Policy evaluation of waste pricing programs using heterogeneous causal effect estimation

Abstract

Using machine learning methods in a quasi-experimental setting, Marica Valente studies the heterogeneous effects of introducing waste prices – unit prices on household unsorted waste disposal – on waste demands and municipal costs. Using a unique panel of Italian municipalities with large variation in prices and observables, she shows that waste demands are nonlinear. The author finds evidence of constant elasticities at low prices, and increasing elasticities at high prices driven by income effects and waste habits before policy. The policy reduces waste management costs in all municipalities after three years of adoption, when prices cause significant reductions in total waste.

...

A growing number of municipalities have implemented Pay-As-You-Throw (PAYT) programs that require households to pay for each unit (per bag, can, or weight) of unsorted waste presented for collection.... Empirical estimates provide mixed evidence on the magnitude of PAYT average effect on unsorted waste as well as on possible indirect causal effects on recycling and total waste. Moreover, policy impacts may vary across municipalities depending, e.g., on the adopted price level and socio-economic characteristics.... In light of this, heterogeneity in causal effects plays an essential role in evaluating policy efficacy, allowing to ascertain subpopulations for which the policy is most beneficial and to generalize estimates to a new target population. On top of this, heterogeneous causal effect estimates can be combined with municipal waste management costs to deliver heterogeneous cost–benefit evaluations of waste policies.

In this paper, Valente examines heterogeneous demand responses to waste prices, and their impact on municipal waste management costs. The main challenge in the analysis is that determinants of waste generation and policy adoption are possibly many, and may confound the estimation of causal effects. This motivates the collection of a unique panel of municipalities with a large variation in prices and observables, and the estimation of municipal level causal effects of prices (continuous treatment) via machine learning methods....

https://en.wikipedia.org/wiki/Naples_waste_management_crisis

The author estimates policy effects on municipal costs for each municipality by combining price causal effects on unsorted and recycling waste with their impacts on waste management costs. She finds that waste prices decrease municipal costs for all municipalities especially in the long-term (after three adoption years) when municipalities show the highest reductions of total waste.

...

Municipalities generate relatively more Recycling Waste (RW) than Unsorted Waste (UW) on average. Managing one unit of UW costs on average twice as much as RW. However, municipal unit costs are largely heterogeneous, and for some of these municipalities (40%) unit costs of RW are higher than those of UW. Table 1 also shows that average costs for UW are slightly higher in per capita terms. Per capita costs indicate that one individual on average spends about €100 per year for waste services, and pays the most for unsorted waste. This implies that UW reductions that do not translate into RW increases will potentially drive cost savings for both households and municipalities. Previous studies point to education and income levels as key determinants of policy adoption and effectiveness.... In her sample, PAYT is implemented in municipalities with on average slightly higher income and comparable education levels.

...

Using prices and UW post-policy, she calculates household variable costs in each municipality. In the third policy year, households in high-price municipalities (>13 cents) pay on average €176 per capita. In low-price municipalities (<3 cents), they pay on average €21 per capita. 

...

Policy effects on municipal costs are mostly positive. However, waste prices raise municipal costs in a fraction of municipalities where the reduction of unsorted waste is largely driven by an increase in recycling, and management costs of recycling are high compared to those of unsorted waste. In year 3, PAYT generates cost savings in all municipalities. Average savings are €20 per capita, which is about one fifth of what municipalities spend for waste management per person on average. As management unit costs are largely unaffected, savings come from UW reductions that do not translate into higher RW. In other words, municipal cost savings are largely driven by total waste reductions.

New Vehicle Standards Will Produce Enormous Benefits for Consumers and the Climate

Updated pollution standards for cars and trucks will cut fuel costs and avoid up to a trillion dollars’ worth of climate-related damages

One April 13, 2023, the Environmental Protection Agency proposed new vehicle standards that will significantly reduce emissions of greenhouse gases and other criteria pollutants from the transportation sector. EPA’s multipollutant standards for light- and medium-duty vehicles sold in Model Years 2027 through 2032 will both reduce pollution and save consumers money—generating substantial societal benefits in the process.

