Recent ucei items

If You Build It, They May Not Come: Willingness to Participate in Managed EV Charging

Thu, 7 May 2026 00:00:00 +0000

If You Build It, They May Not Come: Willingness to Participate in Managed EV Charging

Are Consumers Myopic? Evidence from New and Used Car Purchases

Wed, 6 May 2026 00:00:00 +0000

Are Consumers Myopic? Evidence from New and Used Car Purchases

Profiting from Regulation: An Event Study of the European Carbon Market

Wed, 6 May 2026 00:00:00 +0000

Profiting from Regulation: An Event Study of the European Carbon Market

Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing

Tue, 22 Dec 2009 00:00:00 +0000

A standard result in regulation is that efficiency requires that marginal prices be set equal to marginal costs. This paper performs an empirical test of marginal cost pricing in the natural gas distribution market in the United States during the period 1989-2008. For all 50 states we reject the null hypothesis of marginal cost pricing. Departures from marginal cost pricing are particularly severe in residential and commercial markets, where we find average markups of over 40%. Based on conservative estimates of the price elasticity of demand these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, the current pricing schedules are an important pre-existing distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs. Current markups for residential and commercial customers are already equivalent to a tax of over $200 per metric ton of carbon, considerably higher than the range...

Why Do Companies Rent Green? Real Property and Corporate Social Responsibility

Wed, 16 Sep 2009 00:00:00 +0000

This paper provides the first systematic analysis of the choice by organizations to occupy green office space. We develop a framework of ecological responsiveness, and we formulate five propositions to explain why specific firms and industries may be more likely to lease green space. We test these propositions by analyzing the decisions of more than 11,000 tenants to choose office space in green buildings or in otherwise comparable non-green buildings located nearby. We find that corporations in the oil and banking industries, as well as government-related and non-profit organizations, are among the most prominent green tenants. After appropriately controlling for building quality and for location within one quarter mile, our empirical analysis shows that firms in mining and construction and organizations in public administration are relatively more likely to lease green rather than conventional office space. Furthermore, organizations employing higher levels of human capital...

Doing Well By Doing Good? Green Office Buildings

Wed, 16 Sep 2009 00:00:00 +0000

This paper provides the first credible evidence on the economic value of the certification of “green buildings” – value derived from impersonal market transactions rather than engineering estimates. For some 10,000 subject and control buildings, we match publicly available information on the addresses of Energy Star and LEED-rated office buildings to the characteristics of these buildings, their rental rates and selling prices. We find that buildings with a “green rating” command rental rates that are roughly three percent higher per square foot than otherwise identical buildings – controlling for the quality and the specific location of office buildings. Ceteris paribus, premiums in effective rents are even higher – above six percent. Selling prices of green buildings are higher by about 16 percent.

For the Energy-Star-certified buildings in this sample, we subsequently obtained detailed estimates of site and source energy usage from the U.S. Environmental Protection...

Explaining the Price of Voluntary Carbon Offsets

Wed, 16 Sep 2009 00:00:00 +0000

This paper investigates factors that explain the large variability in the price of voluntary carbon offsets. We estimate hedonic price functions using a variety of provider- and project-level characteristics as explanatory variables. We find that providers located in Europe sell offsets at prices that are approximately 30 percent higher than providers located in either North America or Australasia. Contrary to what one might expect, offset prices are generally higher, by roughly 20 percent, when projects are located in developing or least-developed nations. But this result does not hold for forestry-based projects. We find evidence that forestry-based offsets sell at lower prices, and the result is particularly strong when projects are located in developing or least-developed nations. Offsets that are certified under the Clean Development Mechanism or the Gold Standard, and therefore qualify for emission reductions under the Kyoto Protocol, sell at a premium of more than 30...

When it comes to Demand Response, is FERC its Own Worst Enemy?

Fri, 28 Aug 2009 00:00:00 +0000

The traditional approach to demand response of paying for a customer’s electricity consumption reductions relative to an administratively set baseline is currently being advocated by the Federal Energy Regulatory Commission (FERC) as a way to foster the participation of final consumers in formal wholesale markets. Although these efforts may lead to greater participation of final consumers in traditional demand response programs, they are likely to work against the ultimate goal of increasing the benefits that electricity consumers realize from formal wholesale electricity markets, because traditional demand response programs are likely to provide a less reliable product than generation resources. The moral hazard and adverse selection problems that reduce the reliability of the product provided by traditional demand response resources can be addressed by treating consumers and producers of electricity symmetrically in the wholesale market. Several suggestions are made for how...

