Thursday, January 14, 2021

The New Economics of Electrifying Buildings - An Analysis of Seven Cities - All-Electric New Homes: A Win for the Climate and the Economy

As states and cities across the United States work to cut carbon emissions from every sector, they’re starting to tackle a crucial transition: eliminating fossil fuels in buildings. Burning fossil fuels, primarily gas, to heat space and water and cook food poses a risk to climate goals and public health. Thus, spurring the shift to modern, electric appliances like heat pumps becomes critical.
Buildings are quickly becoming a cornerstone of ambitious climate policy, as policymakers recognize they can’t achieve the necessary science-based emissions reductions without tackling this stubborn sector. This means states and cities across the country won’t meet their climate goals if new buildings in their jurisdiction include fossil fuel systems that lock in carbon emissions over the 50 to 100-year building lifetime.

The cost of such an ambitious transition is often the first consideration. Thus, to help inform these crucial decisions, Rocky Mountain Institute updated and expanded their 2018 analysis, The Economics of Electrifying Buildings. They examined the economics and carbon emissions impacts of electrifying residential space and water heating, now with seven new cities and additional methodology changes. Today, we are releasing the first set of our findings examining newly constructed single-family homes. In every city we analyzed, a new all-electric, single-family home is less expensive than a new mixed-fuel home that relies on gas for cooking, space heating, and water heating. Net present cost savings over the 15-year period of study are as high as $6,800 in New York City, where the all-electric home also results in 81 percent lower carbon emissions over the mixed-fuel home.
Key Findings
The new all-electric, single-family home has a lower net present cost than the new mixed-fuel home in every city we studied: Austin, TX; Boston, MA; Columbus, OH; Denver, CO; Minneapolis, MN; New York City, NY; and Seattle, WA.
  • In most cities, the mixed-fuel home (with gas furnace, water heater, air conditioning, and new gas connection costs) has a higher up-front cost than the all-electric home, which uses a heat pump system for both heating and cooling. This is true in Austin, Boston, Columbus, Denver, New York, and Seattle. The Minneapolis climate requires a higher capacity heat pump than other cities in the study. This comes at a higher cost, outweighing the equipment and labor cost savings seen with heat pump systems in milder climates.
  • There are significant energy savings with the heat pump space and water heater over corresponding gas appliances, resulting in a lower annual utility cost for the all-electric home in most cities—up to 9 percent lower in Minneapolis. The two modeled scenarios have nearly equivalent utility bills in Boston and Seattle.
  • The all-electric home results in substantial carbon emissions savings over the mixed-fuel home in all cities. The greatest savings are found in Seattle (93 percent) and New York City (81 percent). Minneapolis, Columbus, Boston, and Austin all save more than 50 percent over the lifetime of the equipment compared with the mixed-fuel home.
Context and Methodology
Cities in California, Washington, New York, and Massachusetts have all passed laws or adopted codes mandating or encouraging all-electric new building construction. Regional coalitions across the country are forming to extend lessons learned from these first movers to other states, including in New England and the Midwest.

Thus, we extended our Economics of Electrifying Buildings research to assess the economic case for electrification in a variety of climate zones. Several of these states are actively considering new policies or incentives to spur the transition to all-electric buildings.

In partnership with Group 14, we have updated our methodology from the 2018 report to be more readily replicable in support of building decarbonization policy decisions across the United States, incorporating the following:
  • A thorough energy use calibration for each scenario to end-use breakdown, energy use intensity, and gas/electricity fuel split with the latest available Energy Information Administration Residential Energy 
  • Consumption Survey data by climate region
  • A 15-year greenhouse gas emissions comparison that incorporates data from both the US EPA and NREL’s Regional Energy Deployment System model to project changes in carbon intensity for electricity consumed in each state through 2036
  • RSMeans construction costing factors to account for location-specific variability in up-front cost
  • Building industry performance standards from ASHRAE for HVAC systems, EnergyStar for household appliances, and WaterSense for potable water fixtures
Policy Implications
Our analysis shows that all-electric new construction is more economical to build than a home with gas appliances, regardless of location. Given these findings, policymakers should embrace policies that incentivize or mandate all-electric residential new construction. In addition, they should prioritize complementary policies that address several obstacles that are impeding widespread adoption of all-electric homes. We suggest the following actions:
  • Educate contractors. Our research finds that there is low contractor comfort with heat pump systems for year-round heating in cities with severe winter climates, a notion that persists from an era of older technology. Today, there are cold-climate heat pumps designed to address concerns of low capacity and efficiency in cold temperatures, best practice design guidelines, and case studies proving the efficacy of cold-climate heat pumps.To promote contractor readiness as all-electric building codes come online, policymakers and regulatory agencies should establish contractor trainings on heat pump technologies (see for example, NYSERDA’s Clean Energy Workforce Development program and San Jose’s Educational Program). For high rates of participation, ensure attendees have a reason to attend. Some jurisdictions have considered paying participants for their time. Others have allowed trained participants to be added to a qualified contractors list.
  • Educate consumers and developers. Consumers and developers are increasingly knowledgeable about modern, efficient heating and cooking technology like heat pumps and induction stoves. But their comfort with the technologies must be fostered to realize the unprecedented market expansion that is needed in the next 10 years to align the buildings sector with our global climate goals.Policymakers and regulatory agencies should establish education campaigns for residents and building developers about the health, economic, and climate benefits of all-electric homes. Familiarizing consumers with induction cooking is a particularly important issue with a variety of novel solutions (see for example, San Jose’s Induction Cooktop Checkout Program).
  • Update gas line extension allowances. Typically, gas utilities offer an allowance to compensate a portion of the cost of a new customer gas service extension, with the remainder paid by the customer or developer of the new property. Our research finds that the allowance is highly variable: it could be as low as $1,000 or higher than $5,000, in some states covering the total cost to connect the gas pipeline to a new home. Gas utility customers bear the cost of this allowance over time, therefore socializing the cost of unnecessary, uneconomic infrastructure that is not aligned with air quality, health, or climate goals. Regulatory agencies should reassess these allowances as a part of their transition planning and management of stranded asset risk.
  • Address the split incentive challenge through creative financing. In Boston and Seattle, the all-electric home has a lower cost to build, but a slightly higher cost to operate. To ensure that all consumers benefit from the up-front cost savings for all-electric homes, home mortgages could be amortized in a manner to reduce the monthly payments to compensate for higher bills. Additionally, utility regulators and policymakers should work to make the cost of gas reflect the societal cost of greenhouse gas emissions or health impacts. This can be done through a greenhouse gas emissions tax, an air quality/health impacts adder, or an increase in permitting costs for extraction and transport of fossil fuel.
This is the first release of in the new Economics of Electrifying Buildings series. Later this year, we will release findings for single-family retrofits. In early 2021, we plan to provide a detailed technoeconomic analysis for multifamily buildings, examining the case for all-electric new construction and retrofits in all seven cities.

