nep-ene New Economics Papers
on Energy Economics
Issue of 2023‒05‒22
sixty-four papers chosen by
Roger Fouquet
London School of Economics

  1. The dilemmas of relevance: exploring the role of Natural resources and Energy Consumption in managing climate crisis in Africa By Olatunji A. Shobande; Simplice A. Asongu
  2. Imported carbon emissions: evidence from French manufacturing companies By Dussaux, Damien; Vona, Francesco; Dechezleprêtre, Antoine
  3. Addressing the Leakage and Competitiveness Risks of Climate Policy By Aldy, Joseph E.
  4. Issues, Questions, and a Research Agenda for the Role of Pricing in Residential Electrification By Borenstein, Severin; Bushnell, James
  5. Cost Analysis and Emissions Projections under Power Sector Proposals in Reconciliation By Rennert, Kevin; Roy, Nicholas; Burtraw, Dallas
  6. Carbon Pricing and the Elasticity of CO2 Emissions By Rafaty, Ryan; Dolphin, Geoffroy; Pretis, Felix
  7. Mapping County-Level Exposure and Vulnerability to the US Energy Transition By Raimi, Daniel
  8. Emissions Projections under Alternative Climate Policy Proposals By Hafstead, Marc; Look, Wesley; Roy, Nicholas; Palmer, Karen; Linn, Joshua; Rennert, Kevin
  9. Partners, Not Rivals: The Power of Parallel Supply-Side and Demand-Side Climate Policy By Prest, Brian C.
  10. Options for EIA to Publish CO2 Emissions Rates for Electricity By Prest, Brian C.; Villanueva, Seth; Iler, Stuart; Palmer, Karen
  11. Carbon tax sectoral (CATS) model: a sectoral model for energy transition stress test scenarios By Pablo Aguilar; Beatriz González; Samuel Hurtado
  12. Rising US Income Inequality and Declining Residential Electricity Consumption: Is There a Link? By Linn, Joshua; Liang, Jing; Qiu, Yueming
  13. Climate change and sustainable growth: international initiatives and European policies. By Leonor Dormido; Isabel Garrido; Pilar L´Hotellerie-Fallois; Javier Santillán
  14. Matching Geographies and Job Skills in the Energy Transition By Raimi, Daniel; Greenspon, Jacob
  15. From Fabrics to Fossils: What Can the Decline of US Textile Manufacturing Teach Us About the Energy Transition? By Raimi, Daniel; Cook, Kamil
  16. Funding the Green Transition: Governance Quality, Public Debt, and Renewable Energy Consumption in Sub-Saharan Africa By Favour C. Onuoha; Stephen K. Dimnwobi; Kingsley I. Okere; Chukwunonso Ekesiobi
  17. Powering Up Cleaner Choices: A Study on the Heterogenous Effects of Social Norm-Based Electricity Pricing on Dirty Fuel Purchases By Salim Turdaliev
  18. Robust Market Potential Assessment: Designing optimal policies for low-carbon technology adoption in an increasingly uncertain world By Tom Savage; Antonio del Rio Chanona; Gbemi Oluleye
  19. Transmission of risks between energy and agricultural commodities: Frequency time-varying VAR, asymmetry and portfolio management By Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
  20. Five Myths About Carbon Pricing By Gilbert E. Metcalf
  21. Rising energy prices and productivity: short-run pain, long-term gain? By Christophe André; Hélia Costa; Lilas Demmou; Guido Franco
  22. Methane Fees' Effects on Natural Gas Prices and Methane Leakage By Prest, Brian C.
  23. Thinking the green transition: evidence from the automotive industry By Andrea Orame; Daniele Pianeselli
  24. The Greenhouse Gas Index for Products in 39 Industrial Sectors By Mares, Jan; Flannery, Brian
  25. State-Level Planning for Decarbonization: Critical Elements of Effective State Action By Bowen, Thomas; Ivanova, Chrissie; Palmer, Karen; Shobe, Bill; Domeshek, Maya
  26. Assessment of generation adequacy taking into account the dependence of the European power system on natural gas By Maike Spilger; Dennis Schneider; Christoph Weber
  27. The Evolving Role of Greenhouse Gas Emission Offsets in Combating Climate Change By Halem, Zachery M.; Aldy, Joseph E.
  28. Hydrogen Hubs: Is There a Recipe for Success? By Bioret, Lucie; Shih, Jhih-Shyang; Krupnick, Alan
  29. Energy efficiency policies in an agent-based macroeconomic model By Marco Amendola; Francesco Lamperti; Andrea Roventini; Alessandro Sapio
  30. Greening our Laws: Revising Land Acquisition Law for Coal Mining in India By Srivastav, Sugandha; Singh, Tanmay
  31. Learning How to Build Back Better through Clean Energy Policy Evaluation By Aldy, Joseph E.
  32. Do Renewables Create Local Jobs? By Natalia Fabra; Eduardo Gutiérrez; Aitor Lacuesta; Roberto Ramos
  33. Industrial Decarbonization and Competitiveness: A Domestic Benchmark Intensity Approach By Kopp, Raymond J.; Pizer, William; Rennert, Kevin
  34. Community Hubs to Support Energy Transition By Look, Wesley; Haggerty, Mark; Mazzone, Daniel
  35. Determining the Greenhouse Gas Index for Covered Products of Specific Manufacturers By Flannery, Brian; Mares, Jan
  36. Industrial policy for electric vehicle supply chains and the US-EU fight over the Inflation Reduction Act By Chad P. Bown
  37. Increasing supply for woody biomass-based energy through wasted resources: Insights from the US private landowners By Nguyen, Minh-Hoang; Quang-Loc, Nguyen; Jin, Ruining; Nguyen, Minh_Hieu Thi Dr; Nguyen, Thi-Phuong; La, Viet-Phuong; Vuong, Quan-Hoang
  38. Air pollution: a review of its economic effects and policies to mitigate them By Laura Hospido; Carlos Sanz; Ernesto Villanueva
  39. The Distribution of Air Quality Health Benefits from Meeting US 2030 Climate Goals By Burtraw, Dallas; Villanueva, Seth; Domeshek, Maya; Shih, Jhih-Shyang; Lambert, Kathy Fallon
  40. A Net-Zero Target Compels a Backwards Induction Approach to Climate Policy By Dolphin, Geoffroy; Pahle, Michael; Burtraw, Dallas; Kosch, Mirjam
  41. What Is An “Energy Community†? Alternative Approaches for Geographically Targeted Energy Policy By Pesek, Sophie; Raimi, Daniel
  42. An estimation of the carbon footprint in spanish credit institutions’ business lending portfolio By Luis Ángel Maza
  43. How Much Do Consumers Value Fuel Cost Savings? Evidence from the Passenger Vehicle Leasing Market By Ankney, Kevin; Leard, Benjamin
  44. Industrial Decarbonization and Competitiveness: Building a Performance Alliance By Kopp, Raymond J.; Pizer, William; Rennert, Kevin
  45. Nigeria’s Financial Sector Development and Crude Oil Exports: Is There a Link? By Ibitowa, Stephen Adesina
  46. Policies, Projections, and the Social Cost of Carbon: Results from the DICE-2023 Model By Lint Barrage; William D. Nordhaus
  48. The Social Cost of Carbon: Advances in Long-Term Probabilistic Projections of Population, GDP, Emissions, and Discount Rates By Rennert, Kevin; Prest, Brian C.; Pizer, William; Newell, Richard G.; Anthoff, David; Kingdon, Cora; Rennels, Lisa; Cooke, Roger; Raftery, Adrian E.; Å evÄ íková, Hana; Errickson, Frank
  49. The dynamic approach of modelling regional recovery investment policies using environmentally-extended SAM Matrix By Darlington Agbonifi
  50. How Is the US Pricing Carbon? How Could We Price Carbon? By Burtraw, Dallas; Fischer, Carolyn; Fowlie, Meredith; Williams III, Roberton C.; Cropper, Maureen L.; Aldy, Joseph E.
  51. Why the proposed Brussels buyers club to procure critical minerals is a bad idea By Cullen S. Hendrix
  52. Can Resource-backed Loans Mitigate Climate Change ? By Yacouba Coulibaly
  53. Predictive Maintenance on the Energy Distribution Grid - Design and Evaluation of a Digital Industrial Platform in the Context of a Smart Service System By Philipp zur Heiden; Jennifer Priefer; Daniel Beverungen
  54. The Heterogeneous Effects of Lockdown Policies on Air Pollution By Simon Briole; Augustin Colette; Emmanuelle Lavaine
  55. Machine Learning methods in climate finance: a systematic review By Andrés Alonso-Robisco; José Manuel Carbó; José Manuel Marqués
  56. Less disagreement, better forecasts: adjusted risk measures in the energy futures market By Zhang, Ning; Gong, Yujing; Xue, Xiaohan
  58. The Air Quality Effects of Uber By Kim, Yeong Jae; Sarmiento, Luis
  59. POWER for Transition: Investment in Coal Communities through the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative By Look, Wesley; James, Joey; Fedorko, Evan; Pesek, Sophie; Mazzone, Dan; Barone, Aurora; Shelton, Rebecca
  60. Bending the Moral Arc of Technological Adoption in Indonesia Towards Good By Ibrahim Kholilul Rohman; Maria Monica Wihardja
  61. Bayesian Predictive Distributions of Oil Returns Using Mixed Data Sampling Volatility Models By Virbickaite, Audrone; Nguyen, Hoang; Tran, Minh-Ngoc
  62. The Potential Distributional and Economic Wide Impact of the New Indonesia's VAT Law Implementation By Bisuk Abraham Sisungkunon; Atiqah Amanda Siregar; Wildan Al Kautsar Anky
  63. Coordination séquentielle des investissements dans la production d'électricité et dans le réseau électrique : le rôle des incitations renouvelables By Haikel Khalfallah; Bibata Sagnon
  64. Export Rebates and Import Charges for Border Tax Adjustments Under an Upstream US GHG Tax: Estimates and Methods By Flannery, Brian; Mares, Jan

  1. By: Olatunji A. Shobande (University of Aberdeen, UK); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The study examines the role of natural resources and energy consumption in managing the climate crisis in Africa, using annual series data from the World Bank from 1980 to 2019. The empirical strategy is based on the second-generation panel techniques that account for cross-sectional dependency in the series. Specifically, the empirical evidence is based on the Westerlund (2017) panel cointegration test, panel augmented mean group, common correlated effects mean group and the vector autoregressive-vector error correction approach. Evidence from the panel analysis confirmed the existence of Carbon Kuznets Curve (CKC) U-shaped nexus in Africa, but the country-level results are mixed. Furthermore, results using the vector autoregressive-vector correction model indicate possible convergence among the variables across the African countries. Natural resource unidirectionally Granger-causes carbon emissions. We suggest the consideration of environmental factors in the utilisation of natural resources. Similarly, energy efficiency is crucial to decouple carbon from energy usage. The study complements the extant literature by assessing the role of natural resources and energy consumption in managing climate crisis in Africa.
    Keywords: Carbon Kuznets Curve; carbon emission; Natural resource; climate crisis; energy consumption; Africa
    Date: 2023–01
  2. By: Dussaux, Damien; Vona, Francesco; Dechezleprêtre, Antoine
    Abstract: This paper analyzes imported carbon emission at the firm level. To do so, we combine information on emissions, imports, imported emissions and energy prices for French manufacturing firms between 1997 and 2014. We document a significant increase of the carbon emissions embedded in imports of French manufacturing companies over the period 1997 to 2014 that is attributable mainly to a shift towards more carbon-intensive products and countries. We then estimate the impact of imported emissions on domestic emissions and emission intensity using a shift-share instrumental variable strategy based on third countries supply shocks. We do not find compelling evidence of an impact of carbon imports on total emissions, but emission efficiency improves significantly in companies offshoring emissions abroad. A 10% increase in carbon offshoring causes a 4% decline in emission intensity. In addition, we find that the elasticity of domestic emission intensity to imported emissions is stronger in energy-intensive sectors, on high-productivity companies and among exporters. Reassuringly, the relationship between imported emissions and emission intensity does not seem to be driven by a pollution haven motive.
    Keywords: Horizon 2020 Framework Programme; project INNOPATHS (grant number 730403
    JEL: F18 F14 Q56
    Date: 2023–07–14
  3. By: Aldy, Joseph E. (Resources for the Future)
    Abstract: Over the past year, governments across the world have called for more ambitious goals to combat climate change. The European Union, Japan, the United Kingdom, and many other countries have pledged net-zero emission goals by mid-century, with China aiming to do so by 2060. In April, the Biden Administration pledged to cut its emissions in half by 2030 as part of a broader set of aims that includes a carbon-free power sector by 2035 and net-zero emissions economy-wide by 2050.At the same time, a number of governments have raised concerns about how ambitious domestic mitigation policies may impose adverse competitiveness pressures on domestic energy-intensive industries that in turn result in emissions leakage. To address such risks, policymakers have turned their attention to carbon border adjustments, a surcharge on imports from countries that do not have comparable climate policies.Challenges in Implementing Ambitious US Climate GoalsUnder current law, the United States has imperfect tools to deliver on the Biden Administration’s ambitious climate change goals. US climate policy is characterized by a patchwork of energy and environmental tax expenditures, appropriated spending, and regulations at federal, state, and local levels of government. These are subject to legal uncertainty, such as emissions regulatory standards; political uncertainty, such as tax credits with sunset provisions; technological uncertainty, such as on the innovation necessary to decarbonize the economy; and environmental uncertainty, such as the eventual emissions-cutting outcomes of the complicated, overlapping policy patchwork. Crafting an economy-wide, long-term emissions-cutting program requires new legislation. In the interim, making progress in combatting climate change, driving innovation, and leveraging partners around the world necessitate the Biden Administration’s use of all existing authorities as effectively as possible until Congress acts on a credible, durable climate change policy.Applying US Trade Law to Address Competitiveness ConcernsAs a part of this effort, the Biden Administration can explore ways of applying existing trade law to ensure that competitiveness pressures do not result in the leakage of emissions and the shifting of jobs to other jurisdictions with insufficient domestic emissions mitigation policies. Below, I describe briefly the policy principles that could guide this effort to use trade law to mitigate competitiveness risks, before elaborating on how US countervailing duty law could effectively satisfy these principles.