Taxes and Trading versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation (Leakage) or Market Power

Fri, 28 Aug 2009 00:00:00 +0000

This paper investigates whether an emissions tax (equivalent to an emissions cap) is the best policy in the presence of incomplete regulation (leakage) or market power by analyzing an intensity standard regulating emissions per unit of output. With no other market failures, an intensity standard is indeed inferior, although combining it with a consumption tax eliminates this inferiority. For incomplete regulation, I show that under certain conditions an intensity standard can dominate any emissions tax (including the optimal emissions tax). This dominance persists even with the addition of a consumption tax, which ameliorates output distortions and can sometimes help the intensity standard attain the first best (when an emissions tax/consumption tax combination cannot). Comparing intensity standards to output-based updating shows that the latter dominates because of its additional flexibility. Finally, I show that with market power an intensity standard can dominate the optimal...

Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector

Fri, 14 Aug 2009 00:00:00 +0000

New car fleet fuel economy, weight and engine power have changed drastically since 1980. These changes represent both movements along and shifts in the "fuel economy/weight/engine power production possibilities frontier". This paper estimates the technological progress that has occurred since 1980 and the trade-offs that manufacturers and consumers face when choosing between fuel economy, weight and engine power characteristics. The results suggest that if weight, horsepower and torque were held at their 1980 levels, fuel economy for both passenger cars and light trucks could have increased by nearly 50 percent from 1980 to 2006; this is in stark contrast to the 15 percent by which fuel economy actually increased. I also find that once technological progress is considered, meeting the CAFE standards adopted in 2007 will require halting the observed increases in weight and engine power characteristics, but little more; in contrast, the standards recently announced by the new...

The Implied Cost of Carbon Dioxide under the Cash for Clunkers Program

Fri, 14 Aug 2009 00:00:00 +0000

The Cash for Clunker program aims to stimulate the economy, provide relief for automobile manufacturers and reduce greenhouse gas emissions. In this research note, I present estimates of the implied cost of carbon dioxide reductions under the Cash for Clunker program. The estimates suggest that the program is an expensive way to reduce greenhouse gases. This is true under a wide range of assumptions regarding the increase in fuel economy of new vehicles purchased under the program, how long the clunkers would have been on the road if not for the program, and whether we account for reductions in criteria pollutants. Conservative estimates of the implied carbon cost exceed $365 per ton; best case scenario parameter values suggest a cost of carbon of $237 per ton.

Building Out Alternative Fuel Retail Infrastructure: Government Fleet Spillovers in E85

Fri, 14 Aug 2009 00:00:00 +0000

One significant obstacle to meeting aggressive federal and state alternative fuel consumption targets is the relative scarcity of retail fueling stations that carry alternative fuels. Policies that encourage or mandate use of alternative fuel vehicles in government fleets, thereby increasing demand for such fuels, are one popular approach to stimulating further development of the alternative fuel retail infrastructure. I focus specifically on flex-fuel vehicles (FFVs) that burn E85, a combination of 85% ethanol and 15% gasoline, to study the impact of government fleet composition on retail alternative fuel infrastructure. Using data from six states in the Midwest that account for over 60% of US E85 stations, I show that government fleet adoption of FFVs leads to an increase in retail E85 stations. This finding persists when using instrumental variables techniques to address the endogeneity of government fleet FFV purchases. I also explore whether fuel station retail market...

What Do Emissions Markets Deliver and to Whom? Evidence from Southern California’s NOx Trading Program

Tue, 7 Jul 2009 00:00:00 +0000

A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern California’s RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.

Additions to a Design Tool for Visualizing the Energy Implications of California’s Climates

Fri, 17 Apr 2009 00:00:00 +0000

In California there are 16 different climate zones as defined in the California Energy code (Title 24). The code requires slightly different types of buildings in each zone. These different building code requirements make it important for architects, builders, contractors, and homeowners to understand the resources of their unique local climate and how it will influence the performance of their buildings. The objective of this project is to create a tool called Climate Consultant 4.0 that adds a number of features to those in the prior version 3.0, including new graphic screens such as a Monthly Diurnal Averages plot. It also calculates a set of the Top 20 Design Guidelines based on your unique climate, and displays a sketch illustrating how each applies. A new dynamic graphic tutorial has been created to explain the Psychrometric Chart, and how the relationship between air temperature and humidity influences human thermal comfort and HVAC systems design. Climate Consultant...