Austin: Single-Family Homes
RMI analyzed the costs of a new all-electric home versus a new mixed-fuel home that relies on gas for cooking, space heating, and water heating. In Austin, the all-electric home saves $4,400 in net present costs and 15 tons of CO2 emissions over a 15-year period.

Key Findings
The new all-electric home has a lower net present cost than the new mixed-fuel home, presenting savings on both up-front costs and utility bills.
• A mixed fuel home (with gas furnace, water heater, air conditioning, and new gas connection costs) has a higher up-front cost than the all-electric home, which uses the heat pump system for both heating and cooling.
The all-electric home has 7% lower annual utility costs. There are significant energy savings with a heat pump space and water heater over corresponding gas appliances, even though electricity is significantly more expensive than gas per unit energy in Austin.
Carbon emissions from heating, water heating, and cooking are 65% lower over the appliance lifetime in the all-electric home, due to more efficient appliances and increasingly low-carbon electricity.

Boston: Single Family Home
RMI analyzed the costs of a new all-electric home versus a new mixed-fuel home that relies on gas for cooking, space heating, and water heating. In Boston, the all-electric home saves nearly $1,600 in costs and 51 tons of CO2 emissions over a 15-year period.

Wednesday, January 13, 2021

New Report Finds Current Transmission Interconnection Process Unworkable and Inefficient, Raising Energy Costs for Customers and Stifling Job Creation

On January 12, 2021 a report was released that shows that the current system for interconnecting generators to the transmission grid is unworkable and inefficient, creating a backlog of unbuilt energy projects. These lengthy interconnection queues have resulted in increased electricity costs for consumers, delayed rural economic development and job creation, and an added difficulty for clean energy projects looking to be connected to the nation’s grid.

Sponsored by Americans for a Clean Energy Grid as part of the Macro Grid Initiative, Disconnected: The Need for a New Generator Interconnection Policy examines the current interconnection process and finds that current policies governing queues are excessively costly, slow, and unpredictable. At the end of 2019, 734 gigawatts of proposed generation — 90 percent of which are new wind, solar, and storage projects — were waiting in interconnection queues nationwide.

“Connecting to the transmission grid is like spending four years at the Department of Motor Vehicles, except the costs are much less predictable. FERC’s interconnection policy was created in a different era and it no longer works,” said Rob Gramlich, co-author and Executive Director of Americans for a Clean Energy Grid.

The report finds that the current interconnection backlog is:
  • Increasing electricity costs for American homes and businesses by delaying the construction of new energy projects, which are cheaper than existing electricity production.
  • Harming rural economic development and job creation as most new energy projects are located in remote, rural areas.
  • Delaying or preventing state, utility, and Fortune 500 companies from reaching their decarbonization commitments by backlogging the development of new renewable energy projects.
  • Continuing to expose Americans, especially those in marginalized communities, to the harmful impacts of smog, nitrogen oxide, sulfur oxide, fine particulate matter, and carbon dioxide pollution, which are usually associated with older forms of energy production.
“This report further demonstrates the urgency in which we need to upgrade and reform our transmission system,” says Jay Caspary, co-author and Vice President at Grid Strategies LLC. “We won’t be able to access the benefits of new, clean energy projects by relying on incremental, evolutionary reforms to generator interconnection processes.”

Currently, large transmission upgrades rely on participant funding and network planning, creating a situation in which project developers are charged with paying for transmission upgrades despite the fact that there are broad-based, regional benefits. To address this problem, the report argues that FERC and other planning authorities should discontinue the policy of participant funding for new generation and implement an up-front planning system that expands and improves regional and interregional transmission planning to be proactive, incorporate future generation additions and retirements, and spread costs to all beneficiaries.

“Backlogs in interconnection queues have emerged as a significant challenge to the growth of renewable energy, even as consumer demand increases for low-cost wind and solar projects,” said Gregory Wetstone, President and CEO of the American Council on Renewable Energy (ACORE). “This important new report highlights the shortcomings of current interconnection policies and proposes sensible solutions for substantive reform. The renewable energy growth enabled by these policy changes is essential to efforts to address the climate challenge.”

Executive Summary
America’s system for planning and paying for the nation’s transmission grid is causing a massive backlog and delay in the construction of new power projects. While locally produced electric power is gaining in popularity, most of the lowest cost new power production comes from projects which are located in rural areas and, thus, depend on new electricity lines to deliver power to the urban and suburban areas which use most of the nation’s power. Project developers must apply for interconnection to the transmission network, and until the network capacity is expanded to accommodate the resources, the projects must wait in an “interconnection queue.” At the end of 2019, 734 gigawatts of proposed generation were waiting in interconnection queues nationwide.

This massive backlog has multiple negative impacts on the nation. First, it needlessly increases electricity costs for America’s homes and businesses in two ways: (1) it slows or prevents the adoption of new power sources which are cheaper than existing power generation; and (2) it also significantly increases the costs of each new power source. Americans for a Clean Energy Grid’s (ACEG) recent study demonstrates that a comprehensive approach to building transmission to connect remote power resources to electricity load centers in the Eastern half of the U.S. can cut consumers electric bills by $100 billion and decrease the average electric bill rate by more than one-third, from over cents/kWh  today to around 6 cents/kWh by 2050, saving a typical household more than $300 per year.

Second, because the lowest cost proposed power projects are often located in rural areas, this backlog is blocking rural economic development and job creation. In addition, rural power projects expand the tax base of local communities and typically generate lease payments or other revenue for farmers and other landowners. New transmission in the Eastern half of the U.S. alone will unleash up to $7.8 trillion in investment in rural America and create more than 6 million net new domestic jobs.

Third, almost 90 percent of the backlog is for wind and solar projects, thus blocking the resources which dominate new electricity production, reflecting the changing resource mix in the power sector and America’s abundance of high-quality renewable resource areas where the sun shines bright and the wind blows strong. The U.S. Energy Information Administration (EIA) projects wind and solar will account for 75 percent of new electricity generation in 2020.5 Many states, utilities, Fortune 500 companies and other institutions have adopted large commitments or requirements to scale up their renewable energy use or reduce their carbon pollution and this backlog may delay or impede achievement of these commitments or requirements. In addition, delays in developing these projects unnecessarily exposes Americans, especially those in environmental justice communities, to the harmful impacts of smog, and nitrogen oxide, sulfur dioxide, fine particulate and carbon dioxide pollution.

IV. Evidence of a Broken Interconnection Policy
a) Upgrade costs assigned to customers are high
Analysis by Lawrence Berkeley National Laboratory, shown in tables 1 and 2 below, indicates that the costs to integrate new resources, not just renewable projects, have reached levels that are unreasonably high for a developer to proceed in MISO and PJM. As expected, the costs for integrating new resources in MISO are rising substantially relative to previous years, indicating that the large-scale network has reached its capacity and needs to expand to connect more generation. In other words, much more than “driveway” type facilities are needed; larger roads and highways are required to alleviate the traffic. Table 137 below shows that historically, interconnecting wind projects have incurred interconnection costs of $0.85 per megawatt hour (MWh) or $66 per kilowatt (kW). However, newly proposed wind projects now face interconnection costs that are nearly five times higher, at $4.05/MWh or $317/kW. For reference, this is about 23 percent of the capital cost of building a wind project.