    Date: 2021–10–05
  4. By: Borenstein, Severin; Bushnell, James
    Abstract: Within most developed economies, the general blueprint for reducing greenhouse gas emissions involves decarbonizing the electric sector, followed by significant transitions to electricity within the transportation, commercial, and residential sectors. Recent trends summarized in Figure 1 reveal how early in this process the United States is. Overall US greenhouse gas (GHG) emissions declined from 5, 631 mmTons in 2010 to 5, 298 in 2018 despite a decade of economic growth. However, this drop of 333 mmTons reflected a nearly 500 mmTon/year decline in the electric sector partially offset by increases in all other major sectors, including the residential (958 to 1, 007) and transportation (1, 874 to 1, 935) sectors.Substantial progress has been made in electricity, and the combination of rapidly increasing renewable generation and looming retirements of substantial coal generation capacity suggest this will continue, if not accelerate. The GHG growth in all other sectors during the 2010s indicates just how important decarbonization in these sectors will be to accelerate declines in overall emissions. In this paper, we focus on two of these sectors: residential transportation (i.e., light-duty vehicles) and direct residential emissions. Unlike the decarbonization of electric generation, decarbonizing these sectors will require decisions by millions of individual consumers, who will in turn need to commit to newer technologies capable of providing services powered by electricity. There are a myriad of factors driving such choices, including the relative convenience of using the new technologies, the potential need for upgrading household electrical systems, and the relative costs of the new appliances or vehicles. Another factor is the age of these durable goods. Residential furnaces and water heaters can last more than 20 years, yet according to the Residential Energy Consumption Survey, over two-thirds of these appliances are currently less than 15 years old (Figure 2).One other fundamental factor is the costs of powering an electric vehicle (EV) or appliance relative to their conventional counterparts. While electric vehicles and appliances have been touted as significantly less expensive to use, this is not the case in all locations or circumstances. In a survey of the current electrification landscape, Davis (2021) shows that electricity price relative to other energy sources is the key consideration in consumer choices regarding space heating. Consumer acceptance of electric appliances will be impaired if they are only modestly less expensive, let alone more expensive, to use than their conventional counterparts, given the other challenges confronting a transition to electrification. This challenge is even more daunting when one considers how local environmental and utility regulatory policies affect energy prices. In the next two sections of this paper we characterize the marginal retail prices of the key fuels—electricity, gasoline, and natural gas—relative to the social marginal costs of those fuels. One key takeaway is that gasoline is underpriced relative to its social marginal cost in nearly all of the United States, while electricity is highly overpriced in some of the most populous parts of the country. In section 4 we discuss why the price of electricity, and to a lesser extent natural gas, came to be so much higher than social marginal cost, while gasoline remains underpriced. The main point here is that traditional approaches to utility rate design have created large upward biases in utility prices. While the underpricing of environmental externalities somewhat offsets this upward bias, on both coasts of the United States the externality costs are not sufficient to offset regulatory rate distortions in electricity. In Section 5 we explore options for correcting this situation. Most options involve a rethinking of both the objectives and implementation of utility rate design. In Section 6, we explore how mispricing energy is likely to affect incentives for residential electrification. Section 7 concludes with a list of topics for future research raised by the issues and analysis discussed.To read the full working paper, click "Download" above.
    Date: 2021–12–01
  5. By: Rennert, Kevin (Resources for the Future); Roy, Nicholas (Resources for the Future); Burtraw, Dallas (Resources for the Future)
    Abstract: Resources for the Future (RFF) deployed its electricity market model, Haiku, to examine the expected effects on the electricity sector of three policy proposals being considered for the budget reconciliation process: Clean Energy for America Act (CEAA) tax credit extensions, the Clean Electricity Performance Program (CEPP), and a carbon fee. Policy impacts were evaluated in terms of clean electricity generation, emissions reductions, and cost burden on consumers. We find:In 2030, the CEAA tax credit extensions achieve 69 percent clean generation, the CEAA combined with the CEPP achieves 78 percent clean generation, and the CEAA, CEPP, and a central case carbon fee achieve 91 percent clean generation.In 2030, the CEAA and CEPP together achieve 81 percent reduction from 2005 emissions levels in the electricity sector. Adding the central case carbon fee yields a 94 percent reduction.The combination of the CEAA, CEPP, and a central case carbon fee yields a 4.3 percent reduction in nationally averaged retail electricity prices for the 2022-2031 period.Policy scenario details can be found in the RFF issue brief “Emissions Projections under Alternative Climate Policy Proposals†and general modeling assumptions are detailed in the appendix of the issue brief “Emissions Projections for a Trio of Federal Climate Policies.†The CEAA as modeled includes direct pay to generators but excludes the energy efficiency investments to allow for direct comparison of cost-effectiveness across different supply-side policy investments. The CEAA as written is technology neutral, but Haiku only represents new builds of solar and wind. The CEPP is modeled as a $150 per MWh incentive to new solar and wind generation for the first year of operation and does not include a penalty for not achieving performance targets.[1] We assumed policies are implemented as described without strategic behavior from load serving entities. All policies modeled are exclusive to electricity generation and do not account for economy wide electrification, demand response (consumption is fixed for all policy scenarios), revenue use, or a broader economy-wide carbon fee. All dollar values are reported in 2018 USD and emissions estimates in metric tons. The Haiku model solves over a 30-year time horizon with outputs from 2020 to 2040.
    Date: 2021–10–07
  6. By: Rafaty, Ryan; Dolphin, Geoffroy (Resources for the Future); Pretis, Felix
    Abstract: We study the impacts of carbon pricing on CO2 emissions across five sectors for a panel of 39 countries covering 1990–2016. Constructing new sector-level carbon price data, we implement a novel approach to estimate the changes in CO2 emissions associated with (i) the introduction of carbon pricing regardless of the price level, (ii) the elasticity of emissions with respect to the price level, and (iii) the potential response of future emissions to possible carbon price trajectories. Using a synthetic control factor model, we find that the introduction of carbon pricing has reduced growth in total aggregate (national) CO2 emissions by 1–2 percent on average relative to imputed counterfactuals, with most abatement occurring in the electricity and heat sector. Exploiting variation in observed carbon prices to explain heterogeneity in treatment effects, we decompose the average treatment effect obtained from the synthetic control factor model to distinguish the effect of merely introducing a carbon price from the effect of the price level itself. We find a small and imprecisely estimated semielasticity of a 0.03 percent reduction in emissions growth per average $1/metric ton of CO2. Simulating the response of future global emissions to several possible carbon price trajectories, we conclude that carbon pricing alone, even if implemented globally at a level equivalent to the world’s current highest recorded price in Sweden, is unlikely to be sufficient to achieve emission reductions consistent with the Paris climate agreement. Click "Download" above to read the full working paper.
    Date: 2021–10–25
  7. By: Raimi, Daniel (Resources for the Future)
    Abstract: The urgent challenge of climate change necessitates an energy transition at unprecedented speed and scale (National Academies of Science, Engineering, and Medicine 2021). As the United States seeks to deeply reduce greenhouse gas emissions, and as public policies coupled with innovation accelerate the deployment of clean energy and associated technologies, economic changes will occur across the nation. But where are those economic changes likely to be concentrated, and which communities might be most vulnerable to disruptions?This analysis seeks to help answer those questions by combining a near-comprehensive view of fossil fuel activities at the county level with a range of socioeconomic, environmental, and public health indicators. The results can help policymakers better understand and prioritize which communities may be most vulnerable, and which may be most resilient, to accelerating changes in the US energy economy.Several recent analyses have sought to achieve related goals. In the scholarly literature, Carley et al. (2018) develop a framework to evaluate county-level vulnerability associated with the energy transition, incorporating measures of exposure (e.g., job losses), sensitivity (e.g., share of population living in poverty), and adaptive capacity (e.g., institutional capacity). They apply the framework to the case of renewable portfolio standards, which reduce emissions but increase electricity costs, and focus on communities that are vulnerable to these higher costs.Other recent work has reviewed the social outcomes of climate mitigation policies (Lamb et al. 2020), assessed transition-related socioeconomic and environmental risks for communities around the world (Sovacool et al. 2021), examined the vulnerability of low-income US households to higher energy costs (Brown et al. 2020), and proposed principles to guide policymakers (Muttitt and Kartha 2020; Bazilian et al. 2021). Scholars have also provided case studies of US coal communities, identifying challenges and proposing policy pathways to improve transition planning (Haggerty et al. 2018; Jolley et al. 2019; Roemer and Haggerty 2021). A recent analysis examines Appalachian communities, seeking to identify the main factors that help enable economic resilience as coal production has declined (Lobao et al. 2021).Taking a similar approach to this analysis, Snyder (2018) combines fossil fuel employment data from the Bureau of Labor Statistics (BLS) with socioeconomic measures to create an index of energy transition vulnerability for US counties. The paper provides an analogue to the current analysis but is limited in two ways. First, it aggregates all fossil fuel employment into a single category. As discussed in more detail below, the risks from climate policies vary considerably across fuels and technologies, a dynamic that Snyder does not take into account. As a result, for example, counties in Wyoming, which dominates US coal production, do not appear near the top of the index. Second, the rationale for including and weighting various metrics in the index is not clear, making it difficult to know whether the most important contributors to vulnerability are truly reflected in the index.In recent months, government entities and policy researchers have produced analyses to provide more practical guidance for policymakers. The White House Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization recently identified 25 US regions where fossil energy activities are concentrated, grouping regions by BLS metropolitan and nonmetropolitan classifications (Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization 2021). These groupings provide a useful starting point for understanding which regions are likely to be affected, but they offer limited geographic specificity and limited detail on socioeconomic and environmental risk factors.To develop a more granular geographically picture of which communities are most dependent on fossil energy as an economic driver, I produced a series of maps identifying the counties where fossil energy accounts for large shares of employment and wages (Raimi 2021). However, these maps were incomplete because the BLS data that underpin them are often suppressed for low-population (typically rural) counties, which may be particularly vulnerable to the effects of the energy transition. In addition, that analysis did not incorporate additional measures of socioeconomic or environmental vulnerability.The purpose of this analysis is to produce a tool that can guide policymakers in focusing attention and resources on the appropriate places at the appropriate time. To that end, it makes three main contributions. First, it identifies all US counties (or equivalent governmental units) that are heavily dependent on fossil energy as an economic driver, ranking them by the scale of the relevant energy activity. Second, it provides a high level of geographic specificity (county level). Third, it includes not only measures of energy activity but also metrics to assess the socioeconomic and environmental risk factors present in each county. Taken together, these metrics should give policymakers practical guidance on which US communities are most vulnerable to the economic effects of a transition away from fossil fuels.Importantly, this analysis can (and will) be improved in the months ahead. Future work will seek to refine the relevant socioeconomic and environmental indicators, perhaps developing an index to more easily prioritize counties (though, as noted above and discussed more below, index creation presents methodological issues). In addition, it will seek to better characterize how effects may evolve over time in different locations. For example, ambitious climate policies are likely to cause more rapid declines in coal production than natural gas production, leading to differential timing between coal-producing and natural gas–producing communities. What’s more, there is variation within fuels: coals, oils, and natural gases produced in different locations have different life-cycle emissions characteristics, and those with lower life-cycle emissions, better access to markets, and other economic advantages are likely to be most resilient, at least in the near to medium term.Read the full paper here.The data tool, which includes maps for all listed indicators, can be found here.
    Date: 2021–12–14
  8. By: Hafstead, Marc (Resources for the Future); Look, Wesley (Resources for the Future); Roy, Nicholas (Resources for the Future); Palmer, Karen (Resources for the Future); Linn, Joshua (Resources for the Future); Rennert, Kevin (Resources for the Future)
    Abstract: Resources for the Future (RFF) staff utilized a suite of models to estimate the projected energy-related carbon dioxide emissions reductions under different climate policy proposals, including alternative carbon fee scenarios.The first scenario includes tax incentives for renewable energy, energy storage, energy efficiency, and clean light-, medium-, and heavy-duty vehicles (similar to the Clean Energy for America Act, CEAA) AND clean electricity targets embodied in grants to retail electricity service entities (similar to the goals embodied in the Clean Electricity Performance Program, CEPP) set at $150/MWh for the first year of operation. [1]The second set of scenarios includes the “central case†carbon fee scenario in which an economy-wide fee on emissions is set at $15 per metric ton CO2 beginning in 2023, rising to $30 in 2028, and increasing at $10 per year (above inflation) through 2040. We show results for this scenario for multiple policy cases:With and without an exemption for gasoline; andWith and without an exemption for gasoline in addition to CEAA and CEPP-type programsThe third scenario is an alternative economy-wide carbon fee that starts at $15 in 2023 and increases 5 percent annually (above inflation), without exemptions and without additional policies.Details on all major modeling assumptions are included in the RFF Issue Brief “Emissions Projections for a Trio of Federal Climate Policies.†[2]Figure 1 displays the two price path scenarios. By 2040, under the central case scenario, the carbon fee is $150 (in 2023$) whereas in the alternative carbon fee scenario, the fee is $34 in 2040.