The Potential of Cellulosic Ethanol Production from Municipal Solid Waste: A Technical and Economic Evaluation

Wed, 15 Apr 2009 00:00:00 +0000

Municipal solid waste (MSW) is an attractive cellulosic resource for sustainable production of transportation fuels and chemicals because of its abundance, the need to find uses for this problematic waste, and its low and perhaps negative cost. However, significant heterogeneity and possible toxic contaminants are barriers to biological conversion to ethanol and other products. In this study, we obtained six fractions of sorted MSW from a waste processing facility in Fontana, California: 1) final alternative daily cover (ADC Final), 2) ADC green, 3) woody waste, 4) grass waste, 5) cardboard, and 6) mixed paper. Application of dilute sulfuric acid pretreatment followed by enzymatic hydrolysis gave the highest sugar yields in cardboard and ADC final fractions at enzyme loadings of 100 mg enzyme protein/g sugars of raw materials. Treatment with our non-catalytic protein detoxification technology before adding enzymes improved sugar yields at low enzyme loading of 10 mg enzyme...

Clearing the Air? The Effects of Gasoline Content Regulation on Air Quality

Wed, 15 Apr 2009 00:00:00 +0000

This paper examines the effects of U.S. gasoline content regulations on groundlevel ozone pollution. These regulations are costly and have been shown to fragment gasoline markets and raise prices paid by consumers. We provide the first comprehensive empirical estimates of the regulations’ air quality benefits. We exploit the fact that gasoline regulations vary by time and place of introduction, using both difference-in-difference and regression discontinuity designs. We show that federal regulations targeting the emissions of volatile organic compounds (VOCs), one of the two main precursors to ozone, do not substantially improve air quality. This outcome is driven by the response of refiners to the regulation: minimizing the cost of abatement involves removing a type of VOC from gasoline that is not an important determinant of ozone pollution. In California, however, we show that precisely targeted regulations requiring the removal of VOCs particularly prone to forming ozone...

Program Evaluation and Incentives for Administrators of Energy-Efficiency Programs: Can Evaluation Solve the Principal/Agent Problem?

Fri, 3 Apr 2009 00:00:00 +0000

This paper addresses the nexus between the evaluation of energy-efficiency programs and incentive payments based on performance for program administrators in California. The paper describes problems that arise when evaluators are asked to measure program performance by answering the counterfactual question, what would have happened in the absence of the program? Then the paper examines some ways of addressing these problems. Key conclusions are 1) program evaluation cannot precisely and accurately determine the counterfactual, there will always be substantial uncertainty, 2) given the current state of knowledge, the decision to tie all of the incentive to program outcomes is misguided, and 3) incentive programs should be regularly reviewed and revised so that they can be adapted to new conditions.

Regulation, Allocation, and Leakage in Cap-and-Trade Markets for CO2

Fri, 3 Apr 2009 00:00:00 +0000

Among the most contentious elements of the design of cap-and-trade systems for emissions trading is the allocation or assignment of the emissions credits themselves. Policy-makers usually try to satisfy a range of goals through the allocation process, including easing the transition costs for high-emissions firms, reducing leakage to unregulated regions, and mitigating the impact of the regulations on product prices such as electricity. In this paper we develop a detailed representation of the US western electricity market to assess the potential impacts of various allocation proposals. Several proposals involve the “contingent” allocation of permits, where the allocation is tied to the output, or input use, of plants. These allocation proposals are designed with the goals of limiting the pass-through of carbon costs to product prices, mitigating leakage, and of mitigating the costs to high-emissions firms. However, contingent allocation can greatly inflate permit prices, thereby...

Aluminum Microfoams for Reduced Fuel Consumption and Pollutant Emissions of Transportation Systems

Wed, 14 Jan 2009 00:00:00 +0000

Because of frequent acceleration and slowing down and the high speed of most transportation systems, lightweight structural materials are needed to reduce their energy consumption while maintaining safety. Considering the extensive use of energy intensive transportation systems in the United States even a small increase in energy efficiency will result in significant energy savings and reduction in pollutant emissions. Closed-cell solid foams and microfoams are of particular interest since they are light and feature outstanding combination of mechanical, electrical, acoustic, and thermal properties.

