Publications by Year: 2008

FERC State of the Markets Report 2008. 23 pages.

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.

This paper presents a generation expansion model for the power sector which incorporates several features that make it very interesting for application to current electricity markets: it considers the possible oligopolistic behavior of firms, and incorporates relevant policy instruments, carbon emissions trading and tradable green certificates. It combines powerful traditional tools related to the detailed system operation with techniques for modeling the economic market equilibrium and a formulation for the resolution of the emissions permit and tradable green certificates market equilibrium. The model is formulated as a Linear Complementarity Problem (LCP) which allows the optimization problem for each firm considering the power, carbon and green certificate markets to be solved simultaneously. The model has been implemented in GAMS. An application to the Spanish power system is also presented.

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

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.

 

E&ETV – Electricity: Panel weighs challenges of creating national grid to lower prices, improve transmission. October 15, 2008.

U.S. Department of Energy. Electric Transmission Congestion Study. Federal Register / Vol. 73, No. 108 / Wednesday, June 4, 2008 / Notices. 2 pages.

Whitley, Stephen. Markets & Planning: The NYISO Perspective. Presentation to the HEPG 52nd Plenary Session. October, 2008. 22 pages.

Proctor, Michael. Southwest Power Pool‰Ûªs Balanced Portfolio Approach for Economic Upgrades. Presentation to the HEPG 52nd Plenary Session. October, 2008. 22 pages.

Brown, Ashley. Transmission Investment: Competitive Market Platform or Regulation Trojan Horse? Presentation to the HEPG 52nd Plenary Session. October, 2008. 16 pages.

Manz, Laura. Transmission Investment: Competitive Market Platform ‰ÛÒ or Regulation Trojan Horse. Presentation to the HEPG 52nd Plenary Session. 8 pages.

Coglianese, Cary, Heather Kilmartin and Evan Mendelson. Transparency and Public Participation in the Rulemaking Process. A Non Partisan Presidential Transition Task Force Report. July 2008, 54 pages.  

The Task Force was chaired by Prof. Cary Coglianese of the University of Pennsylvania School of Law, and Ashley Brown was one of several members.

Mansur, Erin T. and Matthew W. White, Market Organization and Efficiency in Electricity Markets. Draft paper.

Evans, Lewis, Graeme Guthrie, and Steen Videbeck. "Assessing the Integration of Electricity Markets using Principal Component Analysis: Network and Market Structure Effects." Contemporary Economic Policy, 26(1), January 2008, 145-161. (Journal of the Western Economics Association)

Huntowski, Frank, Neil Fisher, and Aaron Patterson. Embrace Electric Competition or it's Déjà Vu All Over Again. The Northbridge Group, October 2008, 79 pages.

Review of PJM’s Reliability Pricing Model, prepared by The Brattle Group and the PJM Market Monitoring Unit, filed with the FERC on June 30, 2008.

Williams, Paul. Why Electricity Market Redesign is Required. Presentation to the HEPG Fiftieth Plenary Session. February 2008. 8 pages.

Consider a market where producers submit supply functions to a procurement auction with uncertain demand, e.g. an electricity auction. In the Supply Function Equilibrium (SFE), every firm commits to the supply function that maximises expected profit in the one-shot game given the supply functions of competitors. A basic weakness of the SFE is the presence of multiple equilibria. This paper shows that with (i) symmetric producers, (ii) perfectly inelastic demand, (iii) a price cap, and (iv) capacity constraints that bind with a positive probability, there exists a unique, symmetric SFE.

London Economics in association with Global Energy Decisions. Structure and Performance of Six European Wholesale Electricity Markets in 2003, 2004 and 2005: Executive Summary. Presented to DG Comp 26th February 2007.