    Date: 2021–09–16
  9. By: Prest, Brian C. (Resources for the Future)
    Abstract: Despite recent progress in securing international commitments to fight climate change, such as the Paris Agreement, current climate policies remain far from sufficient to limit global temperature rise to 1.5°C. While this indicates more aggressive steps are needed, many policy levers remain underutilized. By and large, the policies pursued thus far have focused on demand-side measures, such as fuel economy standards, that directly reduce the consumption of fossil fuels, whereas supply-side measures that directly reduce fossil fuel extraction have received relatively little attention. This lopsided focus is at odds with the International Energy Agency’s 1.5°C-consistent pathway, which entails “no investment in new fossil fuel supply projects†starting immediately. Similarly, Welsby et al. (2021) calculate that the same target would require leaving 60 percent of existing oil and gas reserves and 90 percent of coal reserves in the ground. Such reserves would seem to be a natural focus of climate policy. In the United States, greenhouse gas emissions associated with federally owned fossil fuels are equivalent to about 24 percent of annual US emissions (Merrill et al. 2018; Ratledge et al. 2022), giving the federal government direct control over the extraction of these resources. Abroad, even larger shares of fossil fuel reserves are directly owned by governments. Yet governments have largely eschewed policies that directly reduce fossil fuel extraction.Climate mitigation policies can generally be classified as either demand-side, directly reducing the consumption of fossil fuels and hence greenhouse gas emissions, or supply-side, directly reducing fossil fuel extraction. Historically, policymakers have overwhelmingly focused on demand-side measures. For example, in the United States, the Obama administration primarily pursued demand-side policies such as fuel economy standards and power plant regulations but did relatively little to directly reduce the production of fossil fuels. That focus on the demand side may stem in part from a common perception by policymakers and economists that supply-side policies are vulnerable to emissions “leakage†—in which reduced domestic fossil fuel production (and hence emissions) is simply offset by increased production and emissions elsewhere—to which demand-side policies are supposedly immune. But is that truly the case? Are these types of policies fundamentally different? More specifically, what are the major differences between these policies with respect to key outcomes such as leakage and, ultimately, global emissions reductions? This paper explores those questions and shows that the two types of policies are not fundamentally different with respect to leakage concerns. Although both types of policies can induce leakage on their own, when pursued jointly, they are in fact complementary, mitigating or even eliminating leakage.Critics frequently dismiss supply-side policies based on a notion that leakage undermines their effectiveness in reducing emissions globally. However, it is commonly overlooked that leakage is an issue for demand-side climate actions as well. For example, whereas analyses of the effects of federal oil and gas development frequently emphasize the potential for leakage of production to other regions, analyses of demand-side policies like fuel economy standards typically do not consider the analogous potential for leakage of consumption elsewhere.On their own, demand-side policies generate leakage by reducing the price of fossil fuels, making it cheaper for other consumers, such as those in other countries, to burn them. Supply-side policies analogously generate leakage by increasing the price of fossil fuels, encouraging more production elsewhere. The climate benefits of either supply- or demand-side policies are each reduced by emissions leakage, or substitution, just via different mechanisms. Despite this symmetry, leakage concerns are disproportionately raised in the context of supply-side policies.Leakage is not inevitable, though. Standard neoclassical economic theory shows that leakage can be avoided if supply- and demand-side policies are implemented in tandem and with equal ambition, in a quantitative sense in terms of the direct number of barrels of oil of consumption and production reduced. Intuitively, leakage is a problem either when demand-side policy suppresses global fossil fuel prices, making it cheaper for other countries to emit, or when supply-side policy boosts those prices and thereby makes it more profitable for other countries to produce more fossil fuels. But if both types of policies are implemented in parallel and in equal magnitude, these two effects can exactly offset each other: reduced supply is offset by reduced demand, muting or even eliminating the effect on global prices and hence the leakage problem. Conversely, a lopsided policy approach that addresses only demand or only supply will continue to generate leakage, demonstrating how the two kinds of policies can create synergies if pursued with similar ambition.In this study, I consider leakage under both types of climate policies and argue that these policies are better thought of as partners that complement each other, and not rivals or alternative policies, as they are commonly seen. I demonstrate this point using standard neoclassical economic theory. This exercise demonstrates conceptually symmetric leakage effects from both demand-side and supply-side policies—if each type of policy is pursued alone. But when both types of policies are pursued in parallel, their individual weaknesses become synergies, mitigating leakage.I first demonstrate this effect using a simple theoretical model that shows the effects of each policy type on the regional distribution of fossil fuel production and consumption. It shows how leakage can be reduced or eliminated, demonstrating that leakage can be eliminated by pursuing supply- and demand-side policies in tandem and with equal ambition.In addition to this theoretical exercise, I use an empirically calibrated model of US and global markets for oil and gas, developed in Prest (2022), to conduct a quantitative exercise of the synergies produced by pursuing supply-side policies (such as reduced development of oil and gas on US federal lands and waters) in parallel with the more commonly implemented demand-side ones (such as fuel economy standards). The results demonstrate how such policies complement each other by mitigating or even potentially eliminating leakage.Beyond the issue of leakage, I outline other benefits of pursuing parallel policies, from both economic and political economy perspectives. I also discuss how the demand-centric structure of existing emissions accounting systems inefficiently skews policymakers’ incentives away from supply-side actions and in favor of demand-side ones. Overall, supply-side policies represent underappreciated tools for reducing greenhouse gas emissions, given their complementarities with more commonly pursued demand-side policies. This underappreciation is a contributor to the disproportionate focus by policymakers and economists alike on demand-side policies like fuel economy standards and power plant emissions intensity regulations.
    Date: 2022–04–21
  10. By: Prest, Brian C. (Resources for the Future); Villanueva, Seth (Resources for the Future); Iler, Stuart; Palmer, Karen (Resources for the Future)
    Abstract: Demand for data on the CO2 intensity of US electricity consumption is growing as governments and private companies seek to understand the emissions effects of both their electricity consumption and their clean energy investment choices. The desire for transparent and consistent data on electricity emissions rates led the US Congress, in the Infrastructure Investment and Jobs Act, to call for the US Energy Information Administration (EIA) to publish spatially and temporally granular electricity emissions rate data, beginning in late 2022. This report reviews the use cases for emissions rate data and options available to EIA to publish data on both average and marginal emissions rates, and it presents relevant findings and recommendations for EIA to consider.
    Date: 2022–08–11
  11. By: Pablo Aguilar (Banco de España); Beatriz González (Banco de España); Samuel Hurtado (Banco de España)
    Abstract: This paper presents a general equilibrium sectoral model designed to produce macroeconomic scenarios that incorporate transition risks associated with policies to curb climate change (but not physical risks associated with the long-term costs of climate change). The model is calibrated to the Spanish economy, and can simulate the impact of shocks to the price and coverage of greenhouse gas emission allowances, with particular attention to sectoral asymmetries arising from (i) the energy intensity of each industry, (ii) the source of that energy, and (iii) the interdependencies with other industries. We show that for an increase in the price of emission allowances similar to that observed in recent years (from approximately €25 per tonne of CO2 in 2019 to almost €100 per tonne in 2022) the model predicts a cumulative decline in Spanish GDP after three years of 0.37%. The loss in value added is very heterogeneous across industries, ranging from 4% in the most severely affected industries to virtually no impact in the least affected industries. In terms of the use of the model for stress testing, this heterogeneity points to potential risks for financial stability and the importance of the right diversification for banks to diminish their exposure to transition risks.
    Keywords: climate change, stress test, input-output matrix
    JEL: Q48 H30
    Date: 2022–09
  12. By: Linn, Joshua (Resources for the Future); Liang, Jing; Qiu, Yueming
    Abstract: After growing steadily for decades, in the mid-2000s, average US household energy consumption began declining. Using household-level data from the Residential Energy Consumption Survey and Current Population Survey between 1990 and 2020, we decompose overall changes in per-household consumption into three components: a) average income; b) cross-household income and geographic distribution; and c) consumption habits, which includes energy efficiency. Growth of average income caused consumption to increase by 11 percent, and rising income inequality reduced consumption by 9 percent, nearly entirely offsetting the effect of income growth. If inequality had remained at 1990 levels, average consumption would have continued growing steadily through 2020. After controlling for average income and the income distribution, changes in habits reduced consumption by a similar amount as rising income inequality. Back-of-the-envelope calculations indicate an unexpected effect of rising income inequality: climate and air quality improvements valued at $3.14 billion in 2020 due to lower electricity consumption. The results indicate the importance of coordinating inequality and pollution policies.
    Date: 2022–06–23
  13. By: Leonor Dormido (Banco de España); Isabel Garrido (Banco de España); Pilar L´Hotellerie-Fallois (Banco de España); Javier Santillán (Banco de España)
    Abstract: In recent years, the fight against climate change and for sustainable growth has been gaining prominence on the international agenda. Reducing pollutant emissions depends on a sufficiently large number of countries adopting efficient mitigating measures that are in line with international agreements. International cooperation is essential to deliver on the commitments undertaken pursuant to these agreements, implement the energy transition and stop climate change. Both the G-20, some of whose members are among the largest greenhouse gas emitters, and the International Monetary Fund are increasingly taking into account climate issues when performing their functions. The European Union plays an active and leading role in this global commitment and is pursuing increasingly ambitious goals. In compliance with the European Green Deal, the European Union has enshrined its goal of climate neutrality in the European Climate Law and has launched a number of groundbreaking policies to implement it, such as the “Fit for 55” package. The war in Ukraine adds an element of uncertainty to this path, given the importance of Russia as a supplier of fossil fuels to the European Union.
    Keywords: climate change, decarbonisation, European Union, G-20, IMF, COP, Green Deal, Ukraine/Russia.
    JEL: F53 P18 H23 H87 Q54 F64 F68
    Date: 2023–01
  14. By: Raimi, Daniel (Resources for the Future); Greenspon, Jacob
    Abstract: Driven by technological innovation, public policy, and other factors, the US energy system is facing rapid changes, raising concerns over potential job losses, particularly among fossil fuel workers. Because there will be considerable variation across the United States in the employment impacts of a changing energy landscape, policies must be tailored to local contexts. This analysis develops and implements a tool to help policymakers understand the localized opportunities and challenges that the US energy workforce may face in the years ahead. We first identify the exposure of local labor markets to job displacement in fossil fuel extraction, transportation, processing, and electricity industries. We then develop an empirical framework that assesses the extent to which the skill sets of existing fossil energy workers are a good match for growing job opportunities with similar pay in their local labor markets. We document substantial differences across local labor markets in terms of the demographics of local fossil fuel workforces, the skills they have attained from their current work, and how well these skills align with those in demand locally over the coming decade. We find that, with the exception of technical skills, the skills important to fossil fuel jobs typically are not the same as those necessary for fast-growing occupations with similar levels of pay, many of which require extensive service-oriented and management skills. Our methodology and associated analytical tools can be readily used to provide locally tailored information about skills gaps between the existing fossil energy workforce and in-demand sectors, suggesting areas where workforce development may bear the most fruit.
    Date: 2022–10–25
  15. By: Raimi, Daniel (Resources for the Future); Cook, Kamil
    Abstract: The imperative to reduce greenhouse gas emissions will almost certainly lead to a major economic transition for the people and places where coal, oil, and natural gas are produced, processed, and consumed at certain facilities, such as power plants. Although the needed scale and speed of the energy transition is unique (National Academies of Science, Engineering, and Medicine 2021), previous economic transitions may provide insight for decisionmakers at the local, regional, and national levels. In this analysis, we draw insights from textile manufacturing, which has undergone multiple transitions in the United States. We focus on public policies that were designed to support this industry and its workers during disruptions, and we draw four key lessons for the energy transition:Advanced planning and notification are crucial. This concept applies to individual workers, plants, and communities and extends further to reflect the importance of developing a predictable, long-term timeline for energy transition that allows all actors to plan appropriately for the future.Employment is more than a paycheck. Policymakers need to carefully consider the social dynamics associated with employment and transition. Workers value the identity and community created by their employment, and programs that preserve these connections are more likely to be successful.Flexibility is important. Each worker has a unique set of circumstances and preferences. Programs that restrict eligibility based on arbitrary criteria or impose tight timelines for benefits are unlikely to allow the flexibility that would benefit individuals and families as they make decisions about their future.We can do better. Evidence on the benefits of federal Trade Adjustment Assistance (TAA) is mixed at best, particularly for textile workers. The energy transition will need to improve on these outcomes if it is to be truly equitable.
    Date: 2021–08–31
  16. By: Favour C. Onuoha (Evangel University Akaeze, Nigeria); Stephen K. Dimnwobi (Nnamdi Azikiwe University, Awka, Nigeria); Kingsley I. Okere (Gregory University, Uturu, Nigeria); Chukwunonso Ekesiobi (Igbariam, Nigeria)
    Abstract: Prompted by the renewable energy funding challenge in sub-Saharan Africa (SSA) amid surging public debt in the region, this study investigates the moderating role of governance quality in the relationship between public debt and REC in the region using the Feasible Generalized Least Squares. The study established that public debt positively impacts REC, but the interactive effect of governance quality and public debt impedes REC. Policy prescriptions are put forward to address the funding challenges of transitioning to a green energy future in SSA by highlighting the critical role of governance.
    Keywords: Public Debt, Renewable Energy Consumption, Governance Quality, Sub-Saharan Africa
    Date: 2023–01
  17. By: Salim Turdaliev (Institute of Economic Studies, Faculty of Social Sciences, Charles University)
    Abstract: This paper examines the heterogeneous effects of the experimental introduction of increasing-block-tariffs (IBT) for residential electricity on the propensity to purchase dirty fuels using panel household data (RLMS-HSE) in a number of regions of Russia. The study demonstrates that despite the design of the IBT being based on prescribed social norms and accounting for various household and dwelling characteristics, the adverse effects of this policy (in the form of increased propensity to purchase dirty fuels) are still more pronounced among households with higher base energy consumption, those receiving subsidies for utilities, and those in a vulnerable social position where the household head's primary occupation is childcare or housekeeping. Additionally, the paper finds that households headed by females are actually 20% less likely to purchase dirty fuels due to the introduction of IBT. The findings suggest that policymakers should fine-tune the calculation of social norms to minimize the negative impacts of IBT. Furthermore, the study's results may be relevant and useful for policymakers in other developing and transition economies that aim to implement various energy reforms, including IBT.