The Implications of a Gasoline Price Floor for the California Budget and Greenhouse Gas Emissions

Wed, 14 Jan 2009 00:00:00 +0000

California is faced with an unprecedented budget crisis. The state is also committed to significant reductions in greenhouse gases that cause climate change. Meanwhile, the price of gasoline is plunging as the world economic slowdown cuts oil demand. At the intersection of these three situations lies an opportunity. In this policy paper, I analyze the effects of a transportation fuel surcharge that moves inversely to the price of oil. Such a surcharge could stabilize gasoline prices at levels that a few months ago would have been celebrated by consumers and still significantly reduce California’s budget deficit. It would also slow the return of gas-guzzling vehicles that will otherwise result if oil prices remain at current levels.

Improving the Energy Performance of Data Centers

Wed, 14 Jan 2009 00:00:00 +0000

Data centers greatly impact California’s natural environment and economy. These buildings host computer equipment that provide the massive computational power, data storage, and global networking that is integral to modern information technology. The concentration of densely packed computer equipment in data centers leads to power demands that are much higher than those of a typical residence or commercial office building. Data centers typically consume 15 times more energy per square foot than a typical office building and, in some cases, may be 100 times more energy intensive (Greenberg et al. 2003). Nationally, data centers consumed 61 Terawatt hours in 2006; equivalent to the practical power generation of more than 10, 1 Gigawatt nuclear power plants (Brown et al., 2007). This is approximately equal to annual electricity consumption for the entire state of New Jersey (EIA, 2006). California has the largest data center market in the U.S., indicating that a significant portion...

Does Daylight Saving Time Save Energy? Evidence from a Natural Experiment in Indiana

Mon, 24 Nov 2008 00:00:00 +0000

The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, consistent practice today, and recent extensions, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. Focusing on residential electricity demand, we conduct the first-ever study that uses micro-data on households to estimate an overall DST effect. The dataset consists of more than 7 million observations on monthly billing data for the vast majority of households in southern Indiana for three years. Our main finding is that—contrary to the policy’s intent—DST increases residential electricity demand. Estimates...

Sacred Cars? Optimal Regulation of Stationary and Non-stationary Pollution Sources

Mon, 24 Nov 2008 00:00:00 +0000

For political and practical reasons, environmental regulations sometimes treat point source polluters, such as power plants, differently from mobile source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NOx), the criteria air pollutant that has proven to be the most recalcitrant in the United States. We find significant differences in marginal abatement costs across source types with the marginal cost of reducing NOx from cars less than half of the marginal cost of reducing NOx from power plants. Our findings have important implications for the efficiency of NOx emissions reductions and, more broadly, the benefits from increasing the sectoral scope of environmental regulation. We estimate that the costs of achieving the desired emissions reductions could have been reduced by nearly $2 billion, or 9 percent of program costs, had marginal abatement costs been equated across source types.

Equity Effects of Increasing-Block Electricity Pricing

Mon, 24 Nov 2008 00:00:00 +0000

Utility regulators frequently attempt to use tariff structures to pursue both distributional and efficiency goals. Efficiency necessitates setting prices as close to marginal costs as possible while still allowing the firm to cover its costs. The common distributional goal is to protect low-income customers from high prices. Perhaps nowhere is the conflict between these goals greater than in the use of increasing-block residential utility pricing, in which the marginal price to the customer increases as the customer’s usage rises. Since the 2000-01 California electricity crisis, the state has adopted some of the most steeply increasing-block tariffs in electric utility history, but the distributional and efficiency effects have not been analyzed in detail. Using a novel approach for matching customer bill data with census data on area income distributions, I derive estimates of the income redistribution effected by the increasing-block tariffs used by California regulated electric...

When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market

Mon, 20 Oct 2008 00:00:00 +0000

Intertemporal tradability allows an emissions market to reduce abatement costs. We study intertemporal trading of nitrogen oxides permits in the RECLAIM program in Southern California. A theoretical model captures the program’s key intertemporal features: two overlapping permit cycles, two compliance cycles for facilities, and tradable permits. We characterize the competitive equilibrium; show that it is cost effective; and demonstrate the firms’ incentive to delay abatement, i.e., to trade intertemporally. Using model extensions to explore market design issues, an arbitrage condition implies that the equilibrium is invariant to overlapping compliance cycles, but depends crucially on overlapping permit cycles. We empirically investigate intertemporal trading of permits using panel data on RECLAIM facilities for 1994-2006. Facilities undertake trading by using a considerable proportion of permits of the opposite cycle. We econometrically test two theoretical propositions – delayed...