Meredith Hankins, Senior Attorney at the Institute for Policy Integrity at NYU School of Law, issued the following statement: “EPA has a long history of using ambitious emission standards to protect public health, and today’s proposal adds to that history. The proposed standards for passenger vehicles are estimated to result in up to $1 trillion dollars in climate benefits, $280 billion in health benefits from reducing other pollution, and up to $770 billion in avoided fuel costs for consumers. This proposal, and the companion proposal for heavy-duty vehicles, recognize automotive manufacturers’ own commitments to electrify their fleets and build on Congressional incentives in the Inflation Reduction Act. EPA’s proposals represent an achievable path toward increasing the market-share of zero-emission vehicles.”

https://tinyurl.com/2lv9dfbe

Relatedly, the Institute for Policy Integrity filed an Amicus Brief Defending NHTSA Corporate Average Fuel Economy Standards on April 4, 2023.  They noted that in May 2022, the National Highway Traffic Safety Administration (NHTSA) finalized a rule to increase its corporate average fuel economy (CAFE) standards for passenger cars and light trucks for model years 2024–2026. A group of fuel and petrochemical manufacturers and states challenged the standards in the U.S. Court of Appeals for the D.C. Circuit, arguing primarily that the Energy Policy and Conservation Act bars NHTSA from including electric vehicles in the analytical baseline for the new standards. Their amicus brief explains that longstanding administrative guidance and case law direct agencies to develop baselines that reflect their best assessment of the real world absent any new agency action. In the context of this rulemaking, that guidance and case law required NHTSA to project how many and what kinds of vehicles—including electric (and plug-in hybrid electric) vehicles—would be built and sold if it did not issue new CAFE standards, which is what NHTSA did here. Their amicus brief also explains that NHTSA has consistently prepared baselines for prior CAFE standards in this manner.

The Institute for Policy Integrity at New York University School of Law, a non-partisan think tank dedicated to improving the quality of government decisionmaking. The institute produces original scholarly research in the fields of economics, law, and regulatory policy; and advocates for reform before courts, legislatures, and executive agencies. https://policyintegrity.org

Press Release dated April 13, 2023

https://policyintegrity.org/files/media/Vehicle_rule_press_release_2023.0412.pdf

https://policyintegrity.org/projects/update/amicus-brief-defending-nhtsa-corporate-average-fuel-economy-standards

Also see

Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles

A Proposed Rule by the Environmental Protection Agency on 05/05/2023

in the Federal Register

https://www.federalregister.gov/documents/2023/05/05/2023-07974/multi-pollutant-emissions-standards-for-model-years-2027-and-later-light-duty-and-medium-duty

An Analysis of US Subsidies for Electric Buses and Freight Trucks

... Congress may create entirely new subsidies for commercial electric vehicles and associated charging infrastructure included in both the Clean Energy for America Act and the Build Back Better Act. This issue brief analyzes the carbon dioxide (CO2) reductions and fiscal costs of subsidies for transit buses and certain trucks.

Medium- and heavy-duty vehicles (that is, anything larger than a passenger vehicle) consume roughly 30 percent of the total energy used by on-road or “highway” vehicles and generate about one-quarter of GHG emissions from the transportation sector (equivalent to 7 percent of total US emissions). 

... The fiscal costs and GHG reductions of the electric truck subsidies will depend on how much truck buyers respond to the subsidies and how much those trucks are driven, but because these subsidies are brand new, it is that much harder to anticipate their effects and assess how much the subsidies may help achieve the Biden administration’s climate objectives.

Joshua Linn and Wesley Look study the potential effects of offering tax credits to transit buses, day cabs (freight trucks that do not include a sleeping compartment), and sleeper cabs (freight trucks that include a sleeping compartment). The three vehicle categories account for almost half of carbon dioxide (CO2) emissions from medium and heavy-duty vehicles (MHDVs), with sleeper cabs making the largest contribution of the three types. 