    Keywords: residential electricity pricing, increasing-block-tariffs, heterogeneous treatment effects, social norms, dirty fuels, post-Soviet economy, Russia, natural experiment
    JEL: Q41 Q48 L98 L94
    Date: 2023–04
  18. By: Tom Savage; Antonio del Rio Chanona; Gbemi Oluleye
    Abstract: Increasing the adoption of alternative technologies is vital to ensure a successful transition to net-zero emissions in the manufacturing sector. Yet there is no model to analyse technology adoption and the impact of policy interventions in generating sufficient demand to reduce cost. Such a model is vital for assessing policy-instruments for the implementation of future energy scenarios. The design of successful policies for technology uptake becomes increasingly difficult when associated market forces/factors are uncertain, such as energy prices or technology efficiencies. In this paper we formulate a novel robust market potential assessment problem under uncertainty, resulting in policies that are immune to uncertain factors. We demonstrate two case studies: the potential use of carbon capture and storage for iron and steel production across the EU, and the transition to hydrogen from natural gas in steam boilers across the chemicals industry in the UK. Each robust optimisation problem is solved using an iterative cutting planes algorithm which enables existing models to be solved under uncertainty. By taking advantage of parallelisation we are able to solve the nonlinear robust market assessment problem for technology adoption in times within the same order of magnitude as the nominal problem. Policy makers often wish to trade-off certainty with effectiveness of a solution. Therefore, we apply an approximation to chance constraints, varying the amount of uncertainty to locate less certain but more effective solutions. Our results demonstrate the possibility of locating robust policies for the implementation of low-carbon technologies, as well as providing direct insights for policy-makers into the decrease in policy effectiveness resulting from increasing robustness. The approach we present is extensible to a large number of policy design and alternative technology adoption problems.
    Date: 2023–04
  19. By: Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
    Abstract: This paper examines energy and agricultural commodities' short-run and long-run connectedness by using the Time-varying parameter vector autoregressions (TVP-VAR). It applies the frequency version of the TVP-VAR model, which is a modified version of the dynamic TVP-VAR model. The frequency decomposition definition also decomposes into short-run and long-run connectedness. We further the analysis by investigating the effect of asymmetry in returns on connectedness. It also examines how portfolio management strategies would lead to a maximization of profits with minimal risks. Empirical evidence indicates that only 32.52% and 31.38% of connectedness in oil and gas, respectively, are transmitted to agricultural commodities, which suggests their weak tendencies in influencing agricultural commodities; the total connectedness index hovers around 40-60% in the 2018-2019 period; however, it dropped below 40% in 2020-2021 when the COVID-19 pandemic contributed to disintegrate the connectedness between energy and agricultural commodities but increased further during the 2022 Russia-Ukraine saga. The findings also indicate that corn, wheat, and flour are net transmitters of risks to oil and natural gas in the long and short-run, and wheat-flour pairwise connectedness is the strongest in the connectedness. Asymmetry is also pronounced in the network of connectedness. Portfolio analyses indicate that investors require a low proportion of energy in a portfolio of energy-agricultural commodities to achieve an optimum profit. The findings will offer exciting insights into the connectedness of agricultural and energy commodities, particularly during periods of high price uncertainty.
    Keywords: Agricultural commodity; Asymmetry; Frequency TVP-VAR; Optimal weight; Risk
    JEL: C22
    Date: 2023–02–03
  20. By: Gilbert E. Metcalf
    Abstract: While carbon pricing, in general, and carbon taxes, in particular, are popular with economists, they are subject to considerable misunderstanding among policy makers and the public. In this paper I consider and refute five myths about carbon taxes: 1) that a carbon price will hurt economic growth; 2) that carbon pricing will kill jobs; 3) that a carbon tax and cap and trade program have the same economic impacts; 4) that we can’t achieve carbon reduction targets with a carbon tax; and 5) that carbon pricing is regressive. I then discuss implications for policy making.
    JEL: H23 Q43 Q48 Q54
    Date: 2023–04
  21. By: Christophe André; Hélia Costa; Lilas Demmou; Guido Franco
    Abstract: Soaring energy prices have raised concerns about the risks energy price shocks pose for firms’ performance and the green transition. This paper estimates the impacts of energy price changes on firms’ productivity as well as their dynamics, distinguishing between the short and medium-to-long term, using historical data. The analysis shows that following an energy price shock, firms adjust down their capacity utilisation, and their productivity declines. The estimates suggest that a 5% increase in energy prices reduces productivity by approximately 0.4% one year later. However, firms may display positive productivity gains in the medium term. Specifically, a shock corresponding to a 10% increase in energy prices is associated with an increase in productivity growth of around 0.9 p.p four years after the shock. These gains are more likely in less energy-intensive sectors, but tend not to materialise for larger shocks. There is some evidence that investment may be the channel behind productivity gains, the latter being larger for firms that had made investments in capital just before the shock.
    Keywords: Energy prices, environmental policy, firm performance, productivity
    JEL: D22 D24 Q40 Q48 Q52
    Date: 2023–05–11
  22. By: Prest, Brian C. (Resources for the Future)
    Abstract: Methane (CH4) is both the primary component of natural gas and also a highly potent greenhouse gas. Methane routinely leaks out from oil and gas wells, pipelines, and processing facilities into the atmosphere, exacerbating climate change. While there is a private incentive for operators to reduce methane leaks to capture and sell it as a valuable commodity, the private incentive to capture the gas falls far short of — around 1/10th of — the social costs imposed by its leakage. As a result, basic economics demonstrates that industry will exert insufficient effort to capture that gas, relative to the social optimum. To combat this problem, economists and policymakers have proposed methane fees to both reduce greenhouse gas emissions and raise federal revenues (for example, as seen in S.645, H.R.4084).While, on the one hand, fees on methane leaks will further encourage oil and gas operators to proactively seek out and mitigate methane leaks, the additional fees will also raise the marginal cost of producing each unit of gas (typically measured in either thousand cubic feet, mcf, or million British thermal units, MMBtu). This increase in marginal cost is the net of three effects, two of which are cost increases (+) and one which represents a decrease (–).(+) The methane fee, assessed as a percentage of each MMBtu of gas production, represents a direct increase in gas producers’ operating cost;(+) The fee will induce gas producers to deploy more time, effort, and resources to reduce methane leaks, representing an indirect, induced operating cost; and(–) The reduced leakage rate resulting from (2) will mean more produced gas can be sold, reducing the cost of each delivered unit of gas.On net, these effects are likely to increase the marginal cost of gas production. In this issue brief, I use a simple economic model to estimate the effects of proposed methane fees on the marginal cost of gas production, methane leakage rates, and the resulting increase in wholesale natural gas prices. While the details are presented in the Appendix, the model simulates how a gas producer would respond to alternative methane fees, based on an augmented version of the model in Marks (2018). The model simulates, for each of a variety of potential methane fees (in units of $/ton CH4), how much gas producers may mitigate their methane leak rates and how much those fees may increase the cost of producing each unit (MMBtu) of gas, as well as how much of those resulting costs may be passed on to consumers. Finally, as a point of comparison, this brief presents as reference points various natural gas prices, such as wholesale and retail prices of natural gas delivered to different end-users (e.g., residential, commercial, industrial, and electric power).
    Date: 2021–09–09
  23. By: Andrea Orame (Bank of Italy); Daniele Pianeselli (Bank of Italy)
    Abstract: We study the European automotive industry in the 2013-2018 period. Volkswagen's Dieselgate scandal and the Paris Agreement, both in 2015, substantially caused a technological shock prompting firms to produce low-emissions cars. By using patent and mergers and acquisitions (M&A) data, we test how firms reacted to that shock. We provide evidence that Italian firms intensified their internal R&D activity but, unlike the rest of Europe, they did not increase their M&A activity. This can potentially reduce the speed of the green transition of Italian firms to the advantage of their competitors.
    Keywords: automotive, green transition, technical change, mergers and acquisitions, innovation, patents, electric car
    JEL: G34 L62 O14 O3
    Date: 2023–04
  24. By: Mares, Jan (Resources for the Future); Flannery, Brian (Resources for the Future)
    Abstract: In recent work, we proposed the GHG index (GGI) as a central concept and administrative tool to determine border adjustments (BAs)—export rebates and import charges for covered products.Flannery 2021. Accounting for Emissions in Global Trade with a Greenhouse Gas Index. Washington, DC: Resources for the Future. With colleagues Jennifer Hillman and Mathew Porterfield (both at Georgetown University Law Center at the time), we initially developed the GGI in the context of a potential upstream US GHG tax. Our Framework report describes how GGIs could be used to determine border tax adjustments (BTAs) compatible with World Trade Organization (WTO) obligations. Flannery, Brian P., Jennifer A. Hillman, Jan W. Mares, and Matthew C. Porterfield, 2020. Framework Proposal for a US Upstream GHG Tax with WTO-Compliant Border Adjustments: 2020 Update. Washington, DC: Resources for the Future. Among other criteria for WTO compatibility, the GGI incorporates relevant aspects of recognized international standards to determine the GHG emissions from an industrial facility and its supply chain, and then allocates them to products it manufactures (see Section 3 of the Framework). Essentially, a product’s GGI, which is expressed as tonnes of CO2 equivalent (CO2e) per tonne of product, multiplied by the GHG tax rate (US$ per tonne of CO2) determines its BTA (US$ per tonne of product). Note that the GGI itself does not depend on the policy used to set a GHG price. Rather, it is a technical metric, based on physical quantities associated with products (i.e., the carbon content of produced fossil resources and GHG process emissions required to create covered products used and produced by manufacturers). For that reason, the GGI could be used in the context of climate policies for BAs other than a GHG tax—or, more generally, as the basis for an international metric that associates GHG emissions with GHG-intensive products for various analyses and policies.For BAs based on a range of policies (besides a tax) that are now under consideration (see footnote 1), the GGI could serve as a metric to assign GHG emissions to products as the basis to apply a price, if there were an objective way to determine the effective GHG price for covered products of these policies. Proposals include the Coons–Peters bill (the FAIR Transition and Competition Act of 2021) and other recent US legislative proposals based on a variety of price-based and regulatory policies, See, for example, the Whitehouse bill (The Clean Competition Act 2022); as well as the European Union’s (EU’s) Carbon Border Adjustment Mechanism (CBAM) based on the EU Emissions Trading System (EU ETS), which applies to facilities, not products. Both provide for BAs only for imports, not exports. The Coons–Peters bill requires procedures both to determine an effective price for US GHG emissions and to assign GHG emissions to imported products. CBAM, which calls for emissions permits for imports, requires procedures to assign emissions to covered products (not facilities). Both proposals also require procedures to determine the effective price of GHG policies in nations from which they import covered products. While designing procedures to determine effective GHG prices pose significant challenges (see discussion in the reference cited in footnote 1), here we focus on the potential application of the GGI to assign emissions as the basis to apply a price or charge to covered products.Our related Policy Guidance report Flannery, Brian P., Jennifer A. Hillman, Jan W. Mares, and Matthew C. Porterfield. 2020. Policy Guidance for US GHG Tax Legislation and Regulation: Border Tax Adjustments for Products of Energy-Intensive, Trade-Exposed and Other Industries. Washington, DC: Resources for the Future. discusses tasks for legislators and regulators In Section 3 of the policy guidance report (footnote 4), we proposed that the US Department of the Treasury should establish a new office as the lead agency to manage implementation of the Framework with assistance from the US Environmental Protection Agency and Department of Commerce. We referred to this set of agencies as the US “Regulator†that would be responsible, among other tasks, for administering BTAs under the Framework. In this introduction to the modules, we refer to US and other national officials responsible for administering BAs as “regulators†but use “Regulator†as defined above throughout the modules. to authorize and implement the Framework. Of note, these tasks include procedures to promote continuous improvement as national and international climate policies and practices inevitably evolve. In particular, they include an appeals process allowing affected parties to challenge information from exporters and importers that they suspect to be incorrect, incomplete, or fraudulent. This appeals process recognizes and relies on existing capabilities of US regulators to conduct investigations in foreign nations regarding relevant data for covered, imported products.In the 25 modules that follow, we provide procedures and information to estimate indicative values of the GGIs for representative, covered products. These modules cover 39 industrial sectors and over 100 individual products, as listed in the North American Industry Classification System (NAICS). As discussed in a related working paper, Flannery, Brian P., and Jan W. Mares. 2021. “Export Rebates and Import Charges for Border Tax Adjustments under an Upstream US GHG Tax: Estimates and Methods.†Working paper 21-32. Washington, DC: Resources for the Future. these procedures rely on information from publicly available sources, such as national average values of products and the resources required to produce them. Our work on this project is ongoing. We are preparing additional modules that cover other sectors. We note that other nations classify covered sectors and products in different ways, and that sectors with similar names in different nations may not include identical products.The modules demonstrate the feasibility of determining indicative estimates for GGI values. They also provide a basis to inform the development of official procedures for BTAs by the regulators in the United States, as well as to engage input from affected industries. We use a variety of publicly available sources of national and sectoral averages for key factors that contribute to GGIs (e.g., average GHG emissions for electricity generation, fuels for thermal energy, and GHG process emissions in key sectors). We refer to these estimates for the GGIs of products as “indicative†and “representative†because they are based on a variety of sources and, for the most part, use average factors rather than facility-specific information. Note that we do not aim to determine GGI values for all possible covered products; rather, we do so for a representative set to demonstrate the process. In many cases this involves only a single product. We used data from national agencies, international institutions, industry and academic sources, and, in a few cases, our own estimates. The GGI values are representative of national averages, rather than actual determinations of the GGI for products of specific facilities, which can differ significantly from national averages.These estimates and procedures to determine the GGI provide a starting point for regulators and manufacturers to determine initial values for export rebates and import charges of GHG-intensive products based on their GGIs. The approaches could be especially useful as a model or template for the US regulators to determine initial import charges based on average values of GGIs for products (or groups of products) exported to the United States from nations that do not currently require detailed reporting of GHG emissions from industrial facilities. In practice, under the Framework, the regulators would develop official estimates for initial import charges based on more up-to-date information using uniform procedures within a sector to allocate emissions from manufacturers to the products they create. During an initial two-year start-up period, import charges would be determined by the US regulators based on national average values of the GGIs for imports. After the start-up period, GGI values for products imported into the United States would be based on facility- and firm-wide averages (as required for US manufacturers seeking export rebates, see immediately below). The start-up period would allow time for capacity building by foreign governments and firms that export to the United States to implement available international procedures to determine GGI values (see Section 3.1 of the Framework). As well, even in the initial years, if the foreign exporter had firm-wide data demonstrating lower values for the GGIs of their products, they would be entitled to appeal for a reduced import charge.In a related working paper, Flannery, Brian P., and Jan W. Mares. 2021. “Determining the Greenhouse Gas Index for Covered Products of Specific Manufacturers.†Working paper 21-31. Washington, DC: Resources for the Future. we describe procedures that would be used to determine GGI values for covered products manufactured in specific facilities, and the use of domestic firm-wide averages as the basis to claim rebates for exports from the United States. In the United States, the information required to determine such GGI values exists and much of it is publicly reported annually. This information could be used by the US regulators to develop authorized procedures for facilities to determine and report their GGI values as the basis for firms to claim export rebates based on their entire domestic production of each covered product.