Toward ZnO Light Emitting Diode

Mon, 20 Oct 2008 00:00:00 +0000

It is estimated that about 25% of all electrical energy is used for lighting purposes. Light-emitting diode (LED)-based lighting technologies can be a factor of nearly 10 times more efficient than incandescent lighting and a factor of about 2-3 times more efficient than fluorescent lighting technologies. It is predicted by Department of Energy (DOE) that by 2025 the use of solid-state lighting will reduce national energy consumption for lighting by 29%. The cumulative energy savings from 2006 to 2025 would result in more than 125 billion dollars of savings to consumer electricity bills. LEDs based on Gallium Nitride (GaN) materials are currently widely developed to conserve electrical energy in numerous lighting applications, such as headlights of vehicles, traffic lights, outdoor displays, and some indoor lighting. The trend towards higher brightness, lower operating current, and longer lifetime has increased the needs for developing alternative next-generation LEDs. Zinc...

Dynamics of the Oil Transition: Modeling Capacity, Costs, and Emissions

Mon, 20 Oct 2008 00:00:00 +0000

The global petroleum system is undergoing an “oil transition,” shifting from conventionally produced petroleum to a suite of substitutes for conventional petroleum (SCPs). This paper describes the Regional Optimization Model for Emissions from Oil Substitutes, or ROMEO, which models this oil transition. ROMEO models the dynamics of the transition to substitutes for oil and the environmental impacts (greenhouse gas (GHG) intensity) of such a transition. It models the global liquid fuel market in an optimization framework. The ROMEO market mechanism operates differently than “perfect foresight” models: it solves each year sequentially, with each year optimized under uncertainty about future prevailing prices or resource quantities.

ROMEO includes more fuel types than models designed for integrated assessments of climate change. ROMEO also includes the differing carbon intensities and costs of production of these fuel types. We use ROMEO to calculate the uncertainty of future...

Economic and Emissions Implications of Load-Based, Source-based and First-seller Emissions Trading Programs under California AB32

Mon, 20 Oct 2008 00:00:00 +0000

In response to Assembly Bill 32, the State of California is considering three types of carbon emissions trading programs for the electric power sector: load-based, source-based, and first-seller. They differ in terms of their point-of-regulation, and in whether in-state-to-out-of-state and out-of-state-to-in-state electricity sales are regulated. In this paper, we formulate a market equilibrium model for each of the three approaches, considering power markets, transmission limitations, and emissions trading, and making the simplifying assumption of pure bilateral markets. We analyze the properties of their solutions and show the equivalence of load-based, first-seller and source-based approaches, when power sales in both directions are regulated under the cap. A numeric example illustrates the emissions and economic implications of the models. In the simulated cases, "leakage" eliminates most of the emissions reductions that the regulations attempt to impose. Further, "contract...

Understanding Crude Oil Prices

Mon, 20 Oct 2008 00:00:00 +0000

This paper examines the factors responsible for changes in crude oil prices. The paper reviews the statistical behavior of oil prices, relates these to the predictions of theory, and looks in detail at key features of petroleum demand and supply. Topics discussed include the role of commodity speculation, OPEC, and resource depletion. The paper concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it may be an important feature of the most recent data.

Fundamental Studies of Diffusion and Reactions in Hydrogen Storage Materials

Mon, 20 Oct 2008 00:00:00 +0000

Hydrogen can serve as an energy carrier in a carbon-neutral system of energy production and use [1,2], but adequate hydrogen storage materials are still lacking in spite of many decades of investigations. In addition to being reversible and meeting stringent weight % and volume criteria, candidate materials must exhibit favorable kinetics for hydrogen uptake and release. The fundamental mechanisms of the (de)hydrogenation process have remained elusive to date. We have initiated a study of the relevant reactions, resulting in an identification of the dominant defect species involved in hydrogen transport in non-metallic hosts. While the concepts discussed here are general, we illustrate them with detailed first-principles results for sodium alanate. We identify hydrogen-related point defects as the essential mediators of hydrogen transport. A novel finding of this work is that the defects are positively or negatively charged, and hence their formation energies are Fermi-level...