New solar projects in MISO South have much higher upgrade costs. The most recent 2019 system impact study for solar projects in MISO South estimated upgrade costs to total $307/kW, with upgrade costs for individual interconnection requests as high as $677/kW.

The rapidly increasing cost of interconnection in recent years shows that the breaking point has been reached. MISO, for example, has reported that “...interconnection studies for new generation resources in MISO’s West sub-region have indicated the need for network upgrades exceeding $3 billion to accommodate the initial queue volume, and a similar trend is expected to occur in other areas with high wind and solar potential, including MISO’s Central and South sub-regions.” Figure 2 below illustrates the large increase in assigned network upgrade costs to generators in MISO West, from approximately $300/kW in 2016 to nearly $1,000/kW in 2017. The costs to build proposed wind projects will likely result in developers abandoning those resources as project integration costs exceed $100/kW.

Tuesday, January 12, 2021

The Benefits and Costs of Decarbonizing Costa Rica's Economy

Costa Rica's National Decarbonization Plan (NDP) sets the ambitious goal for the country to become carbon-neutral by 2050 and lays out a wide range of policy and institutional reforms to achieve this goal. The authors of this report developed an integrated model that estimates the benefits and costs of implementing the NDP in all major sectors, informed by consultations with numerous government agencies, industries, and nongovernmental organizations, and used it to evaluate whether the NDP makes economic sense for Costa Rica — that is, whether the benefits of the NDP exceed its costs.

The authors' analysis suggests that under the vast majority of plausible assumptions about the future, the NDP would achieve or nearly achieve its greenhouse gas emissions reduction goals and do so at a net economic benefit. Conversely, without a concerted focus and investment in decarbonization, Costa Rica's greenhouse gas emissions will increase substantially.

The findings from this study can play an important role in ensuring that the implementation of the NDP is robust — meaning that it will achieve its goals in the uncertain future. This analysis confirms which lines of action are most critical to the success of the NDP — transport and land use — and identifies some key conditions necessary to achieve close to zero net emissions at a large net economic benefit. This study also offers ideas and models that are valuable for other countries interested in decarbonization, and that can inspire development partners globally.

Key Findings
  • Under baseline assumptions, decarbonization would yield $41 billion in net benefits to Costa Rica between 2020 and 2050, using a 5 percent discount rate.
  • Under all but 22 of the more than 3,000 plausible futures considered, implementation of the decarbonization plan would lead to economic benefits that exceed the costs.
  • Currently, electricity is almost completely renewable, and with modest investments it would provide nearly emissions-free energy to support the electrification of much of Costa Rica's economy.
  • In the transport sector, significant emissions reductions are possible through electrification of transport and shifting to public transportation. The economic benefits from energy savings, fewer accidents, time saved from reduced congestion, and the reduced negative impacts of air pollution on health more than compensate for the initially higher up-front costs of switching to electric vehicles and building infrastructure for zero-emissions public transport.
  • Reducing emissions in agriculture and livestock could lead to increased productivity, and increasing carbon sequestration by forests would increase valuable ecosystem services, such as renewable forestry products, water and soil benefits, and support for tourism and cultural heritage.
  • Emissions reductions from buildings, industry, and the waste sector are also important to reach zero net emissions and together provide modest net benefits through energy cost savings, increased productivity, and the value of treating and recycling and reusing liquid and solid waste.

  • Costa Rica should continue implementing its NDP to both meet its international obligations to decarbonize and facilitate an economic transition that would very likely lead to large net benefits and contribute to a sustainable COVID-19 pandemic recovery.
  • As Costa Rica recovers from the COVID-19 pandemic, it should focus on decarbonization investments that would reactivate the economy and provide support to the most critically affected sectors of the economy.
  • Costa Rica should monitor the costs of alternative-fuel vehicles, as well as the adoption of improved public transportation options, and make adjustments to the transport decarbonization strategies as needed to ensure net economic benefits and sufficient emissions reductions.
  • As Costa Rica continues to manage its forests for long-term sustainability, it should measure and monitor ecosystem service benefits in order to best target the NDP interventions.
  • Costa Rica should continue to develop more-detailed proposals for implementing the plan and reevaluate benefits and costs periodically to ensure the greatest net benefits, including by aligning its Nationally Determined Contribution to the NDP.
Our analysis suggests that, under baseline assumptions, implementing the NDP would lead to net-zero GHG emissions by 2050 and provide about $41 billion of net benefits across the economy from 2020 to 2050, discounted back to 2015 at a rate of 5 percent per year.3 It would save or otherwise provide $78 billion in benefits, and it would cost about $37 billion. There is significant uncertainty around these estimates, but the analysis shows that under the vast majority of plausible assumptions about the future, the NDP would achieve or nearly achieve its emissions reduction goals and do so at a net economic benefit.

Under baseline assumptions, fully implementing all lines of action in the NDP would lead to about $41 billion in net benefits (Figure S.2). The greatest benefits are due to actions affecting transport,  agriculture, livestock, and forestry net emissions. In the agriculture, livestock, and forestry sectors, ecosystem services provided by forests, such as renewable forestry products, water and soil benefits, support for tourism and cultural heritage, and improved yields are worth much more than the investments required to decarbonize and the forgone value of land dedicated to forests—providing discounted net benefits of about $22 billion. The public and private transport sectors together with the freight sector would provide $19 billion in net benefits under baseline assumptions, since the economic benefits from energy savings, fewer accidents, time saved from reduced congestion, and the reduced negative impacts of air pollution on health more than compensate for the initially higher up-front costs of switching to electric vehicles and building infrastructure for public transport (Godínez-Zamora et al., 2020). Efficiency gains in industry, and the economic value of recycled materials and treated wastewater, result in a small net benefit for the industry and waste sectors: $1.3 billion together. Figure S.2 shows modest net costs for the electricity and buildings lines of actions. However, the benefits of cheaper electricity are accounted for under the transport, industry, and buildings sectors.

by David G. Groves, James Syme, Edmundo Molina-Perez, Carlos Calvo Hernandez, Luis F. Víctor-Gallardo, Guido Godinez-Zamora, Jairo Quirós-Tortós, Felipe De León, Andrea Meza Murillo, Valentina Saavedra Gómez, Adrien Vogt-Schilb

Friday, January 8, 2021

Local Sectoral Specialization in a Warming World

This paper quantitatively assesses the world's changing economic geography and sectoral specialization due to global warming. It proposes a two-sector dynamic spatial growth model that incorporates the relation between economic activity, carbon emissions, and temperature. The model is taken to the data at the 1° by 1° resolution for the entire world. Over a 200-year horizon, rising temperatures consistent with emissions under Representative Concentration Pathway 8.5 push people and economic activity northwards to Siberia, Canada, and Scandinavia. Compared to a world without climate change, clusters of agricultural specialization shift from Central Africa, Brazil, and India's Ganges Valley, to Central Asia, parts of China and northern Canada. Equatorial latitudes that lose agriculture specialize more in non-agriculture but, due to their persistently low productivity, lose population. By the year 2200, predicted losses in real GDP and utility are 6% and 15%, respectively. Higher trade costs make adaptation through changes in sectoral specialization more costly, leading to less geographic concentration in agriculture and larger climate-induced migration.