They analyze a subset of the vehicle types that are eligible for subsidies, and are not estimating the total effect of the policies on all MHDVs.

They use a new computational model of MHDVs that accounts for the effects of subsidizing 30 percent of the up-front purchase cost of transit buses, day cabs, and sleeper cabs to estimate the uptake, fiscal costs, and CO2 benefits of the subsidies through 2035, relative to a baseline case that does not include the subsidies. They consider scenarios that differ by the rate at which electric vehicle prices decline over time; in all scenarios, the subsidy phases out after electric vehicles achieve 50 percent market share.

Their key findings are:

1. In the baseline case (no subsidies), electric buses, day cabs, and sleeper cabs are unlikely to achieve significant shares of new purchases by 2035.

2. The effectiveness of the 30 percent subsidy at increasing electric bus and truck sales depends on the assumed rate at which electric vehicle prices decline. Assuming a moderate rate of pre-subsidy price decline, the subsidy causes electric bus, day cab, and sleeper cab sales to begin increasing around 2030 and achieve a 50 percent market share in 2035.

3. Assuming a faster rate of price decline, the subsidy causes electric buses, day cabs, and sleeper cabs to achieve a combined 80 percent market share by 2035. At a faster rate of price decline, the subsidy reduces emissions by about 60 million metric tons of CO2 in 2035, which amounts to about a 60 percent decrease in emissions relative to the baseline (no subsidy) scenario.

Figure 1. Total Sales (number of new EV trucks sold per year

Total (undiscounted) fiscal costs between 2022 and 2031 are $2-24 billion, depending on the degree of price decline, with faster decline causing greater uptake and higher fiscal cost. Fiscal costs per ton of CO2 reduction are broadly comparable to recent estimates for subsidizing plug-in electric light-duty vehicles.

Note that the Biden administration’s target is for total US GHG emissions in 2030 to equal half of total emissions from 2005. The emissions reduction in 2030 for transit buses, day cabs, and sleeper cabs in the high-technology scenario amounts to 1.4 percent of the total emissions reduction needed to achieve that target. 
...
An individual buyer considering either a bus or cab trades off up-front purchase costs against fuel and maintenance costs. For example, they assume that an all-electric bus has a purchase price of about $185,000 in 2030 (not including subsidies), which is almost 50 percent higher than the price of a diesel bus.

Figure 3. Percent of Electric Buses and Trucks on the Road

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.

Recommendations

• 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.

https://www.rand.org/pubs/research_reports/RRA633-1.html

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

Rand www.Rand.org

 

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.

...

Mechanisms

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.

https://www.carbontax.org/where-carbon-is-taxed/

Reaching Net Zero Emissions In Virginia Could Increase State GDP More Than $3.5 Billion Per Year

When Governor Ralph Northam signed the Virginia Clean Economy Act (VCEA) into law this April, the state joined the vanguard of U.S. states enacting ambitious policy to transition from fossil fuels to a clean energy economy. But while the VCEA would significantly decarbonize Virginia’s power sector by 2050, it will still fall short of the emissions reductions needed for a safe climate future.

New modeling using the Virginia Energy Policy Simulator (EPS), developed by Energy Innovation and Rocky Mountain Institute, estimates the VCEA will reduce power sector emissions nearly 64% and cut economy-wide emissions 26% by 2050 compared to business-as-usual. While the VCEA puts Virginia on the path to significant decarbonization, it does not cover the rest of the state’s economic sectors, and falls short of the Intergovernmental Panel on Climate Change’s recommended pathway to limit warming to 1.5° Celsius for a safe climate future.

...

[The general Energy Policy Simulator available for other regions is available at https://us.energypolicy.solutions/ and more fully described  in a blog post at https://tinyurl.com/yajhwfw7 ]

Percent GDP Change in a Net Zero Scenario - U.S.