Model Studies of Pore Stability and Evolution in Thermal Barrier Coatings (TBCs)

Thu, 24 Jan 2008 00:00:00 +0000

Studies of high-temperature morphological evolution of controlled-geometry surface cavities and of controlled-geometry internalized pores etched into (100) and (111) surfaces of yttria-stabilized zirconia (YSZ) have been conducted. Results show significant crystallography-dependent variations in the morphologies and evolution rates. The terraceledge structures on (100) and (111) YSZ surfaces differ substantially. Internalized pores that are largely or partially bounded by {111} surfaces are particularly stabilized with regard to shape relaxation and axial instability. The results suggest that controlled variation of thermal barrier coating (TBC) texture and microstructure could result in significant changes in stability and lifetimes.

Cost, Conflict and Climate: U.S. Challenges in the World Oil Market

Thu, 24 Jan 2008 00:00:00 +0000

Dramatic increases in the price of crude oil during the last half of 2007 have ratcheted up attention on energy policy, but cost is only one of the three oil challenges that confront the U.S. This short essay discusses the recent increases in oil prices and attempts to clarify how the challenge from high oil costs interacts with, but is distinct from, the geopolitical and climate change challenges that oil use also creates. Central to addressing these challenges successfully is recognizing that policy responses need to be evaluated in the context of the worldwide oil market.

The Market Value and Cost of Solar Photovoltaic Electricity Production

Thu, 24 Jan 2008 00:00:00 +0000

The high cost of power from solar photovoltaic (PV) panels has been a major deterrent to the technology’s market penetration. Proponents have argued, however, that typical analyses overlook many of the benefits of solar PV. Some of those benefits are in the realm of environmental and security externalities, but others occur within the electricity markets. In this paper, I attempt to do a more complete market valuation of solar PV. I incorporate the fact that power from solar PV panels is generated disproportionately at times when electricity is most valuable due to high demand and increased line losses. I find that the degree to which the timing of solar PV production enhances its value depends very much on the extent to which wholesale prices peak with demand, which in turn depends on the proportion of reserve capacity held in the system. In a typical US system with substantial excess capacity, I find that the favorable timing of solar PV production increases its value by...

Electricity Rate Structures and the Economics of Solar PV: Could Mandatory Time-of-Use Rates Undermine California’s Solar Photovoltaic Subsidies?

Wed, 9 Jan 2008 00:00:00 +0000

In May 2007, a Los Angeles Times newspaper article reported that the California Solar Initiative (CSI), commonly called the "million solar roofs" program, was being hobbled by a requirement that recipients of the solar PV subsidies go on time-of-use (TOU) rates. TOU rates charge higher prices for electricity at peak demand times (primarily weekday summer afternoons in California) and lower prices at off-peak times than the more common flat-rate tariff, which imposes the same price for a kilowatt-hour (kWh) of electricity at all times. The LA Times story reported that orders for solar installations had dropped 78% since January 1, 2007 when the TOU-mandate went into effect for solar-rebate recipients. By June, California regulators had eliminated the TOU mandate. I examine data from a sample of 274 medium- to high-use residential customers of Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) to see if the TOU mandate makes the solar rebate program...

Principal-agent incentives, excess caution, and market inefficiency: Evidence from utility regulation

Wed, 9 Jan 2008 00:00:00 +0000

Regulators and firms often use incentive schemes to attract skillful agents and to induce them to put forth effort in pursuit of the principals’ goals. Incentive schemes that reward skill and effort, however, may also punish agents for adverse outcomes beyond their control. As a result, such schemes may induce inefficient behavior, as agents try to avoid actions that might make it easier to directly associate a bad outcome with their decisions. In this paper, we study how such caution on the part of individual agents may lead to inefficient market outcomes, focusing on the context of natural gas procurement by regulated public utilities. We posit that a regulated natural gas distribution company may, due to regulatory incentives, engage in excessively cautious behavior by foregoing surplus-increasing gas trades that could be seen ex post as having caused supply curtailments to its customers. We derive testable implications of such behavior and show that the theory is supported...

Learning by Drilling: Inter-Firm Learning and Relationship Persistence in the Texas Oilpatch

Wed, 9 Jan 2008 00:00:00 +0000

Production in many industries, such as construction and heavy manufacturing, relies on inputs from both lead firms and contractors. These firms’ joint productivity often hinges on their ability to share information and coordinate activities, suggesting that they have strong incentives to learn about each other’s personnel, procedures, and expertise. This learning differs from standard learning-by-doing in that it is relationship-specific: its benefits are not appropriable outside the relationship in which the learning takes place. In this paper, I empirically examine the importance of relationship-specific learning using high-frequency data from oil and gas drilling. I find that the joint productivity of a lead firm and its drilling contractor is enhanced significantly as they accumulate experience working together. This result is robust to other relationship specificities. I also find that firms appear to recognize the benefits of joint experience: controlling for other specificities,...