The Value of Time in the United States: Estimates from Nationwide Natural Field Experiments

The value of time determines relative prices of goods and services, investments, productivity, economic growth, and measurements of income inequality. Economists in the 1960s began to focus on the value of non-work time, pioneering a deep literature exploring the optimal allocation and value of time. By leveraging key features of these classic time allocation theories, we use a novel approach to estimate the value of time (VOT) via two large-scale natural field experiments with the ridesharing company Lyft. We use random variation in both wait times and prices to estimate a consumer's VOT with a data set of more than 14 million observations across consumers in U.S. cities. We find that the VOT is roughly $19 per hour (or 75% (100%) of the after-tax mean (median) wage rate) and varies predictably with choice circumstances correlated with the opportunity cost of wait time. Our VOT estimate is larger than what is currently used by the U.S. Government, suggesting that society is under-valuing time improvements and subsequently under-investing public resources in time-saving infrastructure projects and technologies

Having gotten this far in our study you have surely invested a fair amount of time. We hope that such time was indeed an investment, and not ill-spent. This is because time is the ultimate scarce resource, and its value has deep implications for a range of economic phenomena and investment decisions. Our starting point is a literature from the 1960s that had deep implications for our understanding of the family, the household, and time allocation more generally. We leverage insights from these classic time allocation theories to provide a theoretically-consistent but updated approach to estimate the VOT. The theory carefully directs two large-scale natural field experiments on the Lyft platform to estimate the causal effects of wait time and price on ride-share demand.

We report several interesting insights. First, we estimate a VOT that is roughly $19 per hour (2015 prices). This estimate is 75-80% of the mean wage rate for the various regions in our experiment, which is quantitatively different from the findings of previous empirical studies on the VOT (Small et al., 2007) and is greater than the existing US policy guidelines on the VOT (USDOT, 2015). Second, we document that, consistent with standard microeconomic models (Becker, 1965; DeSerpa, 1971), the VOT is related to the opportunity cost of time, the available substitute set, and other key features of the trip that impact marginal benefits and marginal costs. Third, taken in aggregate, our research has key implications for policy. Specifically, we recommend that policymakers: (i) account for the great deal of VOT heterogeneity with respect to cities, locations within cities, day of week, and time of day; and (ii) adjust the rule-of-thumb VOT estimates up to 75% of the after-tax mean wage rate otherwise.

Sources of Cost Overrun in Nuclear Power Plant Construction Call for a New Approach to Engineering Design

• US nuclear plant cost estimation does not align with observed experience
• “Indirect” expenses, largely soft costs, contributed a majority of the cost rise
• Safety-related factors were important but not the only driver of cost increases
• Mechanistic models inform innovation by relating engineering design to cost change

Nuclear plant costs in the US have repeatedly exceeded projections. Here, we use data covering 5 decades and bottom-up cost modeling to identify the mechanisms behind this divergence. We observe that nth-of-a-kind plants have been more, not less, expensive than first-of-a-kind plants. “Soft” factors external to standardized reactor hardware, such as labor supervision, contributed over half of the cost rise from 1976 to 1987. Relatedly, containment building costs more than doubled from 1976 to 2017, due only in part to safety regulations. Labor productivity in recent plants is up to 13 times lower than industry expectations. Our results point to a gap between expected and realized costs stemming from low resilience to time- and site-dependent construction conditions. Prospective models suggest reducing commodity usage and automating construction to increase resilience. More generally, rethinking engineering design to relate design variables to cost change mechanisms could help deliver real-world cost reductions for technologies with demanding construction requirements.
The history of nuclear energy in the US is one of mixed results. Rapid capacity growth in the 1960s was accompanied by significant unit upscaling, followed by operational improvements and rising capacity factors. But in the 1970s, rising project durations and costs, alongside studies on thermal pollution and low-level radiation, became a source of public controversy. Following the 1979 Three Mile Island accident, a long hiatus of nuclear construction began. Rising construction costs and project delays have continued to affect efforts to expand nuclear capacity in the US since the 1970s. A survey of plants begun after 1970 shows an average overnight cost overrun of 241%. Since the 1990s, two nuclear projects have begun construction, both two-reactor expansions of existing generating stations. The VC Summer project in South Carolina was abandoned in 2017 with sunk costs of $9B, and the Vogtle project in Georgia is severely delayed. Current estimates place the total price of the Vogtle expansion at $25B ($11,000/kW), almost twice as high as the initial estimate of $14B, and costs are anticipated to rise further.

Challenges in nuclear construction are not unique to the US. Recent projects in Finland (Olkiluoto 3) and France (Flamanville 3) have also experienced cost escalation, cost overrun, and schedule delays. Cost estimates for a plant under construction in the United Kingdom (Hinkley Point C) have been revised upward. In contrast to the experience in Western Europe and the US, however, China, Japan, and South Korea have achieved construction durations shorter than the global median since 1990. Cost and construction duration tend to correlate (e.g., Lovering et al.), but it should be noted that cost data from these countries are largely missing or are not independently verified. (Cost data should be provided and audited by entities not actively involved in plant procurement and construction, including data from international organizations or government agencies as opposed to data from utilities and reactor equipment providers.)
[The researchers concluded that between 1976 and 1987, indirect costs—those external to hardware—caused 72% of the cost increase. “Most aren’t hardware-related but rather are what we call soft costs,” says Trancik. “Examples include rising expenditures on engineering services, on-site job supervision, and temporary construction facilities.”]

Percentage contribution of variables to increases in containment building costs These panels summarize types of variables that caused costs to increase between 1976 and 2017. In the first time period (left panel), the major contributor was a drop in the rate at which materials were deployed during construction. In the second period (middle panel), the containment building was redesigned for improved safety during possible emergencies, and the required increase in wall thickness pushed up costs. Overall, from 1976 to 2017 (right panel), the cost of a containment building more than doubled.

As the left and center panels above show, the importance of those mechanisms changed over time. Between 1976 and 1987, the cost increase was caused primarily by declining deployment rates; in other words, productivity dropped. Between 1987 and 2017, the containment building was redesigned for passive cooling, reducing the need for operator intervention during emergencies. The new design required that the steel shell be approximately five times thicker in 2017 than it had been in 1987—a change that caused 80% of the cost increase over the 1976–2017 period.

Thursday, January 7, 2021

These Trees Are Not What They Seem - How the Nature Conservancy, the world’s biggest environmental group, became a dealer of meaningless carbon offsets

At first glance, big corporations appear to be protecting great swaths of U.S. forests in the fight against climate change.