    Date: 2022–09–27
  25. By: Bowen, Thomas; Ivanova, Chrissie; Palmer, Karen (Resources for the Future); Shobe, Bill; Domeshek, Maya (Resources for the Future)
    Abstract: All over the United States, state governments are pursuing decarbonization on their own and in concert with other states. Much of this effort has focused on the electricity sector, where decarbonization will require investment in clean generation and transmission and a bigger focus on demand management. On April 5, 2022, the University of Virginia, the National Renewable Energy Laboratory, and Resources for the Future gathered experts to discuss the unique barriers that states face as they work toward electricity decarbonization.Three important institutional issues arise when pursuing subnational climate policy: coordination, authority, and expertise. Coordination among a large number of states (and other jurisdictions) is challenging even when the costs and benefits of acting are confined to the jurisdictions involved. For decarbonization, with costs and benefits shared both among and beyond the acting states, the transaction costs of coordination can be expected to rise rapidly. Such problems exist within states as well, as effective decarbonization policies require actions across traditionally independent lines of agency authority. The difficulty of inducing cooperation across agency lines of authority presents a substantial friction that can slow the drive to decarbonization. Add to this the important role of regional Independent System Operators (ISOs) and other nonstate actors, and the coordination problems for state-level action can appear daunting indeed.The federal structure of authority in the US limits the range of state action. US states, as with subnational jurisdictions everywhere, have limited authority, especially in addressing problems that cross state lines, and they are also limited in the ways in which they can cooperate.Finally, large economies of scale exist in developing the expertise and institutional capacity needed to address the challenge of global warming. Once again, coordinating investments in new knowledge and expertise among the states would probably yield large gains, but allocating costs and benefits across jurisdictions poses significant challenges.For clean generation investment, barriers include market structures that disfavor renewable energy resources, backed-up interconnection queues, local siting opposition, policy uncertainty, and challenges in arranging for efficient procurement of clean power. Barriers to needed transmission investment include institutional mismatch between state agencies and Regional Transmission Operators (RTOs) with authority over transmission, difficulty agreeing on cost allocation for interstate and interregional transmission, insufficient state government capacity for studying and engaging with the planning process, and local opposition. Demand management is hampered by lack of access to energy efficiency for low-income households and renters, inadequate metrics for energy efficiency, inadequate price incentives for consumers, incomplete incentives for utilities and transmission investors, and inequitable and confusing rate structures. Workshop participants suggested ways that states can engage with the Federal Energy Regulatory Commission, RTOs, state public utilities commissions, other state agencies, regulated utilities, independent power producers, and local governments to address these barriers. Participants also suggested many promising areas for future research that academics, state and federal agencies, national labs, and independent research organizations can address to help states move toward electricity decarbonization.
    Date: 2022–09–22
  26. By: Maike Spilger; Dennis Schneider; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Reductions in gas supply following the Russian invasion of Ukraine have affected the security of supply of the European power system along with other stress factors like low availability of French nuclear reactors. Consequently, more sophisticated approaches to investigate generation adequacy and to anticipate risks in security of supply are needed. Especially a thorough assessment of generation adequacy taking into account both the variability of renewable infeed and the availability of thermal power plants based on a probabilistic approach has been missing so far. In this paper, we apply a novel integrative approach to analyze generation adequacy in a case study for Central Western Europe during the winter half year 2022/2023. The approach makes use of a multivariate probabilistic framework built on publicly available data. For assessing generation adequacy, stochastic distributions are fitted to the data and Monte Carlo simulations are performed to identify future threats to generation adequacy. Results show that based on data available at the end of September 2022, generation adequacy (GA) was at risk in several core European countries, yet that the European interconnected power grid contributed to a strong risk reduction.
    Keywords: Security of Supply, Generation Adequacy, Probabilistic, Monte Carlo, Energy System Modeling
    Date: 2023–03
  27. By: Halem, Zachery M.; Aldy, Joseph E. (Resources for the Future)
    Abstract: As governments, firms, and universities advance ambitious greenhouse gas emission goals, the demand for emission offsets—projects that reduce or remove emissions relative to a counterfactual scenario—will increase. Reservations about an offset’s additionality, permanence, double-counting, and leakage pose environmental, economic, and political challenges. We review the role of offsets in regulatory compliance, as an incentive for early action, and in implementing voluntary emission goals. The rules and institutions governing offsets drive large variations in prices and in the types of projects deployed to reduce or remove emissions across offset programs. A lack of carbon price convergence and potential information asymmetries may contribute to limited price discovery and market segmentation. Taking into account the financial properties of offsets, an array of financial and technological innovations could enhance offsets’ environmental integrity and promote liquid offset markets. Unresolved questions about the future of policy will influence the evolution of voluntary offsets markets.
    Date: 2022–09–29
  28. By: Bioret, Lucie (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future); Krupnick, Alan (Resources for the Future)
    Abstract: In 2022, the Department of Energy’s (DOE) issued a request for information on the design and implementation of a possible clean hydrogen hubs program as a part of the Infrastructure Investment and Jobs Act (IIJA). The IIJA has a goal of “accelerating research, development, demonstration, and deployment of hydrogen from clean energy sources, †primarily by allocating 8 billion dollars for the development of clean hydrogen hubs (H2Hubs) around the United States. On June 6, after receiving over three hundred responses to a detailed list of questions in its request for information, DOE released a Notice of Intent (NOI) on the implementation of a new H2Hubs program. The NOI alerts all potential bidders to the Funding Opportunity Announcement (FOA) to come in the Fall.To get started, under the IIJA, the hubs are to:“Demonstrably aid achievement of the clean hydrogen production standard developed under section 822(a) [of the Energy Policy Act of 2005 (42 USC 16166a)];Demonstrate the production, processing, delivery, storage, and end use of clean hydrogen; andCan be developed into a national clean hydrogen network to facilitate a clean hydrogen economy.†The first point is a requirement for every funded hub to meet the minimum clean hydrogen production standard: Less than 2kg of CO2e emissions per kilogram of hydrogen produced at the site of production. The second point concerns the development of a full clean hydrogen value chain within the H2Hubs. The last point is more vague, since neither the NOI nor the IIJA seems to detail the meaning of a “national clean hydrogen network.†A few possible definitions exist for this network:A physical network linking the various hubs;Hubs that learn from one another about technologies and best practicesEconomic, environmental and social impacts that are optimized at a national scale rather than at an individual hub level; andThe establishment of a mature national clean hydrogen market with sufficient producers and end-users and stable prices competitive with carbon intensive hydrogen and substitute fossil fuels. It would be useful for DOE to clarify this term, perhaps in the Funding Opportunity Announcement (FOA) and/or the expected national clean hydrogen strategy and roadmap.However these objectives are defined, this program faces a daunting task. Achieving these goals will require dramatic reductions in the cost of creating low greenhouse gas (GHG) hydrogen and the generation of enough demand to buy the production at a price necessary to cover costs and a reasonable profit, irrespective of the subsidies provided by the H2Hubs program. Production will need to be large to take advantage of economies of scale. New technologies on the supply and demand sides will be needed to aid achievement of the clean hydrogen standard and reach the Hydrogen shot goal of decreasing the cost of clean hydrogen production to $1 per kg in a decade. In addition, the applicants must navigate multiple requirements involving production inputs, specific targeted end-uses, varied locations, as well as environmental justice considerations and jobs growth, all under timeline and budget constraints. On the latter constraint, the risk of having an unsuccessful hub has to be low enough to attract at least 50 percent of the financing from private sources.In this issue brief, we offer our comments on the DOE’s outline of the H2Hubs program.
    Date: 2022–07–01
  29. By: Marco Amendola; Francesco Lamperti; Andrea Roventini; Alessandro Sapio
    Abstract: Improvements in energy efficiency can help facing the on-going climate and energy crises, yet the energy intensity of economic activities at the global level in recent years has decreased more slowly than it is required to achieve climate goals. Based on this premise, the paper builds a macroeconomic agent-based K+S model to study the effects of different policies on energy efficiency. In the model, energy efficiency of capital goods improves as the outcome of endogenous, bottom-up technical change. Public policies analysed range from indirect policies based on taxes, incentives, and subsidies, rooted in the traditional role of the State as fixing market failures, to direct technological policies, akin to the entrepreneurial state approach, in which a public research laboratory invests in R&D with the aim to establish a new technological paradigm on energy efficiency. Simulation results show that while most policies tested are effective in reducing energy intensity, the public research lab is extremely effective in promoting energy efficiency without deteriorating macroeconomic and public finance conditions. The superiority of the national lab policy, however, emerges on a relatively long time-horizon, highlighting the importance of governments that are patient enough to wait for the returns of that policy and the necessity to complement this strategy with more ''ready to use'' indirect measures. Additionally, results indicate that the macroeconomic rebound effect induced by most of the policies is rather small. Concerns about macroeconomic rebound effects are, therefore, most likely often overstated.
    Keywords: Energy efficiency policies; Sustainability; Rebound effect; Agent-based modelling.
    Date: 2023–05–09
  30. By: Srivastav, Sugandha; Singh, Tanmay
    Abstract: Laws that govern land acquisition can lock in old paradigms. We study one such case: the Coal Bearing Areas Act of 1957 (CBAA) which provides minimal social and environmental safeguards, and deviates in important ways from the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR). The lack of due diligence in the CBAA confers an undue comparative advantage to coal development, which is inconsistent with India's current stance to phasedown coal use, reduce air pollution, and advance modern sources of energy. We argue that the premise under which the CBAA was historically justified is no longer valid due to significant changes in the local context. Namely, the environmental and social costs of coal-based energy are far more salient and the market has cleaner energy alternatives that are cost competitive. We recommend updating land acquisition laws to bring coal under the general purview of LARR or, at minimum, amending CBAA to ensure adequate environmental and social safeguards are in place, both in letter and practice.
    Keywords: coal, land acquisition, environmental protection, social impact assessment, rehabilitation and resettlement.
    Date: 2023–05
  31. By: Aldy, Joseph E. (Resources for the Future)
    Abstract: The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act authorized and appropriated unprecedented spending and tax expenditures to decarbonize the American economy. In the spirit of “build back better, †this paper examines how integrating evaluation in the design and implementation of these new clean energy policies can facilitate the learning necessary for policymakers to make policy better over time. It draws lessons from two case studies: (1) on institutionalizing evaluation based on the experience with regulatory review, and (2) on conducting evaluation based on the research literature assessing the 2009 Recovery Act’s clean energy programs. The paper identifies in recent legislation the programs and their characteristics amenable to various evaluation methodologies. The paper closes with recommendations for a clean energy program evaluation framework that would enable implementation of climate-oriented learning agendas under the Evidence-Based Policymaking Act.
    Date: 2022–08–31
  32. By: Natalia Fabra (UNIVERSIDAD CARLOS III); Eduardo Gutiérrez (Banco de España); Aitor Lacuesta (Banco de España); Roberto Ramos (Banco de España)
    Abstract: We investigate whether investments in renewable energy – solar and wind plants – create jobs in the municipality where they are located. Using 13 years of monthly data, we exploit the variation in the timing and size of investment projects across more than 3, 200 municipalities in Spain, a country with substantial investments in this area. We use a new estimator for staggered differences-in-differences analysis that extends the local projections approach with clean controls (Dube et al., 2022). We find strong heterogeneity in the magnitude and pattern of the impacts of solar and wind investments. On average, solar investments increase employment by local firms, but the effects on the unemployment of local residents are weak. The effects of wind investments on local employment and unemployment are mostly non-significant. These findings have important implications for public policy.
