Energy Policy in Practice
Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM
Swissotel Chicago, Zurich G
- Chair: Joseph A. Cullen, Washington University-St. Louis
Welfare Spillovers From Local Energy Policy: The Case of Renewable Portfolio Standards
AbstractRenewable portfolio standards (RPSs) are state-level policies that require in-state electricity providers to procure a minimum percentage of their electricity sales from renewable sources. Using both analytical and empirical models, we show that RPSs induce out-of-state emissions reductions because states allow for inter-state trade of the credits used for RPS compliance. When one state passes an RPS, it increases demand for credits faced by firms in other (potentially non-RPS) states. We find that increasing one state’s RPS stringency decreases coal<br />
generation and increases wind generation in outside states. In aggregate, this results in billions of dollars of annual welfare gains from avoided pollution.
Federal Coal Program Reform, the Clean Power Plan, and the Interaction of Upstream and Downstream Climate Policies
AbstractCan supply-side environmental policies that limit the extraction of fossil fuels reduce CO2 emissions? We study interactions between a specific supply-side policy – an environmental charge on federal coal, or “royalty adder” – and demand-side emissions regulation under the Clean Power Plan (CPP). Using a detailed dynamic model of the power sector, we estimate that, absent the CPP, a royalty adder equal to the social cost of carbon would generate three-quarters of the projected CPP emissions reductions. With the CPP in place, the royalty adder reduces emissions by reducing leakage and causing the CPP to be non-binding in some scenarios.
Pigouvian Taxes at Odds: Freight Vehicles and Externalities
AbstractIn the United States, freight truck taxes present a quandary: fuel taxes, which address environmental externalities, provide an incentive for trucks to increase their weight and with it, damage to roads and highways. Axle-weight distance charges address road damage but fail to correct for pollution externalities. Federal Courts in the United States have agreed with truckers that when states levy both taxes they impose an undue burden on truckers.
We estimate the relationship between diesel taxes, road damage, and environmental externalities using the “Weigh in Motion” (WIM) data that we have obtained for the states of California and New York. WIM data is collected on major highways from detectors embedded in the road, and offers a detailed picture of the weight and axle count of trucks on highways.
To address the endogeneity of fuel prices we regress the difference in weight between the two states on the difference in fuel prices, instrumenting for fuel prices with weather conditions in the northeastern US. Because diesel fuel and home heating oil are the same, abnormally cold or warm weather during the heating season affects the fuel price differential. Preliminary results suggest a 10% increase in fuel price increase vehicle weight by 0.5-1.0%. Quantile regression shows that these weight increases are pronounced among already heavy trucks. We find that a 50 cent diesel tax increase generates road damage equal to 10% of the increased tax revenues.
These regressions show substantial heterogeneity within states regions, likely due to variation in local industry demand. To address heterogeneity, we examine detector level results in New York and California, matching detectors on the basis of factors including the local industries, geography, and distribution of trucks’ axle-weights at that detector.
Joseph A. Cullen,
Washington University-St. Louis
Erik P. Johnson,
Georgia Institute of Technology
University of California-Berkeley
University of Colorado-Boulder
- Q4 - Energy