Papers

Gavan, John C., and Rob Gramlich. John C. Gavan and Rob Gramlich - A New State-Federal Cooperation Agenda for Regional and Interregional Transmission, 2021. Publisher's VersionAbstract

Excerpt from the Introduction:

The experience of grid operators and planners in the United States and around the world has shown that both decarbonization and power system resilience will require large-scale regional and inter-regional trans- mission expansion. In the United States, transmission planning, cost recovery, and siting are all subject to both state and federal jurisdiction. To meet the challenge of expanding transmission to implement decarbonization, the Federal Energy Regulation Commission (FERC) and the National Association of Regulatory Utility Commissioners (NARUC) recently announced the Joint Federal-State Task Force on Electric Transmission to focus on this issue.1 Resolving issues of siting and cost recovery for interstate electric transmission lines will encourage constructive state-federal cooperation. The task force and related regional and national coordination among the states, FERC, the Department of Energy (DOE), and federally regulated transmission providers will be critical to ensuring a resilient and clean power system.

Cicala, Steve. “Imperfect Markets versus Imperfect Regulation in U.S. Electricity.” In, 2016.Abstract

This paper estimates changes in electricity generation costs caused by the introduction of market mechanisms to determine output decisions in service areas that were previously using command-and-control-type operations. I use the staggered transition to markets from 1999- 2012 to evaluate the causal impact of liberalization using a nationwide panel of hourly data on electricity demand and unit-level costs, capacities, and output. To address the potentially confounding effects of unrelated fuel price changes, I use machine learning methods to predict the allocation of output to generating units in the absence of markets for counterfactual pro- duction patterns. I find that markets reduce production costs by $3B per year by reallocating output among existing power plants: Gains from trade across service areas increase by 20% based on a 10% increase in traded electricity, and costs from using uneconomical units fall 20% from a 10% reduction in their operation.

Salovaara, Jackson. “Coal to Natural Gas: Fuel Switching and CO2 Emissions Reduction.” Applied Mathematics, 2011.Abstract

US natural gas prices fell in 2009 on account of weak demand and increased supply from shale gas production. The fall in prices led to a reduction in coal- fired electricity generation and a concomitant increase in natural gas-fired electricity generation. Low natural gas prices conjoined with static coal prices and underutilized natural gas power plant capacity to create an environment primed for switching from natural gas to coal. Due to differences in chemical make-ups and plant efficiencies between the two fuels, this switching led to a significant reduction in carbon dioxide emissions. This thesis models how the fuel switching effect occurred and how it translated to an emissions reduction. It also analyzes several hypothetical policies aimed at augmenting the effect to achieve further reductions in emissions. Throughout the analysis, it considers the other impacts— environmental, human health, and economic—of a large-scale shift from a fuel

system based on coal to one based on natural gas.

Interconnection, PJM. Coal Capacity at Risk for Retirement in PJM: Potential Impacts of the Finalized EPA Cross State Air Pollution Rule and Proposed National Emissions Standards for Hazardous Air Pollutants. PJM Interconnection. PJM Interconnection, 2011.Abstract

In its role of maintaining reliability and resource adequacy, PJM has been following the finalized Cross State Air Pollution Rule (CSAPR)1 and proposed National Emissions Standards for Hazardous Air Pollutants (NESHAP),2 issued by the United States Environmental Protection Agency (EPA), affecting electric generating units, and coal-fired units in particular. PJM has been in the process of estimating the impacts of these rules on the amount of coal-fired generating capacity that may retire, rather than install pollution control retrofits by examining the retrofit status of coal capacity by the age and size of coal-fired units.

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.

Linares, Pedro, Francisco Javier Santos, Mariano Ventosa, and Luis Lapiedra. “Incorporating oligopoly, CO2 emissions trading and green certificates into a power generation expansion model.” Automatica 44, no. 6 (2008): 1608-1620. Publisher's VersionAbstract
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.
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.

 

Rudkevich, Aleksandr. “Economics of CO2 Emissions in Power Systems .” In, 2009.Abstract

The paper analyzes the economics of CO2 emissions in power systems by introducing concepts of marginal carbon intensity (MCI) of electricity demand and shadow carbon intensities (SCI) of binding transmission constraints. It demonstrates that values of MCIs are time and location dependent and exhibit properties similar to those of locational marginal prices of power. These concepts and their properties are discussed using simple examples illustrating their importance and potential use in solving practical problems and designing CO2 abatement policies.

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.

Consilting, Navigant. Price Signals and Greenhouse Gas Reduction in the Electricity Sector . Navigant. Navigant Consulting, 2009.Abstract

Excerpt from the Executive Summary

Competitive electricity markets will play
a vital role in the success of any market- based program for controlling heat-trap- ping emissions that contribute to climate change. Restructured competitive electricity markets help promote the technological in- novation and changes in consumer behav- ior required for a greenhouse gas (GHG) reduction program to be successful.

Competitive wholesale and retail electricity markets were implemented to provide the financial incentives that encourage efficient electricity production and consumption patterns. Similarly, state and federal policy- makers are embracing“cap-and-trade”poli- cies (a.k.a the carbon market1) that rely on the same market forces and financial incen- tives to reduce GHG emissions – primar-
ily carbon dioxide (CO2). President Barack Obama recently stated that he is interested in a cap-and-trade approach precisely be- cause he thinks the market makes decisions about these technologies better than the public sector.2 Policy supporters argue that
a market-based approach to reducing GHG emissions will be the most cost-effective and result in more innovative approaches
to emission reductions than other regulatory approaches. With non-utility competi- tive suppliers owning approximately 40 percent of today’s installed electric gener- ating capacity, it is therefore important to understand the complementary interaction between competitive electricity markets and market-based GHG policies.

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