    Keywords: renewable energy, employment, unemployment, NIMBY, spatial effects
    JEL: L94 C33 O25 R23
    Date: 2023–01
  33. By: Kopp, Raymond J. (Resources for the Future); Pizer, William (Resources for the Future); Rennert, Kevin (Resources for the Future)
    Abstract: To achieve the net-zero ambitions of the Paris Agreement, emissions from the “hard-to-abate, †greenhouse gas–intensive industrial sectors (steel, aluminum, cement, and chemicals) must be reduced. The pace of current decarbonization efforts will be aided by the introduction of new low- and zero-carbon production technologies driven by government policies. In many cases, products from these sectors are exchanged on highly competitive international markets, raising concerns that domestic decarbonization policies could result in lost competitive advantage vis-à -vis nations with weaker environmental policies.To address such competitiveness concerns, decisionmakers have proposed policies to couple domestic industrial decarbonization efforts with trade policies and thereby address three goals: a) maintain domestic competitiveness against imports produced in countries with relatively weaker environmental policies, b) maintain competitiveness in export markets, and c) provide incentives for trading partners to improve their environmental performances. A prominent example of such a trade policy is a carbon border adjustment mechanism (CBAM) that applies a fee to imported goods. A proposed CBAM is under active discussion in the European Union and CBAM legislation is in the early stages of development within the US Congress. Traditionally, trade policies to address competitiveness concerns have been proposed as a layer on top of a country’s preexisting approach to decarbonizing the industrial sector. Another approach, which may be more appropriate for the current state of global climate policy, is to design an industrial decarbonization policy that natively and explicitly addresses competitiveness concerns.This issue brief outlines such an alternative approach. This policy would define a performance metric for a selected set of industrial sectors and apply a fee based on the greenhouse gas (GHG) content of produced goods in those sectors, but only to the extent the goods’ GHG content exceeds the metric. The fee would be applied equally to both foreign and domestically produced goods, maintaining a level playing field. Overall, this policy approach inherently addresses competitiveness concerns and creates incentives to reduce emissions down to the performance metric, while offering additional advantages. By starting with a performance metric close to current US industrial performance, it would primarily affect those trading partners with higher emissions and not US producers. By assessing the fee only on emissions above the performance metric, the metric would reduce potential effects on the price of regulated industrial goods compared to a traditional carbon price, thereby minimizing downstream and export disruptions.In a follow-on issue brief, we will introduce the idea of an alliance of like-minded nations working to drive decarbonization in selected industrial sectors through an alignment of comparable efforts. Such an alignment would level the playing field of economic competition and negate the need for border measures within the alliance. Border measures would continue to be imposed on countries that do not choose to meet the minimum comparable effort and join the alliance.
    Date: 2022–05–12
  34. By: Look, Wesley (Resources for the Future); Haggerty, Mark; Mazzone, Daniel
    Abstract: The increasing competitiveness of clean energy and growing efforts to reduce greenhouse gas emissions are reshaping the US energy economy. For energy communities—cities, towns, and regions with deep ties to fossil fuel production and electricity generation—this transition may pose significant costs for workers, businesses, and local governments. Federal investments through things such as workforce development and infrastructure expansion can mitigate such costs and provide new opportunities for prosperity.A critical component of making such investments successful is tailoring them to the specific needs and unique circumstances of each community (Davis and Dumont 2021). Such tailoring can improve outcomes for workforce development programs (Harper-Anderson 2008; Pynes 2004) and possibly the cost-effectiveness of federal economic development efforts (Markusen and Glasmeier 2008).Such tailoring requires mechanisms for coordination between local leaders and the federal government. Local leaders, often working through community-based organizations (CBOs), tend to have the most nuanced understanding of the needs and opportunities in their communities and the local relationships and trust needed to get projects done. However, especially in low-income and isolated rural communities, they often lack resources to fully engage with the variety of federal programs that could benefit from their expertise (Pipa and Geismar 2020; Ajilore and Willingham 2020; Haggerty et al. 2018). It is therefore reasonable to consider that a federal energy transition policy would not only invest in workforce, infrastructure, and economic development but also local capacity required to effectively implement such policies. Capacity is generally defined here as “increasing the ability of people and institutions to do what is required of them†(Murray and Dunn 1995).This brief provides an overview of one option for building and supporting capacity in energy-dependent communities: creating a network of community “hubs†(Aspen Institute 2019; BlueGreen Alliance 2021) supported by a federally chartered development corporation. This concept leverages recent policy roadmaps produced by stakeholders from energy regions in transition emphasizing the importance of customization and investing in local leadership (Just Transition Fund 2020; BlueGreen Alliance 2021). Community hubs and the federal development corporation described here also share institutional design features with recommendations from the National Academies of Sciences (2021) related to just transition and a congressional proposal to reform the fiscal relationships between natural resources and rural economies (Forest Management for Rural Stability Act 2019; Iglehart 2018; Haggerty 2018).The Biden Administration’s Build Back Better (BBB) framework recognizes the need for local capacity building in rural America. For example, BBB proposed a $1 billion investment in a Rural Partnership Program (RPP), For more information on the Biden Administration’s Build Back Better framework (the American Jobs Plan) and the Rural Partnership Program, see which is intended to build the capacity of local organizations. Flexible, multiyear grants could be used to support collaborative planning, staffing, and implementation of locally led economic development efforts. Collaborations may include rural and Tribal governments, nonprofits, philanthropic organizations, community colleges, and other CBOs.These proposals and efforts reflect an embrace of place-based and people-centered models for economic development (Shambaugh and Nunn 2018; Topolsky 2021, Muro et al. 2021) and of government’s role in shaping markets and driving innovation (Mazzucato 2021). In the following sections, we provide detail on what we mean by a “community hub†and outline the key structural components of how a supported network of hubs might work—including the potential challenges.
    Date: 2022–02–15
  35. By: Flannery, Brian (Resources for the Future); Mares, Jan (Resources for the Future)
    Abstract: In the context of a US upstream GHG tax, our 2020 Framework and related Policy Guidance reports propose a Framework to create and implement border tax adjustments (BTAs)—export rebates and import charges for covered greenhouse gas (GHG) intensive products—consistent with US obligations under the World Trading Organization (WTO). They provide background and details on internationally recognized methodologies to determine GHG emissions from facilities and how they can be used to create WTO-compatible BTAs for GHG-intensive products eligible for and subject to BTAs.The GHG index (GGI) is a central concept and administrative index proposed in the Framework that is used to determine BTAs for covered products. Given the GGI (with units of carbon dioxide-equivalent [CO2e] per tonne of product) of a covered domestic product, the rate for its export rebate (US$ per tonne of product) is given by the GGI multiplied by the GHG tax rate (US$ per tonne CO2). Similarly, for a covered imported product, the import charge is the US GHG tax rate multiplied by its GGI. GGI values for like products produced by different manufacturers in different ways (e.g., using different natural resources, technologies, processes, sources of thermal energy, and electricity) can have significantly varied GGI values. While like products will be taxed at the same US GHG rate, the amount of the import charge or export rebate will differ depending on the product’s GGI. Section 3.6 of the Framework report details how GGI is determined in a manner analogous to value-added taxes (VATs), but here we apply it to propagation of the upstream sources of taxed emissions.Click "Download" above to read the full working paper.
    Date: 2021–10–21
  36. By: Chad P. Bown (Peterson Institute for International Economics)
    Abstract: The Inflation Reduction Act (IRA) of 2022 provoked a transatlantic trade spat. After the law was passed, the Biden administration addressed some of the concerns raised by the European Union by writing controversial rules to implement the legislation. These regulations are expected to have complex effects that, in some instances, may offset the intended impact of other provisions in the original legislation. This paper examines how the law, its implementing regulations, policy decisions on leasing, as well as potential critical minerals agreements all have the potential to affect the electric vehicle (EV) supply chain. The EV case study showcases the political-economic complications involved in US and EU attempts to cooperate over clean energy transition policy to address the global externality of carbon dioxide emissions. EVs are but one example of the challenge facing partners with integrated supply chains and similar levels of economic development that share concerns about climate change, rising inequality, workers, other social issues, and democracy itself. The EV conflict laid bare the differing US and EU prioritization of these issues relative to economic efficiency, World Trade Organization rules, the approach to nonmarket economies, and national security vulnerabilities that arise from depending on an authoritarian regime such as China for import sourcing of critical inputs.
    Keywords: Electric vehicles, industrial policy, supply chains, climate, US, EU
    JEL: L52 F13
    Date: 2023–05
  37. By: Nguyen, Minh-Hoang; Quang-Loc, Nguyen; Jin, Ruining; Nguyen, Minh_Hieu Thi Dr; Nguyen, Thi-Phuong; La, Viet-Phuong; Vuong, Quan-Hoang
    Abstract: Preventing climate change from reaching the tipping point requires the reduction of Greenhouse Gas Emissions. Woody biomass is suggested as a substitute for fossil fuels to achieve sustainable development. Transitioning the land purpose entails investment and a tradeoff between wood pellet production and the current utilities created by the land, hindering the private landowners’ willingness. The current study suggests that utilizing the woody leftover on the land can potentially increase the woody biomass supply. Employing the Bayesian Mindsponge Framework (BMF) analytics on a dataset of 707 private landowners in the United States (US), we aimed to identify the characteristics of woody-resource-wasting landowners and examine how to increase their likelihood to contribute to woody biomass-based energy. We discovered that landowners being male, having higher income, and being a member of a state/national forestry organization are more likely to waste woody resources. Moreover, woody-resource-wasting landowners perceiving woody biomass-based energy as a substitution for fossil fuel are likelier to sell wood, while those perceiving environmental costs over benefits of woody biomass-based energy are less likely to sell. These findings can be used as insights for policymakers, logging companies, and state agencies to find an additional supply of woody biomass-based energy from landowners likely to waste woody resources.
    Date: 2023–04–11
  38. By: Laura Hospido (Banco de España, CEMFI and IZA); Carlos Sanz (Banco de España and CEMFI); Ernesto Villanueva (Banco de España)
    Abstract: Air pollution is an increasing cause of concern among the scientific community, policymakers and the general public. This interest has led to a sharp increase in the number of scientific papers on air pollution. This paper provides a summary of the most prominent recent economic literature on the effects of air pollution, the main policy lessons that can be drawn from it, and the areas in which more research would be especially valuable. The literature has found sizable negative effects of air pollution on health and mortality. There is also some evidence that air pollution may have negative non-health effects, reducing labour supply and productivity, although the evidence is more mixed on the latter aspect. The literature also suggests that effects on both health and non-health dimensions may be heterogeneous in a number of dimensions, most prominently age, with more negative effects for the elderly. Finally, more research is needed on which policies to tackle air pollution would be more cost-effective.
    Keywords: air pollution, health, labour supply, productivity
    JEL: I12 J22 J24 Q51 Q53
    Date: 2023–01
  39. By: Burtraw, Dallas (Resources for the Future); Villanueva, Seth (Resources for the Future); Domeshek, Maya (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future); Lambert, Kathy Fallon
    Abstract: This analysis provides one of the first nationwide estimates of health benefits associated with meeting the United States’ Paris Agreement climate goal. The target, which was established by the Biden Administration in April 2021, aims for a 50-52 percent reduction in the United States’ economy-wide net greenhouse gas emissions in 2030. A new report by scholars at Resources for the Future (RFF) finds that the health benefits associated with avoiding premature deaths are significant and accrue in every state in the nation.The authors examine avoided premature deaths in the context of “secondary†PM2.5, which is formed when several pollutants associated with the combustion of fossil fuels—sulfur dioxide (SO2 ), nitrous oxide (NOx ), and ammonia—combine in the atmosphere. The team analyzes the distribution of health benefits across states, counties, and demographic groups in a future that includes a binding cap on CO2 emissions, sector-specific regulations, and innovation policies in line with US climate goals.All regions of the United States would experience health benefits by reducing PM2.5, with the Midwest seeing the most benefits per capita. Benefits accrue broadly across income levels and racial and ethnic groups as well. These estimates are likely an underrepresentation of total health benefits because they exclude benefits related to averted non-lethal health problems, premature mortality associated with other pollutants, and environmental improvements.
    Date: 2022–01–31
  40. By: Dolphin, Geoffroy (Resources for the Future); Pahle, Michael; Burtraw, Dallas (Resources for the Future); Kosch, Mirjam
    Abstract: Jurisdictions around the world increasingly affirm their contributions to the 2015 Paris Agreement by pledging net zero targets. We argue that delivering on a net-zero target compels a backward induction approach to climate policy, which differs from the prevailing approach by stipulating that the objective for designing policy pathways must change from minimizing the cost of the policy to maximizing its credibility. Our argument rests on the premise that private investments play a key role for net zero, and to align them with net zero, getting expectations right is more relevant than getting the prices right. Backward induction compels a dynamically consistent pathway that can overcome the problem that emitters may expect the rules and targets of climate policy as open for constant political renegotiation. We furthermore sketch the main elements for a regulatory strategy to put this approach into action that builds on instilling commitment.
    Date: 2022–10–12
  41. By: Pesek, Sophie (Resources for the Future); Raimi, Daniel (Resources for the Future)
    Abstract: The Inflation Reduction Act of 2022 seeks to dramatically increase clean energy innovation, manufacturing, and deployment in the United States. Unlike most previous federal energy policy, it ties many incentives to labor requirements, domestic manufacturing, and project location. We examine a provision of the law that offers additional financial incentives for projects to locate within “energy communities.†Our analysis indicates that the law’s definition of energy communities could vary widely depending on interpretation of key phrases. In addition, we find that the law, as written, is unlikely to steer investment specifically toward those communities that will be most heavily affected by a transition away from fossil energy. We illustrate these findings through three interpretations of the energy communities definition and show that it does not specifically target fossil energy–dependent local economies, but instead is likely to cover between 42 and 50 percent of US land area. We then offer our own definition of “energy communities, †which more narrowly targets locations that have been or are heavily dependent on fossil fuels as a driver of local economic activity, employment, and government revenue.
    Date: 2022–11–01
  42. By: Luis Ángel Maza (Banco de España)
    Abstract: This paper proposes an indicator to estimate the carbon footprint of the business lending of Spanish credit institutions. The growing interest in our societies in environmental issues means that the action taken by financial institutions to support the fight against climate change and the green transition needs to be analysed. In this respect, it is essential to have quality environmental information available and to establish robust methodologies to assess the climate exposure of the financial sector. This paper seeks to contribute to this debate, offering an experimental statistic to measure the degree of exposure of the banking sector in Spain to the risks involved in the transition to a more sustainable economic model. The results obtained show that the carbon footprint of the loans of Spanish credit institutions seems to have been significantly reduced recently. This decline is compatible with the overall reduction in the intensity of pollutant emissions that has taken place in the Spanish economy in recent years, but also with a slight shift in the composition of the loan portfolio towards less polluting activities.