JPMorgan Chase & Co. has paid almost $1 million to preserve forestland in eastern Pennsylvania. Forty miles away, Walt Disney Co. has spent hundreds of thousands to keep the city of Bethlehem, Pa., from aggressively harvesting a forest that surrounds its reservoirs.  Across the state line in New York, investment giant BlackRock Inc. has paid thousands to the city of Albany to refrain from cutting trees around its reservoirs.

... By funding the preservation of carbon-absorbing forests, the companies say, they’re offsetting the carbon-producing impact of their global operations. But in all of those cases, the land was never threatened; the trees were already part of well-preserved forests.... By taking credit for saving well-protected land, these companies are reducing nowhere near the pollution that they claim.

The Nature Conservancy recruits landowners and enrolls its own well-protected properties in carbon-offset projects, which generate credits that give big companies an inexpensive way to claim large emissions reductions. In these transactions, each metric ton of reduced emissions is represented by a financial instrument known as a carbon offset. The corporations buy the offsets, with the money flowing to the landowners and the Conservancy. The corporate buyers then use those credits to subtract an equivalent amount of emissions from their own ledgers.
The market for these credits is booming, according to BloombergNEF.... In the first 10 months of this year, companies used more than 55.1 million carbon credits to offset their emissions (equivalent to the pollution from 12 million cars), a 28% increase from the same period in 2019. While some of these credits are paying for projects that are truly reducing emissions, an unknown number represent inflated claims.

Few have jumped into this growing market with as much zeal as the Nature Conservancy,... protecting more than 125 million acres. Last year its revenue was $932 million, which eclipsed the combined budgets of the country’s next three largest environmental nonprofits.

Danny Cullenward, a lecturer at Stanford and policy director at CarbonPlan, a nonprofit that analyzes climate solutions says.if the Conservancy is enrolling landowners who had no intention of cutting their trees ... “they’re engaged in the business of creating fake carbon offsets.”

The Conservancy defends its carbon-offset projects, saying that all adhere to peer-reviewed methodologies developed by independent registries and that each project is validated by third-party auditors.
A forested ridge, 80 miles northwest of Philadelphia, ... claimed as a protectorate of JPMorgan and other corporate patrons, ... generates carbon credits.... These 2,380 acres of trees have absorbed almost a half-million tons of carbon dioxide, storing it in their trunks, stems, and roots. If not for payments for carbon offsets ... This would be jeopardized, according to documents for the project, developed by the Nature Conservancy and Blue Source LLC, a carbon-project development company. Aggressive timber harvesting could “feasibly occur,” the documents say, wiping out about 89% of the living trees in only five years.... The landowner generates hundreds of thousands of carbon offsets—worth millions of dollars—over a two-decade period. JPMorgan has ... acquired more than 96,000 of the offsets, which  ... help erase the emissions from its employees’ air travel.  But this ... ridge wasn’t in peril. Ninety years ago hunters congregated on these mountains each fall to shoot the hawks for sport.  Rosalie Edge, a philanthropist ... acquired the land, hired a warden, and kicked out the hunters in the 1930s. Edge created a nonprofit ... to preserve the forested land as natural habitat for the migrating birds.  The trees have remained untouched for 85 years. Hawk Mountain has become wildly popular with researchers and birdwatchers, with 60,000 visitors each year. The nonprofit has grown into a $3 million organization.... The additional revenue from the carbon-offset program helps them take better care of the land, plant more saplings, and improve the forest’s health.... The project documents show almost all of the credits come from the assumption that the land would have been heavily harvested. However, the nonprofit had no intention to cut down most of its trees.
ACR, like other carbon registries, says it’s impossible to predict how lands will be managed in the future and prefers to compare the forested properties to nearby parcels, including those run by commercial timber harvesters.

... Carbon can gets reduced by spending $200 a ton capturing CO2 from the exhaust of a coal-burning power plant in China or one-tenth that amount planting trees to absorb the gas in Chile.   By allowing companies or governments to pay—and take credit for—cheaper emissions reductions beyond their fence lines, the cost of addressing climate change becomes less formidable. It also allows industries with little flexibility, such as airlines, where cleaner biofuels aren’t yet widely available to power fleets, to start taking action to reduce their net emissions.
Delta Air Lines Inc., for instance, earlier this year vowed to allocate $1 billion over the next decade, much of it on carbon offsets, to zero out the greenhouse gas emissions from its hundreds of aircraft. Royal Dutch Shell Plc says it’s spending $300 million over three years on projects that will eventually generate offsets by increasing the amount of carbon trees and soil absorb. And Microsoft Corp. and Google recently vowed to erase all of the historic carbon emissions from their operations, which will require them to buy millions of offsets (most cost about $8 to $10 per credit).

Some experts say this is just the beginning. Offsets will need to grow by at least fifteenfold if the world is to have any chance of zeroing out all its carbon emissions by 2050, says Mark Carney, special envoy on climate action and finance to the United Nations, who started a task force in September to help boost the credibility and supply of offsets.

Academics have worried for years about the validity of many forest offset projects, because it’s difficult to predict what would have happened without carbon revenue. But some nonforest projects clearly show how offsets can be effective. For instance, Stripe, a San Francisco-based technology company, recently paid $775 per ton to Climeworks AG, a Swiss company that uses renewable geothermal energy to capture CO2 from the air, concentrate it, and store it underground in rock formations. In this case, the carbon payment from Stripe is causing the reduction to happen, because there is no other reason for Climeworks to carry out this expensive process. (It hopes to drive that cost down to $100 to $200 per ton.)

Climate Finance

We review the literature studying interactions between climate change and financial markets. We first discuss various approaches to incorporating climate risk in macro-finance models. We then review the empirical literature that explores the pricing of climate risks across a large number of asset classes including real estate, equities, and fixed income securities. In this context, we also discuss how investors can use these assets to construct portfolios that hedge against climate risk. We conclude by proposing several promising directions for future research in climate finance.
Our review of the current literature is organized into two parts. In the first section, we discuss efforts to incorporate climate risk into macro-finance models. The pioneering work of Nordhaus (1977) paved the way for thinking about the interaction of the physical process of climate change with the real economy. Early papers in this literature — such as Nordhaus (1977, 1991, 1992) — focused on optimal climate change mitigation, and worked in deterministic settings. As such, these papers did not directly speak to the ways in which climate change affects asset prices and risk premia. Subsequent work extends these models to incorporate different aspects of risk and uncertainty about climate change and its link to the economy. These attributes include the stochastic nature of physical and economic processes as well as uncertainty about models of these processes (see, for example, the work by Kolstad, 1992, Manne et al., 1992, Nordhaus, 1994, Kelly & Kolstad, 1999, Nordhaus & Popp, 1997, Weitzman, 2001, 2009, Lemoine & Traeger, 2012, Golosov et al., 2014). Much of this literature has focused on the way risks and uncertainties affect optimal mitigation policies and the “social cost of carbon.” More recently, the financial economics literature has explored the implications of these models for the prices and returns of financial assets.

