states --- both regulated and restructured --- and some of these challenges are affecting resource evaluation processes, and corresponding resource decisions, for the ultimate load-serving entities. The 2 most challenging legislative and business issues today ---- layered on top of continuing discontent with competitive market design and competitive procurement --- are the looming debates over mandated Renewable Portfolio Standards and mandated CO2 emission reductions. These frenzied discussions have led some policymakers and activists to call for a moratorium on new coal plants and the retirement of existing ones, along with a dogmatic focus on renewables and energy efficiency as the primary sources for new power supply. So --- it’s not just the restructured states that are undergoing political upheaval and second-guessing with respect to how electricity is provided to customers.

     Whether you reside in a vertically integrated, rate-regulated, and cost-of-service ratemaking jurisdiction, OR a "retail competition" state that is undergoing some type of transformation back to a more regulated service obligation and pricing regime, you are facing changes in the way that federal and state legislators, and various activist groups, expect you to manage your electric generation portfolio.

    The premise of my remarks today, which is a conclusion that I have reached during the past several months, is that I'm not sure how much of a "competitive market" or even a self-directed future I see for any retail service provider ---- no matter what state you're in or what type of regulatory framework you have.

    This new, unilateral focus on environmental issues is obscuring the laws of physics --- with respect to how the electricity grid works and what it takes to keep the lights on --- and the laws of economics --- with respect to what electricity costs, based on the fuel source used. My overall prediction is, if our hands are tied by the passage of very specific government-mandated generation portfolio standards, and laws that impose penalties on the consumption of specific fuels, we will be dealing with reliability problems in all states, a deviation from “least cost purchasing” standards in traditional states, and a significant reduction in market-driven resource decisions in restructured states.

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