    Keywords: climate change, carbon footprint, financial risks
    JEL: Q50 Q56 G10 G20
    Date: 2022–03
  43. By: Ankney, Kevin; Leard, Benjamin (Resources for the Future)
    Abstract: Vehicle leasing involves a consumer renting a car for an average of three years. Given the typical lease length, we show that estimating valuation of leased vehicle fuel costs is fundamentally different from estimating valuation of purchased vehicle fuel costs. We find that new vehicle lessees and buyers both undervalue lifetime fuel costs. But because leasing periods last about three years, new vehicle lessees fully value lease-specific fuel costs. Our estimates also imply that leasing companies set residual values, defined as the post-lease expected value of the vehicle, with the expectation that used vehicle buyers undervalue post-lease fuel costs.
    Date: 2021–08–25
  44. By: Kopp, Raymond J. (Resources for the Future); Pizer, William (Resources for the Future); Rennert, Kevin (Resources for the Future)
    Abstract: Reducing greenhouse gas (GHG) emissions from carbon-intensive industrial sectors like steel, aluminum, cement, and chemicals will be aided by the introduction of new low- and zero-carbon production process technologies. While the cost of new technologies will decline over time, in the short run they will likely cost more than more carbon-intensive, incumbent technologies. When the products from these sectors are exchanged on highly competitive international markets, decarbonization efforts could therefore lead to lost competitive advantage vis-à -vis nations with weaker environmental policies.A recent issue brief, “Industrial Decarbonization and Competitiveness: A Domestic Benchmark Approach†(hereafter, “Benchmark†), introduced an idea for a domestic emissions reduction policy that targets the US industrial sector, paired with a border adjustment tariff. The Clean Competition Act recently introduced by Senator Sheldon Whitehouse (D-RI) builds on the paired policy structure. As US industry continues to decarbonize, these paired policies would protect domestic producers from competitive imports, maintain competitiveness in export markets, and provide incentives for trading partners to increase environmental ambition.In this issue brief, we introduce the related idea of a “performance alliance†in which a group of countries align industrial decarbonization efforts and trade policies to maintain competitiveness, limit leakage of emissions, and provide incentives for others to pursue ambitious decarbonization policies. This idea can be traced to work on “climate clubs, †initially popularized by William Nordhaus. The most recent reference to a climate club can be found in the G7 Leaders Communiqué, released May 20, 2022. Catalyzing leadership, action, and inclusivity is a key element of the G7 grouping and suggests the idea of an alliance more than the notion of exclusivity and protectionism suggested by a club.The international policy proposed in the Clean Competition Act and the EU carbon border adjustment mechanism (CBAM) proposal point to implicit climate clubs. In the EU case, a nation exporting primary commodities to the European Union could be a member of the club if that nation imposes a carbon price on its domestic production. That carbon price for the nation’s primary commodities would have to be equal to or greater in magnitude to the price charged within the European Union. In such a case the exporting nation does not face an EU-imposed border fee. In the case of the Clean Competition Act, a nation exporting primary commodities to the United States could be a member of the club if the GHG intensity of its domestic primary commodity production is less than the US benchmark intensity. In such a case the exporting nation does not face a US-imposed border fee. If one were to consider the Clean Competition Act and the EU CBAM as forms of climate clubs, true members of each club might further align their own border measures to match the European Union and the United States.Admission to such an EU club requires the adoption of a common policy to address emissions from the industrial sector; that policy is a specific and explicit carbon price. Admission to such a US club requires environmental performance on a par with the United States, where that performance is measured in terms of GHG intensity of production. We might think of the EU approach as a policy club, while thinking of the US as a performance club.In the remainder of this issue brief we elaborate on the idea of an alliance, rather than a “club, †where members work to drive industrial sector decarbonization–this would happen through an alignment of efforts and advanced technology that levels the playing field of economic competition and negates the need for border measures within the alliance. Border measures would remain a component of this approach for countries that do not choose to increase their ambition and join the alliance. The border measures need not be harmonized among the alliance members. This reduces the protectionist feel of the alliance.
    Date: 2022–07–06
  45. By: Ibitowa, Stephen Adesina
    Abstract: Using yearly data from 1986 to 2020, the study looked at whether the Nigeria’s financial sector development is connected to the country’s ever increasing crude oil exports. The results of the utilized autoregressive distributed lag model demonstrated that, both in the short and long periods, there is no connection between Nigeria’s financial sector development and crude oil exports. Additionally, the research indicated that the country’s financial system is not yet adequately established to sustain exports of goods other than crude oil in the short term.
    Date: 2023–03–24
  46. By: Lint Barrage; William D. Nordhaus
    Abstract: The present study examines the assumptions, modeling structure, and preliminary results of DICE-2023, the revised Dynamic Integrated Model of Climate and the Economy (DICE), updated to 2023. The revision contains major changes in the carbon and climate modules, the treatment of non-industrial greenhouse gases, discount rates, as well as updates on all the major components. The major changes are a significantly lower level of temperature of the cost-benefit optimal policy, a lower cost of reaching the 2° C target, an analysis of the impact of the Paris Accord, and a major increase in the estimated social cost of carbon.
    JEL: C6 H4 Q5
    Date: 2023–04
  47. By: Timo Goeschl; Marcel Oestreich; Alice Soldà (-)
    Abstract: How to design audit mechanisms that harness the benefits of self-reporting for achieving compliance with regulatory targets while limiting misreporting is a pressing question in many regulatory contexts, from climate policies to public health. Contrasting random audit and competitive audit mechanisms, this paper theoretically and experimentally studies their performance in regulating socially undesirable emissions when peer information about others’ emissions is present or absent. Our focus is on the compliance of emission levels with regulatory targets, going beyond existing results on truthfulness of reporting. Confirming theoretical predictions, the experiment shows that in contrast to the random audit mechanism, the competitive audit mechanism can leverage peer information for compliance: emission levels are closer to the social optimum. Yet, emission levels fall somewhat short of full compliance. The results highlight the considerable potential of competitive audit mechanisms for achieving not only more truthfulness, but also more compliance.
    Keywords: Regulation; compliance; tournament theory; online experiment
    JEL: D62 H41 H83 L51 Q58
    Date: 2023–05
  48. By: Rennert, Kevin (Resources for the Future); Prest, Brian C. (Resources for the Future); Pizer, William (Resources for the Future); Newell, Richard G. (Resources for the Future); Anthoff, David (Resources for the Future); Kingdon, Cora; Rennels, Lisa; Cooke, Roger (Resources for the Future); Raftery, Adrian E.; Å evÄ íková, Hana; Errickson, Frank
    Abstract: The social cost of carbon is a vitally important metric for informing the climate policy of numerous entities, including most notably its role in guiding climate regulations issued by the US federal government (USG). Characterization of uncertainty and transparency of assumptions are critical for supporting such an influential metric used in policy analysis. Challenges inherent to SCC estimation push the boundaries of typical analytical techniques and require augmented approaches to assess uncertainty, which in turn also raises important considerations for discounting. This paper addresses challenges related to projecting very long-term economic growth, population, and greenhouse gas emissions, as well as calibration of key discounting parameters for consistency with those projections. Our work improves upon alternative approaches that have been used by the USG, such as the use of non-probabilistic scenarios and constant discounting. The most prominent set of scenarios commonly used for this purpose do not fully characterize the uncertainty distribution of fully probabilistic model input data or corresponding SCC estimate outputs. Incorporating the full range of economic uncertainty in the SCC further underscores the importance of adopting a stochastic discounting approach to account for such uncertainty in an integrated manner.Click "Download" above to view the full working paper.To read the Appendix, click "Online Appendix" below.
    Date: 2021–09–09
  49. By: Darlington Agbonifi (Department of Economics (University of Verona))
    Abstract: This paper analyzes the socioeconomic and environmental dynamic impacts of an exogenous public-financed increases in infrastructure investments and modernization projects (CIS) of around EUR 1097 billion for the 2021-2026 period on industrial outputs, household employment and income distribution, in the Italian province of Taranto using an environmentally extended Social Accounting Matrix (ESAM) techniques for the year 2015. This method reconciles the analysis of the impact of an investment policy aiming at climate neutrality on a local economy. As well as an in-depth evaluation of the intersectoral production linkages through trade and multiplier analysis, with the cost-benefit (CB) analysis of a large-scale investment project. The evaluation of the dynamic impacts on the local economy produces a benefit/cost ratio of 5.63 that increases to 7.88 when the CB analysis of the project, and therefore the revenues generated during the operational period, are also included. The inclusion of environmental externalities associated with industrial greenhouse gas (GHGs) emissions reduces by about 16% the benefit/cost ratio in the construction period. In the operational period, when we assume that green production technologies are adopted, the reduction of the ratio is more consistent. The distributional impact of the investments on the annual income of households is also acceptably equitable.
    Keywords: Policy Impact Evaluation, Cost Benefit Analysis, Local Economic Development, SAM
    JEL: C67 D57 Q56 Q58 R11
    Date: 2023–04
  50. By: Burtraw, Dallas (Resources for the Future); Fischer, Carolyn (Resources for the Future); Fowlie, Meredith; Williams III, Roberton C. (Resources for the Future); Cropper, Maureen L. (Resources for the Future); Aldy, Joseph E. (Resources for the Future)
    Abstract: Economists have for decades recommended that carbon dioxide and other greenhouse gases be taxed—or otherwise priced—to provide incentives for their reduction. The United States does not have a federal carbon tax; however, many state and federal programs to reduce carbon emissions effectively price carbon—for example, through cap-and-trade systems or regulations. There are also programs that subsidize reductions in carbon emissions. At the 2022 meetings of the American Economic Association, the Society for Benefit-Cost Analysis brought together five well-known economists—Joe Aldy, Dallas Burtraw, Carolyn Fischer, Meredith Fowlie, and Rob Williams—to discuss how the United States does, in fact, price carbon and how it could price carbon. Maureen Cropper chaired the panel. This paper summarizes their remarks.
    Date: 2022–10–13
  51. By: Cullen S. Hendrix (Peterson Institute for International Economics)
    Abstract: Concerned about critical mineral supply chains and its own strategic vulnerabilities, the European Union is advancing a buyers club to procure minerals critical to the clean energy transition, such as bauxite, cobalt, lithium, and nickel. The European Union is deeply dependent on imports of both raw and processed critical minerals and materials and thus highly exposed to global price volatility. The door appears to be open for the United States or other EU trading partners and like-minded countries to join this club. Decarbonization is not the only impetus behind the proposed Brussels buyers club. Both the European Union and United States view China's dominance of critical mineral supply chains as a national security issue, because these minerals are key inputs to modern military technology. Hendrix agrees that supply chains for critical minerals desperately need widening to meet projected global demand and tackle climate change mitigation, but he warns that a purchasers club would not be a step in the right direction. A buyers club would be prone to free riding, set up distributive conflicts within the European Union, and reduce the share of climate mitigation benefits accruing to critical mineral-producing countries, many of which are developing and middle-income economies.
    Date: 2023–05
  52. By: Yacouba Coulibaly (UO - Université d'Orléans, UCA - Université Clermont Auvergne)
    Abstract: Resource-backed loans are used today by many resource-rich countries as an effective means of providing public goods and services. However, this type of financing can undermine environmental sustainability (e.g., forest cover loss, CO2 emissions, pollution, ecological collapse, material footprint, etc.). In this paper, we first use propensity score matching, which allows for self-selection bias in signature policies, coarsened exact matching, and the entropy balancing method to test whether resource-backed loans have a causal impact on forest cover loss in 64 developing countries from 2004 to 2018. Through a series of econometric and alternative specification tests, we find that resource-backed loans increase forest cover loss. Nevertheless, when we disaggregate resource-backed loans to run the regressions, we find that mineral, tobacco, and cocoa-backed loans increase forest cover, while oil-backed loans have no significant direct impact on forest cover. We recommend that signatory countries and those considering signing resource-backed loans put in place a very strong compensation mechanism, such as introducing taxes or reforming the current tax system in resource-backed loan agreements, to protect biodiversity and mitigate the environmental impacts of these loans. Signatory countries must ensure full transparency of resource-backed loans to make the characteristics of the loans more fluid, avoiding a situation of budgetary debauchery.
    Keywords: H81, C12, Q54, Q01, Resource-backed loans, Resource rents, Forest cover loss, Resource taxation, Environment, Climate Change, Propensity score matching O13
    Date: 2023–04–18
  53. By: Philipp zur Heiden (Paderborn University); Jennifer Priefer (Paderborn University); Daniel Beverungen (Paderborn University)
    Abstract: The energy turnaround and the shift towards sustainable mobility threaten the stability of European energy distribution grids due to substantially increasing load fluctuations and power demand. These challenges can critically impact assets in the distribution grid—–e.g., switchgears–—intensifying the need to plan, conduct, and manage their maintenance. Predictive maintenance strategies that analyze assets’ current and historical condition data have been discussed as promising approaches toward that end. However, the extant research focuses on designing and improving analytical IT artifacts while not considering how a maintenance service is co-created by companies with IT. This study posits that IT and service must be aligned closely, presenting an ensemble artifact comprising a digital industrial platform and a smart service system for predictive maintenance on the distribution grid. The artifact is evaluated by conducting a willingness-to-pay analysis with asset operators, documenting their demand for condition monitoring and predictive maintenance as an integrated solution. Building on these results, we contribute design principles for information systems and implications for managing corporate networks for maintaining critical assets in the distribution grid.