In the second part of this review article, we discuss the empirical literature that explores the pricing of climate risk across a large number of asset classes. This literature considers the price effects of at least two broad categories of climate related risk factors: physical climate risk and transition risk. Physical climate risk includes risks of the direct impairment of productive assets resulting from climate change; transition risk includes risks to cash flows arising from a possible transition to a lowcarbon economy. A central element of the research designs in these papers is that assets are differentially exposed to these climate risk factors: for example, houses located near the sea are more exposed to physical climate risks, while coal companies are more exposed to transition risks. Many papers then combine the differential exposure of assets within an asset class with time-varying attention paid to climate risk in order to understand how this type of risk is priced in asset markets. We review research that documents climate-related asset price effects in equity markets, bond markets, housing markets, and mortgage markets. We also discuss recent work that shows how one can use financial assets to construct portfolios that hedge climate change risks.
To sum up, the debate around the term structure of discount rates for valuing investments to mitigate climate change (and its effects on the social cost of carbon) can in large part be traced to different assumptions about the nature of the shocks that mitigation investments are hedging, and about the dynamics of the economy and the climate in response to those shocks. While this two-dimensional distinction does not fully span the variety of models that have been written in the literature, it helps to understand what has lead the literature to reach different (sometimes opposite) conclusions.
Lemoine (2020) argues that accounting for model uncertainty leads to higher estimates of the social cost of carbon than would otherwise prevail. ... Uncertainty thus introduces a new channel that impacts asset prices in the form of covariance between model parameters and agents’ consumption. This induces precautionary savings and risk premia effects in addition to those resulting from stochastic shocks in standard unambiguous models. Viewing damage uncertainty as a compound lottery, when the
agent “draws” an especially adverse damage parameter, carbon mitigation becomes especially valuable and raises the social cost of carbon (as long as relative risk aversion is greater than one, as commonly assumed in calibrations of macro and finance models).
Barnett et al. (2020) analyze the additional incremental effects of ambiguity aversion on the social cost of carbon. Holding fixed the extent of model uncertainty, they compare model calibrations with ambiguity averse investors versus a model with ambiguity neutrality.  Ambiguity aversion magnifies the cost of carbon by roughly 60% to 70% in current value terms relative to the baseline scenario with model uncertainty but ambiguity neutrality.
Krueger et al. (2020) conduct a survey of active investment managers to explore their approaches to managing climate risk. They find that investors believe that climate change has significant financial implications for portfolio firms, and that considerations of climate risk are important in the investment process. For example, 39% of investors in the survey reported to be working to reduce the carbon footprints in their portfolios. These survey responses are also consistent with findings from Alok et al. (2020), who show that fund managers adjust their portfolios in response to climatic disasters. Pedersen et al. (forthcoming) provide an ESG CAPM framework and outline how investor beliefs and preferences regarding climate change risks (and ESG considerations more broadly) fit in with the factor model paradigm that dominates empirical asset pricing research.
Given the attention that investors dedicate to climate change, a growing literature explores the pricing of various dimensions of climate risk in equity markets (e.g., Hong et al., 2019). Much of this literature has focused on the effects of regulatory climate risk, where different measures of carbon intensity or environmental friendliness are often used as proxies for regulatory climate risk. For example, Bolton & Kacperczyk (2020) analyze U.S. equity markets, and demonstrate that firms with higher carbon emissions are valued at a discount. Quantitatively, the authors estimate that a one standard deviation increase in emissions across firms is associated with a rise in expected returns of roughly 2% per annum. The authors trace this effect at least in part to exclusionary screening performed by institutional investors to limit the carbon risk in their portfolios. In related work, Hsu et al. (2020) show a similar spread in average returns between high- and low-pollution firms, and link it to uncertainty about environmental policy. Engle et al. (2020) document that stocks of firms with high E-Scores — which the authors argue capture lower exposure to regulatory climate risk — have higher returns during periods with negative news about the future path of climate change. Similarly, Choi et al. (2020) explore global stock market data and find that stocks of carbon-intensive firms underperform during times with abnormally warm weather, a period when investors’ attention to climate risks are likely to be particularly high. Barnett (2020) uses an event study analysis to explore financial market impacts of regulatory risk. He finds that increases in the likelihood of future climate policy action lead to decreased equity prices for firms with high exposure to climate policy risk. Similar evidence of the pricing of climate risk can be found in equity options markets. Ilhan et al. (2019) show that the cost of option protection against extreme downside risks is larger for firms with more carbon-intense business models, and particularly so at times when there is an increased public attention to climate risk.

Climate risks may also affect financial assets beyond equities. Municipal bond markets are a particularly interesting setting for analyzing the financial market implications of climate risk. In particular, when considering the physical risks of climate change, firms may be at risk depending on the location of their production facilities. However, even the most exposed firms usually have the option of relocating their modes of production to other geographies. Municipalities have no such luxury. As a result, one would expect that municipal debt backed by tax revenues from localities more exposed to physical climate risks such as rising sea levels or wildfires would trade at a substantial discount. In evidence along these lines, Painter (2020) shows that at-issuance municipal bond yields are higher for counties with large expected losses due to sea level rise (SLR). Consistent with the hypothesis that such price differences reflect the pricing of climate risk, he finds that this effect is concentrated in long-dated bonds and essentially absent at short maturities over which the likelihood of SLR remains low. In related work, Goldsmith-Pinkham et al. (2019) show via a structural model that this effect of SLR on municipal bond yields is tantamount to a 3–8% reduction in the present value of local government long-run cash flows.
To implement this dynamic hedging strategy, it is necessary to determine which firms increase or decrease in value when there is news around climate change.  Engle et al. (2020) solve this problem by proxying for firms’ climate risk exposures using “E-Scores” that capture various aspects of how environmentally friendly a firm is. The hedge portfolio would then overweight high-E-Score firms, and underweight lowE-Score firms, with the relative weights updated dynamically as more data on the relationship between E-Scores, climate news, and asset prices is obtained. While it is straightforward to construct such a hedge with the benefit of hindsight, the true test of a hedge portfolio is its ability to profit in adverse conditions on an out-of-sample basis. Indeed, Engle et al. (2020) find an out-of-sample correlation of 20% to 30% between the return of the hedge portfolio and innovations in the WSJ climate change news index. In summary, the paper provides a rigorous methodology for constructing portfolios to hedge against climate risks that are otherwise difficult to insure.
Zillow economist Krishna Rao (2017) calculates that a six feet sea level rise would put 1.9 million homes worth about $882 billion at risk of flooding, with about half the losses coming from Florida alone. 
Using these data, Giglio et al. (2020) show that while properties in a flood zone generally trade at a premium compared to otherwise similar properties (likely because of positive amenities such as beach access), this premium compresses in periods with elevated attention paid to climate risk. Quantitatively, a doubling in the Climate Attention Index (i.e., a doubling in the share of listings that mention climate risk-related words) is associated with a relative 2.4% decline in the transaction prices of properties in the flood zone.
A number of other papers exploit related research designs to explore the pricing of climate risk in real estate markets. Bernstein et al. (2019) also explore the relationship between house prices and sea level rise (SLR). They find that houses that are exposed to sea level rise sell for a discount compared with observably equivalent unexposed properties. The authors are able to control for the distance from the beach, which allows them to alleviate some concerns around differential amenity values of these properties. Quantitatively, properties that will be inundated after one foot of global average SLR sell at a 14.7% discount, properties inundated with two to three feet of SLR sell at a 13.8% discount, and properties inundated with six feet of SLR sell at a discount of 4.4%. Baldauf et al. (2020) present related evidence suggesting that the extent to which physical climate risk is priced in housing markets depends on whether the local population believes in climate change. Bakkensen & Barrage (2017) explore a similar point, highlighting that when individuals who do not believe in climate change disproportionately sort to purchase more exposed properties, this will reduce the extent to which climate change risk is priced in housing markets.