... A more ambitious policy package that implements climate policies across the transportation, buildings, industrial, land, and agricultural sectors could put Virginia on a 1.5°C pathway and generate massive economic benefits: By 2050, this scenario could achieve net-zero emissions, generate more than 12,000 job-years, and increase state GDP by more than $3.5 billion per year.

Virginia’s second-largest source of emissions is the electricity sector. Before the VCEA was enacted, the state’s power sector emissions were projected to grow from roughly 30 million metric tons of carbon dioxide-equivalent (MMT CO2e) in 2019 to about 35 MMT CO2e in 2050.

The VCEA will spur significant electricity sector emissions reductions by requiring the state’s investor-owned utilities to decarbonize, including requiring Dominion to achieve 100 percent carbon-free electricity by 2045 and Appalachian Power to achieve 100 percent carbon-free electricity by 2050. It also requires closing nearly all coal-fired power plants by 2024 and most natural gas, biomass, and petroleum-fired power plants by 2045.

The VCEA would also [increase] Virginia’s renewable energy industry with targets for 5,200 megawatts (MW) of offshore wind by 2034, 3,100 MW of energy storage capacity by 2035, and significant energy efficiency growth....Virginia currently has 2,300 MW of installed renewable energy capacity....

...

Transportation is the largest current source of statewide emissions, followed by industry and buildings as the third- and fourth-largest greenhouse gas contributors....

Modeling of the VCEA and 1.5°C pathway was conducted using the open-source and peer reviewed Virginia EPS computer model, which allows users to estimate climate and energy policy impacts on emissions, the economy, and public health.... 

This policy package would reduce economywide emissions 63% below 2005 levels by 2030 and achieve net-zero emissions before 2050.... In addition to the economic benefits, the scenario would reduce harmful air pollution, creating health benefits for Virginians.

... The Virginia EPS ... [requires] all new passenger cars sold to be electric by 2035, and all new trucks to be electric by 2045. This standard aligns with California’s transportation sector policies and the multi-state Memorandum of Understanding on moving to zero emissions medium and heavy duty vehicles that 17 states follow. The scenario also includes investing in alternatives to passenger car travel, with supportive land use and transportation policies that empower people to use public transit or walk and bike, resulting in a 20% passenger car travel reduction by 2050.

In the buildings sector, a sales standard requiring all newly sold building equipment to be electric by 2030 would shift gas space and water heating systems to all-electric heat pumps, which are already commercially available and common in many parts of the U.S. Strong efficiency standards (potentially state standards on new equipment sales, a utility rebate program, or a statewide energy efficiency resource standard) further improve the efficiency of newly sold building equipment.

The Virginia EPS 1.5°C pathway ...covers the entire electricity sector (including municipal and cooperative utilities) and targets 100% clean power [earlier], by 2035. The VCEA’s offshore wind, energy storage, and power plant closure requirements are also included along with additional policies to expand the transmission system, spur demand response, and add even more storage for valuable grid flexibility.

Virginia’s industry sector emissions come from [leaks].... To reduce energy-related emissions, the scenario requires industrial facilities electrify all end-uses where possible, to switch to a zero-carbon fuel (in this case hydrogen) for all others by 2050, and for the hydrogen to be produced through the zero-carbon process known as electrolysis. Policies promoting more efficient use of industrial materials and improved industrial energy efficiency achieve additional reductions.

...

By 2050, this scenario would generate more than 12,000 job-years and increase Virginia’s GDP by more than $3.5 billion per year.

Moving away from fossil fuels also improves air quality by reducing particulate matter emissions and other pollutants that harm human health – [avoiding] more than 16,000 asthma attacks per year by 2050.

...

by Silvio Marcacci, Communications Director at Energy Innovation a nonpartisan climate policy think tank helping policymakers make informed energy policy choices and accelerate clean energy by supporting the policies that most effectively reduce greenhouse gas emissions.