The Implementation of California AB 32 and its Impact on Wholesale Electricity Markets

Wed, 9 Jan 2008 00:00:00 +0000

California is considering the adoption of a cap-and-trade regulatory mechanism for regulating the greenhouse gas emissions from electricity and perhaps other industries. Two options have been widely discussed for implementing cap-and-trade in the electricity industry. The first is to regulate the emissions from electricity at the load-serving entity (LSE) level. The second option for implementation of cap-and-trade has been called the “first-seller” approach. Conceptually, under first-seller, individual sources (i.e. power plants) within California would be responsible for their emissions, as with traditional cap-and-trade systems. Emissions from imports would be assigned to the “importing firm.” An option that has not been as widely discussed is to implement a pure source-based system within California, effectively excluding imports from the cap-and-trade system altogether. This paper examines these three approaches to implementing cap-and-trade for California’s electricity...

Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US

Wed, 9 Jan 2008 00:00:00 +0000

This paper produces the first large-scale estimates of the US health related welfare costs due to climate change. Using the presumably random year-to-year variation in temperature and two state of the art climate models, the analysis suggests that under a ‘business as usual’ scenario climate change will lead to an increase in the overall US annual mortality rate ranging from 0.5% to 1.7% by the end of the 21st century. These overall estimates are statistically indistinguishable from zero, although there is evidence of statistically significant increases in mortality rates for some subpopulations, particularly infants. As the canonical Becker-Grossman health production function model highlights, the full welfare impact will be reflected in health outcomes and increased consumption of goods that preserve individuals’ health. Individuals’ likely first compensatory response is increased use of air conditioning; the analysis indicates that climate change would increase US annual...

Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage

Wed, 9 Jan 2008 00:00:00 +0000

For political, jurisdictional and technical reasons, environmental regulation of industrial pollution is often incomplete: regulations apply to only a subset of facilities contributing to a pollution problem. Policymakers are increasingly concerned about the emissions leakage that may occur if unregulated production can be easily substituted for production at regulated firms. This paper analyzes emissions leakage in an incompletely regulated and imperfectly competitive industry. When regulated producers are less polluting than their unregulated counterparts, emissions under incomplete regulation exceed the level of emissions that would have occurred under complete regulation. The reverse can be true when regulated firms are relatively dirty. In a straightforward application of the theory of the second best, I show that incomplete regulation can welfare dominate complete regulation of emissions from an asymmetric oligopoly. The model is used to simulate greenhouse gas emissions...

Towards a Sustainable Energy Balance: Progressive Efficiency and the Return of Energy Conservation

Wed, 9 Jan 2008 00:00:00 +0000

We argue that today’s primary focus on energy efficiency may not be sufficient to slow (and ultimately reverse) the growth in total energy consumption and carbon emissions. Instead, policy makers need to return to an earlier emphasis on “conservation,” with energy efficiency seen as a means rather than an end in itself. We briefly review the concept of “intensive” versus “extensive” variables (i.e., energy efficiency versus energy consumption), and why attention to both consumption and efficiency is essential for effective policy in a carbon- and oil-constrained world with increasingly brittle energy markets. To start, energy indicators and policy evaluation metrics need to reflect energy consumption as well as efficiency.

We introduce the concept of “progressive efficiency,” with the expected or required level of efficiency varying as a function of house size, appliance capacity, or more generally, the scale of energy services. We propose introducing progressive efficiency...

Greenhouse Gas Reductions Under Low Carbon Fuel Standards?

Tue, 17 Jul 2007 00:00:00 +0000

A low carbon fuel standard (LCFS) seeks to reduce greenhouse gas emissions by capping an industry’s carbon emissions per unit of output. California has launched an LCFS for automotive fuels; others have called for a national LCFS. We show that this policy causes production of high-carbon fuels to decrease but production of low-carbon fuels to increase. The net effect of this may be an increase in carbon emissions. The LCFS may also reduce welfare, and the best LCFS may be no LCFS. We simulate the outcomes of a national LCFS, focusing on gasoline and ethanol as the high- and low-carbon fuels. For a broad range of parameters, we find that the LCFS is unlikely to increase CO2 emissions. However, the surplus losses from the LCFS are quite large ($80 to $760 billion annually for a national LCFS reducing carbon intensities by 10 percent), and the average carbon cost ($307 to $2,272 per ton of CO2 for the same LCFS) can be much larger than damage estimates. We propose an efficient...