Tuesday, January 5, 2021

Is Air Pollution Regulation Too Stringent?

This paper describes a novel approach to estimating the marginal cost of air pollution regulation, then applies it to assess whether a large set of existing U.S. air pollution regulations have marginal costs exceeding their marginal benefits. The approach utilizes an important yet underexplored provision of the Clean Air Act requiring new or expanding plants to pay incumbents in the same or neighboring counties to reduce their pollution emissions. These “offset” regulations create several hundred decentralized, local markets for pollution that differ by pollutant and location. We describe conditions under which offset transaction prices can be interpreted as measures of the marginal cost of pollution abatement, and we compare estimates of the marginal benefit of abatement from leading air quality models to offset prices. We find that for most regions and pollutants, the marginal benefits of pollution abatement exceed mean offset prices more than ten-fold. In at least one market, however, estimated marginal benefits are below offset prices. Marginal abatement costs are increasing rapidly in real terms. Notably, our revealed preference estimates of marginal abatement costs differ enormously from typical engineering estimates. Some evidence suggests that using price rather than existing quantity regulation in these markets may increase social welfare.
Table 2 compares the marginal benefits of pollution abatement to offset prices, using our full data from 16 states plus Washington, DC, over the years 2010-2019. Columns (1) and (2) describe transactions for NOx, and columns (3) and (4) for VOCs. Columns (1) and (3) show a mean which is weighted by the tons of pollution it represents; columns (2) and (4) show a mean which is weighted by the population it represents. Panel A pools all markets, while Panels B through E describe the four regions of the US, as defined by the US Census Bureau. 

Table 2 shows that national mean marginal benefits of abatement are well above offset prices. This provides our main finding that air pollution regulation in these markets is less stringent than is efficient. This conclusion is statistically precise at greater than 99 percent confidence for all pollutants and regions. On average for NOx, mean marginal benefits of abatement are $40,000 to $51,000, depending whether the average is weighted by tons of pollution or population. Mean offset prices, however, are $2,200 to $4,000. Thus, the ratio of mean marginal benefits of abatement to mean offset prices is 13 to 18. Of course, this is far above a ratio of one. Similarly, for VOCs, we obtain a ratio of 8 to 10.

To interpret these ratios economically, consider an incumbent firm deciding whether to decrease its NOx pollution emissions and thus generate offsets for sale. On average, the firm would receive between $2,200 to $4,000 per ton for cleaning up pollution. At the same time, by decreasing emissions, the firm would be creating $40,000 to $51,000 per ton in health and welfare benefits to society. In this sense, regulation is giving less incentive to clean up pollution than is optimal, and thus is too lenient.

Table 2, Panels B through E, show similar patterns in all four regions of the country. For both pollutants NOx and VOCs, both weighting schemes, and all four regions, the ratio of the marginal benefits of abatement to offset prices is well above one. This would suggest that the regulations we study are too lenient on average in all these regions. The ratios are largest in the Northeast and Midwest, where the marginal benefits of abatement are more than fifty times mean offset prices. For NOx in the Northeast, for example, the marginal benefits of abatement are approximately $44,000, but mean offset prices are only about $500. The ratios are modestly lower in the West, at 7.1 to 9.2. The ratios are the lowest in the South, at 1.4 to 6.6.

Figure 2 plots offset prices and the marginal benefits of abatement for all markets (Panel A) and for each census region (Panels B through E), separately by year. The marginal benefits of abatement vary year-by-year due to changes in population density and differences in baseline levels of all pollutants. For example, the marginal damages of emitting NOx depend on the baseline ambient levels of NOx, VOCs, and other pollutants in each market. Table 2 essentially shows the mean value of these lines in the period 2010-2019, while these graphs show the underlying year-by-year averages, for all years.

A glance at the lines in Figure 2 shows the enormous vertical distance between the marginal benefits of abatement and offset prices in most regions and pollutants. That gap reflects the finding that the marginal bene ts of abatement are much higher than mean offset prices. Once again, the only exception is for the VOC market in the South, where the marginal benefits of abatement and offset prices have been closer in the last decade. The year-by-year values in Figure 2 are similar to the mean values over the entire last decade from Table 2.

Carbon Pricing and Innovation in a World of Political Constraints

Executive Summary:
Workshop Purpose
- In March 2020, a workshop of academic and policy experts was convened including economists, political scientists, energy innovation scholars and policy practitioners, seeking to synthesize collective expertise and academic research and to reflect on the role of carbon pricing and innovation in climate policy.
- Participants discussed the experience with carbon pricing around the world and the way forward for carbon pricing as a climate policy tool, including political feasibility, economic efficiency, and interaction and integration with other policy mechanisms. The workshop emphasized in particular the importance of political economy considerations on the design, implementation, and durability of climate policies.

Main Points of Discussion
- Carbon pricing has been an important pillar of climate policy discussions, facing no shortage of support from economists and policymakers favoring cost-effective reductions in carbon pollution. To date, around 15% of global carbon emissions are subject to carbon prices, most well under $50/tCO₂.
- Real-world experience with carbon pricing policies is mixed. In Sweden and British Columbia, carbon taxes have led to some emissions reductions, while many other places have low and ineffectual prices. Jurisdictions like Australia and Ontario, Canada have also rolled back policies. Broad-scale experience in California, the Northeast and mid-Atlantic (RGGI) states, and the EU has shown that carbon pricing systems should be seen in the context of wider climate policies and can be a source of revenues for other policy objectives.
- Key criteria for climate policy design are environmental efficacy, cost-effectiveness, and political feasibility as well as durability over time and the interaction of carbon pricing with broader climate, environmental, economic and social policies and political priorities.
- Political challenges in the form of wavering public support and interest group pressures can handicap carbon price policies as prices rise and benefits are perceived as diffuse. Research indicates this is particularly true in nations with higher income inequality.
- Carbon prices supported by complementary innovation and industrial policies can bring down technology and compliance costs and can potentially be sequenced to build political coalitions for more expansive climate policy over time.