    Keywords: Design Science Research, Predictive Maintenance, Smart Service System, Digital Platform, Distribution Grid, Value-Creation Network
    JEL: D47 L94 M15
    Date: 2022–12
  54. By: Simon Briole (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); Augustin Colette (INERIS - Institut National de l'Environnement Industriel et des Risques); Emmanuelle Lavaine (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier)
    Abstract: While a sharp decline in air pollution has been documented during early Covid-19 lockdown periods, the stability and homogeneity of this effect are still under debate. Building on pollution data with a very high level of resolution, this paper estimates the impact of lockdown policies on P M 2.5 exposure in France over the whole year 2020. Our analyses highlight a surprising and undocumented increase in exposure to particulate pollution during lockdown periods. This result is observed during both lockdown periods, in early spring and late fall, and is robust to several identification strategies and model specifications. Combining administrative datasets with machine learning techniques, this paper also highlights strong spatial heterogeneity in lockdown effects, especially according to long-term pollution exposure.
    Keywords: air pollution, P M 2.5, lockdown, spatial heterogeneity, machine learning, Covid-19
    Date: 2023–04–28
  55. By: Andrés Alonso-Robisco (Banco de España); José Manuel Carbó (Banco de España); José Manuel Marqués (Banco de España)
    Abstract: Preventing the materialization of climate change is one of the main challenges of our time. The involvement of the financial sector is a fundamental pillar in this task, which has led to the emergence of a new field in the literature, climate finance. In turn, the use of Machine Learning (ML) as a tool to analyze climate finance is on the rise, due to the need to use big data to collect new climate-related information and model complex non-linear relationships. Considering the proliferation of articles in this field, and the potential for the use of ML, we propose a review of the academic literature to assess how ML is enabling climate finance to scale up. The main contribution of this paper is to provide a structure of application domains in a highly fragmented research field, aiming to spur further innovative work from ML experts. To pursue this objective, first we perform a systematic search of three scientific databases to assemble a corpus of relevant studies. Using topic modeling (Latent Dirichlet Allocation) we uncover representative thematic clusters. This allows us to statistically identify seven granular areas where ML is playing a significant role in climate finance literature: natural hazards, biodiversity, agricultural risk, carbon markets, energy economics, ESG factors & investing, and climate data. Second, we perform an analysis highlighting publication trends; and thirdly, we show a breakdown of ML methods applied by research area.
    Keywords: climate finance, machine learning, literature review, Latent Dirichlet Allocation
    JEL: L93 R4 R11
    Date: 2023–02
  56. By: Zhang, Ning; Gong, Yujing; Xue, Xiaohan
    Abstract: This paper develops a generic adjustment framework to improve in the market risk forecasts of diverse risk forecasting models, which indicates the degree to which risk is under- and overestimated. In the context of the energy commodity market, a market in which tail risk management is of crucial importance, the empirical analysis shows that after this adjustment framework is applied, the forecasting performance of various risk models generally improves, as verified by a battery of backtesting methods. Additionally, our method also lessens the risk model disagreement among post-adjusted risk forecasts.
    Keywords: energy futures; expected shortfall; finance; model disagreement; value at risk; ES/K002309/1; ES/R009724/1; Wiley deal
    JEL: C52 C53 G10
    Date: 2023–03–05
  57. By: Jay A. Soled (Rutgers Business School); James Alm (Tulane University)
    Abstract: The Inflation Reduction Act of 2022 has the potential to encourage taxpayers to make automobile-related gifts. However, the genesis of such gift-giving likely will not be due to genuine generosity, but rather will be part of a strategy designed to achieve significant income tax savings.
    Keywords: Inflation Reduction Act of 2022, Internal Revenue Service, electric vehicles, gift tax, tax compliance
    JEL: H0 H2 H26
    Date: 2023–04
  58. By: Kim, Yeong Jae; Sarmiento, Luis
    Abstract: This study identifies the effect of Uber on the air quality of urban agglomerations in the United States. For this, we infer its causal impact on the Environmental Protection Agency’s air quality index with state-of-the-art difference-in-difference estimators accounting for Uber’s staggered implementation and dynamic treatment effects. Results show that Uber improves air quality. The value of the air quality index and the number of unhealthy air quality episodes decrease after its introduction. We provide evidence that the bulk of the improvement comes from declining ozone levels during the summer. Notably, results hold for a plethora of different specifications, samples, and robustness exercises. To the best of our knowledge, this article is the first to estimate the air quality effects of ride-hailing technologies empirically in the United States. However, further research is required to identify the exact mechanisms through which Uber’s impact on the transportation system affects air quality.
    Date: 2021–11–01
  59. By: Look, Wesley (Resources for the Future); James, Joey; Fedorko, Evan; Pesek, Sophie (Resources for the Future); Mazzone, Dan; Barone, Aurora; Shelton, Rebecca
    Abstract: This report examines implementation of the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative (2015–2020), established by the Obama administration to assist communities hurt by declines in coal mining and coal-fired electricity generation. It examines the distribution of POWER funds by state, county, project type, and career sectors. The lessons learned through this retrospective analysis can be used to guide current and future federal policymaking to revitalize the economies of US coal communities.The POWER Initiative was a collaboration across several federal entities, with four agencies playing primary roles: the Economic Development Administration (EDA), the Employment and Training Administration (ETA), the Small Business Administration (SBA), and the Appalachian Regional Commission (ARC). Grants were awarded for projects that would benefit communities affected by employment loss in coal and associated industries.We developed a novel data set of grant recipients, and we identified 641 coal counties across the United States, based on the presence of coal production or a coal-fired power plant in recent decades (Section 3). Those criteria, along with direct coal mining job loss and ARC’s economic status classification, allow for comparison of counties with potential need and the actual distribution of funds.Between 2015 and 2020, POWER provided $410 million through 484 grants awarded across 200 counties in 30 states (Section 5). ARC administered around 60 percent of total funding, and EDA, just under 40 percent. More than 75 percent of the funding went to five Appalachian states: Kentucky, West Virginia, Pennsylvania, Ohio, and Virginia. Appalachia, which has faced serious challenges from the energy transition, is the focus of all ARC grants. The amounts awarded to grantees within a county varied substantially, ranging from $30, 000 to $15.9 million over the five-year period.The majority of coal counties did not receive POWER grants; only 200 of the 641 coal counties received POWER funds directly. Moreover, only 134 of the 200 counties that received POWER funding were coal counties, and 28 percent of funding was granted to applicants outside coal counties. However, we could not identify all the communities served by every project and therefore assigned funding according to the location of the primary grantee. Since grantees sometimes serve communities beyond the county in which they are located, it is possible that more coal counties benefited than our research indicates.In general, we find low levels of federal funding explicitly designed to support communities impacted by the decline of coal (there are other federal programs that benefit coal communities, but not much is explicitly tailored to coal community transition). For example, if we divide total 2015 – 2020 POWER funds identified through our research by all 641 eligible coal counties, each county would have received under $640, 000 over the five-year period.We also classified grants by six project types (Section 6): education and workforce development; business development; economic asset development; health; research, planning, and feasibility studies; and leadership and community capacity development. Education and workforce development projects received the greatest amount of POWER funds ($165.5 million), followed by business development ($160.7 million) and economic asset development ($83.1 million).More than half of all POWER funding went to projects with an infrastructure component (Section 7). The top three infrastructure funding categories were building construction or renovation ($89.2 million), water and wastewater ($51.9 million), broadband ($39.4 million), and equipment and materials ($33.7 million).By career sector (Section 8), the top spending categories were manufacturing ($102.6 million), health and social services, including substance abuse prevention and treatment ($81.2 million), tourism and hospitality ($42.9 million), information technology ($40.0 million), and agriculture and forestry ($33.4 million). Renewable energy; arts, design, and entertainment; and education and public service received little funding and are potential future areas of growth.The report reveals the counties and project types that were prioritized in the POWER Initiative. It also indicates the possibility that little funding flowed to some particularly distressed coal communities. Further analysis is needed to elucidate whether this reflects a lack of capacity in local economic assistance programs, a lack of need, or (as noted above) data limitations. A deeper understanding of these gaps will allow future initiatives to holistically support communities across the country.
    Date: 2022–07–25
  60. By: Ibrahim Kholilul Rohman; Maria Monica Wihardja
    Abstract: Municipal solid waste (MSW) management remains a challenge in in Pekanbaru. To avoid the negative externalities associated with improper waste disposal, the development of waste-based power plant (or PLTSa), including through incineration technology, is increasingly viewed as an attractive option. This study estimated that electricity generation potential from MSW in Pekanbaru could reach 0.021 MW/ton MSW and levelized cost of electricity (LCOE) from incineration PLTSa is around 21.03¢ per kWh. Waste calori?c value and feedstock supply are essential to maintain the cost competitiveness of incineration PLTSa in Pekanbaru.
    Keywords: digital technology — impact assessment — SDG
    JEL: L86 N70 O14 Q55
    Date: 2022
  61. By: Virbickaite, Audrone (CUNEF Universidad); Nguyen, Hoang (Örebro University School of Business); Tran, Minh-Ngoc (Discipline of Business Analytics, The University of Sydney Business School)
    Abstract: This study explores the benefits of incorporating fat-tailed innovations, asymmetric volatility response, and an extended information set into crude oil return modeling and forecasting. To this end, we utilize standard volatility models such as Generalized Autoregressive Conditional Heteroskedastic (GARCH), Generalized Autoregressive Score (GAS), and Stochastic Volatility (SV), along with Mixed Data Sampling (MIDAS) regressions, which enable us to incorporate the impacts of relevant financial/macroeconomic news into asset price movements. For inference and prediction, we employ an innovative Bayesian estimation approach called the density-tempered sequential Monte Carlo method. Our findings indicate that the inclusion of exogenous variables is beneficial for GARCH-type models while offering only a marginal improvement for GAS and SV-type models. Notably, GAS-family models exhibit superior performance in terms of in-sample fit, out-of-sample forecast accuracy, as well as Value-at-Risk and Expected Shortfall prediction.
    Keywords: ES; GARCH; GAS; log marginal likelihood; MIDAS; SV; VaR
    JEL: C22 C52 C58 G32
    Date: 2023–04–14
  62. By: Bisuk Abraham Sisungkunon (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)); Atiqah Amanda Siregar (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)); Wildan Al Kautsar Anky (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))
    Abstract: Municipal solid waste (MSW) management remains a challenge in in Pekanbaru. To avoid the negative externalities associated with improper waste disposal, the development of waste-based power plant (or PLTSa), including through incineration technology, is increasingly viewed as an attractive option. This study estimated that electricity generation potential from MSW in Pekanbaru could reach 0.021 MW/ton MSW and levelized cost of electricity (LCOE) from incineration PLTSa is around 21.03¢ per kWh. Waste calori?c value and feedstock supply are essential to maintain the cost competitiveness of incineration PLTSa in Pekanbaru.
    Keywords: international economy — open economy — economic integration — digital economy — sustainable economy — ASEAN
    JEL: Q42 Q48 Q55
    Date: 2022
  63. By: Haikel Khalfallah; Bibata Sagnon
    Abstract: Le développement de la production électrique d’origine renouvelable, variable et décentralisée soulève de nombreux défis pour l’ensemble des acteurs du système électrique. L’introduction massive des sources renouvelables et variables impose de repenser le modèle d’affaire des opérateurs de réseaux. Nous traitons donc, dans ce papier, la question centrale de la coordination des investissements dans le réseau électrique et dans les énergies renouvelables dans un contexte d’instabilité des subventions. A travers un jeu stratégique à trois étapes, nous développons un modèle benchmark où le gestionnaire est proactif que nous confrontons ensuite à un modèle alternatif où le gestionnaire est réactif. Nous utilisons une modélisation dynamique stochastique pour formaliser les choix des acteurs comme un programme mathématique avec contraintes d’équilibre. Et la technique du problème de complémentarité mixte est ensuite utilisée pour résoudre les sous-problèmes du jeu et trouver l’équilibre à chaque étape. Le résultat majeur de l’étude consiste à démontrer qu’un gestionnaire réactif peut dans certains cas être plus efficace socialement qu’un gestionnaire proactif. Cela dépend principalement du poids des coûts réseaux et des délais engendrés, de l’intensité des mesures de soutien envers le renouvelable et de la maturité des technologies renouvelables.
    Keywords: Coordination, Proactif, Réactif, Prime, Modélisation, Investissement, Réseau Electrique, Energie Renouvelable
    JEL: C61 O21 Q40 L94
    Date: 2023–05
  64. By: Flannery, Brian (Resources for the Future); Mares, Jan (Resources for the Future)
    Abstract: In recent reports, we’ve proposed a Framework to create and implement border tax adjustments (BTAs) in the context of an upstream US GHG tax that are compatible with US obligations under World Trade Organization (WTO) agreements. Determining BTAs—export rebates and import charges—for covered greenhouse gas (GHG)-intensive products presents significant but feasible administrative challenges, especially at startup and during early years of the program. Challenges include developing required information for the large number of GHG-intensive products exported from and imported to the United States, the availability of reliable data (especially from firms in developing countries), and the need to develop capacity in affected firms around the world and in the US government to determine BTAs for covered products.To illustrate how some of these challenges could be met, this report describes how indicative, representative estimates of export rebates and import charges can be determined based on available information, as well as estimates for what they would be for a sampling of commodity products from several industrial sectors. Section 2 summarizes the technical background to determine BTAs for covered products based on the GHG index (GGI)—a critical concept and administrative index proposed in the 2020 Framework report (see footnote 1). Section 3 discusses issues and approaches to address challenges to the start-up and phase-in of BTAs in the initial years. Section 4 provides an overview of methods to determine initial estimates for GGIs. Section 5 presents a summary and conclusions. Two related documents complement this report. The first, accompanying report (see footnote 3) describes how specific facilities and operations would determine their GHG tax and GGI values for covered products they create. The second, forthcoming report (see footnote 4) contains modules with estimates of GGI values for products in about 40 sectors based on the methods described here.Click "Download" above to read the full working paper.
    Date: 2021–10–21

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