Measurement of Oil and Gas Emissions from a Marine Seep

Tue, 17 Jul 2007 00:00:00 +0000

Understanding the flows of fluids and carbons on continental margins is of great importance to understand their role in carbon budgets one important source of these fluid flows is marine hydrocarbon seeps (cold seeps). Seeps are found on all continental margins (Judd et al., 2002) and are important to global atmospheric budgets of the important greenhouse gas, methane, contributing an estimated 35-45 Tg yr-1 (Etiope and Klusman, 2002). Of this, marine seeps are estimated to contribute ~20 Tg yr-1 (Kvenvolden et al., 2001) or ~13% of natural emissions and primarily arises from methane hydrates and thermogenic source. Methane hydrates are a form of ice that is stable at high pressure and low temperature wherein methane gas is trapped in the ice crystal lattice. Methane hydrate deposits are estimated at 2000 Tg (Collett and Kuuskraa, 1998; Kvenvolden, 1999), and pose a significant climate threat should oceanic warming occur and lead to increased atmospheric greenhouse gases (Kennett...

California's Greenhouse Gas Policies: Local Solutions to a Global Problem?

Tue, 17 Jul 2007 00:00:00 +0000

emissions. This paper summarizes the initiatives likely to impact the electricity generating sector. We present calculations showing that there is a substantial risk that two of the most prominent policies could simply result in a reshuffling, on paper, of the electricity generating resources within the West that are dedicated to serving California. This reshuffling is different from the conventional leakage problem as it involves no physical changes to the way electricity is generated across regulated and unregulated regions, but is instead driven by a contractual reshuffling of who buys power from whom. The problem is similar to an ineffective consumer boycott. The problem is still present but less severe if more Western states adopt carbon limitations. We also show that some of the least market-based initiatives, the renewable portfolio standards (RPS), are likely to have the biggest near-term impact on the carbon-intensity of electricity generation in the West. Thus the...

A New Design Tool for Visualizing the Energy Implications of California's Climates

Tue, 17 Jul 2007 00:00:00 +0000

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.

Modeling the Flow in an Underflow Plenum

Tue, 17 Jul 2007 00:00:00 +0000

The object of this research is to examine the flow in a plenum of an underfloor air distribution system (UFAD). UFAD installations have often performed poorly because the air entering the space through different vents attached to the plenum has different temperatures. The temperature differences vary in time and can be as much as 5 °C from diffuser to diffuser. It is believed that these temperature inhomogeneities are a result of circulating patterns established in the air flow in the plenum, and that these circulations, in turn, are a result of specific supply and plenum geometries. We have carried out laboratory simulations and numerical modeling of the plenum flow in an attempt to establish the dependence of the flow patterns on the supply configurations. We have conducted a systematic study of the flow patterns for different forcing arrangements and discuss the implications for plenum design. In each case the plenum is square in plan form and the configurations studied...

Demand-Side Management and Energy Efficiency Revisited

Tue, 17 Jul 2007 00:00:00 +0000

The key finding of an influential paper that received the International Association for Energy Economists' Best Paper Award (2004) is that utilities have been overstating electricity savings and underestimating costs associated with energy efficiency demand side management (DSM) programs. This claim is based on point estimates of average DSM-related savings and costs implied by an econometric model of residential electricity demand. In this response we first argue that the choice of test statistics, by not weighting estimated savings and costs by utility electricity sales and DSM expenditures respectively, biases results in favor of rejecting the null hypothesis that utility-reported electricity savings reflect true values. We also note that utility estimates of average program savings and costs are rejected based on point estimates alone; no attempt is made to evaluate the uncertainty surrounding these estimates. We use the same data and econometric model to estimate the appropriate...

The Guy at the Controls: Labor Quality and Power Plant Efficiency

Tue, 17 Jul 2007 00:00:00 +0000

This paper examines the impact of individual human operators on the fuel efficiency of power plants. Although electricity generation is a fuel and capital intensive enterprise, anecdotal evidence, interviews, and empirical analysis support the hypothesis that labor, particularly power plant operators, can have a non-trivial impact on the operating efficiency of the plant. We present evidence to demonstrate these effects and survey the policies and practices of electricity producing firms that either reduce or exacerbate fuel efficiency differences across individual plant operators.

Virtual Divestitures, Will They Make A Difference?: Cournot Competition, Options Markets and Efficiency