Key Recommendations
- Well implemented carbon pricing policies are a potentially important tool in the climate policy toolkit. However, carbon pricing cannot stand alone. Politically feasible carbon pricing policies are not sufficient to drive emissions reductions or innovation at the scale and pace necessary.
- Carbon pricing should be implemented as part of a comprehensive suite of climate policies, such as clean energy standards, low or no-carbon transportation projects, government procurement and subsidy for market adoption of emerging technologies, and direct support for clean energy research, development, demonstration, and deployment (RDD&D).
- Using revenues from carbon pricing for clean energy RDD&D, public infrastructure projects, public procurement or subsidy, and alleviating distributional burdens associated with climate policy, may further decarbonization goals and increase public support.
Carbon pricing can be most directly implemented through a carbon tax or cap-and-trade system. Tax instruments provide greater price certainty; quantity instruments, like cap-and-trade, provide greater emissions certainty. Under a carbon tax, the carbon price remains stable, while emissions can vary depending upon the degree to which emitters choose to pay the tax versus reducing emissions. Carbon prices are often designed to increase over time—a feature that may increase their efficacy while undermining their popularity. With cap-and-trade programs, the emissions level is set by the cap, while the price can vary depending upon the supply and demand for allowances. In practice, quantity and price instruments can be hybridized to achieve some of the benefits of both approaches. California’s cap-and-trade system, for example, includes price floors and ceilings to limit price uncertainties.

Other cap-and-trade design considerations concern carbon “leakage”—the potential for carbon pricing in one jurisdiction or sector to lead to increases in emissions in other jurisdictions or sectors—and other trade implications, emissions hotspots, linkage to other systems, and whether or not to allow carbon offsets. All these decisions need to weigh a number of competing environmental, economic, and political priorities.

The Social Cost of Carbon
One metric often combined—and all-too-often confused—with conversations around carbon pricing is the social cost of carbon (SCC). The SCC, technically the “SC-CO2,” is typically defined as the marginal social damage, or cost, of one additional ton of carbon dioxide (CO2) being emitted into the atmosphere. It plays an important role in shaping policy decisions across the world, providing a metric to measure the economic harm of climate impacts, and to thereby calculate the benefit of regulatory or policy action. To calculate the SCC, researchers estimate the current and future CO2 or broader GHG emissions impacts on the economy, earth systems, and human welfare. Computing the SCC combines modeling of complex economic, behavioral, and geophysical systems.

Social cost of carbon calculations have a long and storied history. Yale economist Bill Nordhaus was one early pioneer. He shared the Nobel Prize in economics for his efforts leading to the calculation of the SCC. His calibrations have been famously conservative, leading to an SCC of around $40/ton of CO2 (tCO2) emitted today, a number similar to that calculated by the Obama Administration’s Interagency Working Group for the Social Cost of Carbon. Recent work applying the same fundamental benefit-cost model has led to SCC estimates of at least $100/tCO2, sometimes $200/tCO2 and above, typically driven by updated climate damage and discount rate assumptions. Most unknowns and unknowables result in still higher SCC estimates. The same goes for other extensions such as more disaggregated climate damage functions, and heterogeneity within and across countries, which result in estimates of around $400/tCO2.

Monday, January 4, 2021

Now Available for Preorder, Aptera Advanced Solar Electric Vehicle that Boasts up to 1,000-Mile Range and Requires No Charging for Most Drivers and a starting price of $25,900

On December 4, 2020 Aptera Motors announced it has introduced the first solar electric vehicle (sEV) that requires no charging for most daily use and boasts a range of up to 1,000 miles per full charge, shattering industry performance achievements to date. Aptera leverages breakthroughs in lightweight structures, low-drag aerodynamics and cooling, material science, and manufacturing processes to deliver the most efficient vehicle ever made available to consumers.

,,, Never Charge is built into every Aptera and is designed to harvest enough sunlight to travel over 11,000 miles per year in most regions. The Aptera vehicle is made of lightweight composites that are many times stronger than steel, allowing its unique body shape to slip through the air with an unheard-of drag coefficient (Cd) of .13. 
Aptera key breakthroughs and features include:
  • Record-breaking range: Aptera’s low drag gives it the longest range of any production vehicle ever created – achieving up to 1,000 miles per charge and unburdening drivers from frustrating range anxiety.
  • Solar: Integrated solar can be configured to provide up to 45 miles of range per day with over 3 square meters and 180 efficient solar cells designed into the body structure. This makes Aptera the first vehicle capable of meeting most daily driving needs using solar power alone. 
  • Efficient powertrains: Liquid-cooled electric motors propel Aptera from 0-60 in as fast as 3.5 seconds, with a top speed of 110 mph. All-wheel drive and vectorized torque control give Aptera comfort, stability control, and the ability to handle inclement weather. 
  • Tunable efficiency:  Adjustable settings built into Aptera’s user interface keep drivers updated with ways they can conserve energy and extend range in real time. 
  • Scalable manufacturing:  Aptera has solved key challenges allowing for rapid, high-volume, and cost-efficient vehicle production – having just four main pieces. 
Aptera has been available to pre-order at beginning at 4 p.m. PST on Dec. 4. For a refundable fee of $100, customers can reserve one of a limited number of special edition Paradigm and Paradigm+ vehicles, which will be the first produced in 2021. They can also design and customize their own Aptera and choose ranges of 250, 400, 600, or 1,000 miles in both AWD and FWD packages. Pricing is between $25,900- $46,900+. 

It has the ability to travel up to 45 miles a day on free power from its integrated solar panels. With only four key structural parts, Aptera’s unique body shape allows it to slip through the air using far less energy than other electric and hybrid vehicles on the road today. 

Press Release dated December 4, 2020

On December 11, 2020 Aptera announced that they quickly sold out the Paradigm and Paradigm+ editions on the first day and had $100 million in pre-orders for 3,000 vehicles,

In "Aptera unveils super-efficient electric car with up to 1,000 miles of range and solar power" at Electrec on December 7, 2020 Fred Lambert pointed out that  The startup was launched in 2006, and unveiled the idea for a super-efficient, three-wheel electric car with a prototype in 2008.  The startup failed. Cofounders Steve Fambro, Chris Anthony, and Michael Johnson went on to create Flux Power, a successful company that provides batteries to electrify forklifts.  Now they are coming back.  It can achieve 250 miles of range on a fairly small battery pack, resulting in a vehicle starting at just $25,900.  Buyers can also configure the Aptera with a battery pack that extends the range to 400 miles for $29,800, 600 miles for $34,600, and 1,000 miles for $44,900.  Aptera also offers the choice of a 100 kW front-wheel-drive system or 150 kw all-wheel-drive powertrain.  The interior of the Aptera is minimalist and reminiscent of Tesla’s Model 3 and Model Y. It even has a similar display and user interface.... It is partly solar powered.... Since the Aptera is extremely efficient, the solar power that it will generate can actually make a difference. The company offers the option to embed solar cells on the roof, hood, and back of the vehicle.  It believes that it can add between 16 and 40 miles of range per day, depending on the configuration. Aptera calls it “Never Charge” technology.

Additional discussions are at