FOR FULL STORY GO TO:

https://tinyurl.com/y87s5ntw

https://www.forbes.com/sites/energyinnovation/2020/12/09/reaching-net-zero-emissions-in-virginia-could-increase-state-gdp-more-than-35-billion-per-year

Forbes www.forbes.com

December 9, 2020

Also see Greentech Media's coverage at https://tinyurl.com/y7zvgj8y

Study Finds Energy Storage Can Save Long Island Electric Customers $390 million over the Next Decade - Replacing 2,300MW of Fossil-Fueled Peaker Power Plants with Energy Storage by 2030 can save customers money, maintain electric grid reliability and reduce air pollution

A new study released by the New York Battery and Energy Storage Technology Consortium (NY-BEST), in partnership with the consulting firm, Strategen, finds that more than 2,300 MW of fossil fueled “peaking” power plants on Long Island can be cost-effectively replaced with energy storage over the next decade, saving Long Island customers more than $390 million over the next ten years and significantly reducing harmful air pollutants. The study, conducted by Strategen, examined the operations of Long Island’s aging fleet of fossil-fueled “peaker” plants, those power plants that operate primarily only during high demand or “peak” times. The analysis shows that it is technically feasible and cost-effective to replace more than 2,300 MW of Long Island’s 4,300 MW fossil-fueled peaker plants with energy storage over the next decade. It also finds that approximately half of the peaker plants, around 1,100 MW, could be retired and replaced with energy storage by 2023. The remaining 1,200 MW could be replaced by 2030, in conjunction with New York State’s plans to increase solar energy, energy efficiency measures, and offshore wind resources.

“Replacing Long Island’s oldest, least efficient, and most polluting fossil-fueled peaker plants today with lower cost, emission-free energy storage is a no-regrets solution for the Long Island Power Authority (LIPA), PSEG Long Island, Long Island electric customers, the environment, and the State of New York, said Dr. William Acker, Executive Director of NY-BEST. “As we work to achieve New York’s nation-leading and mandated goals for a carbon-free electric grid by 2040, energy storage is an essential proven technology that will enable renewable energy, maintain reliability, reduce emissions and provide a resilient electric grid.”

ATehachapi Energy Storage Project, Tehachapi, California
https://en.wikipedia.org/wiki/Battery_storage_power_station 

As part of New York State’s commitment to halting climate change, the State has mandated a carbon-free grid by 2040. The study released October 28, 2020 examines the cost-effectiveness of retiring Long Island’s aging and inefficient fossil-fueled peaker fleet and replacing it with energy storage, a “low-hanging fruit” in the Island’s energy transition. The analysis shows that replacing the aged, polluting peaker fleet will reduce energy costs, create jobs, build a more resilient power system, and reduce air pollution and greenhouse gas emissions in communities across Long Island, including Potential Environmental Justice Areas.

Long Island is home to 26 fossil-fueled power plants, composed of 74 individual turbine units, that seldom operate yet impose significant costs on Long Island electric customers. Of LIPA’s portfolio of 5,667 MW of fossil-fueled generators, 4,357 MW are “peaker plants” that operate at an annual capacity factor of 15% or less (i.e., roughly 15% of the time).

To maintain these peakers, LIPA customers pay an estimated $473 million annually in capacity costs, almost three times the market rate for capacity resources cleared through NYISO’s competitive markets.

Retiring and replacing these aging assets has the potential to create $10.5 million of annual savings in 2021, growing to $150 million annually in 2030. Over the next decade, fossil peaker replacements could save LIPA customers as much as $393 million, representing savings of approximately $360 per household across LIPA’s 1.1 million customers.

“This important and timely study demonstrates the significant potential and cost savings for energy storage on Long Island as we transition to 100% zero-carbon electricity,” said Gordian Raacke, Executive Director of Renewable Energy Long Island. “The findings make it clear that we can take steps today to replace many of Long Island’s antiquated and polluting fossil-fueled power plants with energy storage while saving consumers money.”

"This groundbreaking study shows that, over the next decade, fossil-fuel peakers on Long Island can reliably be replaced by cleaner and cheaper battery storage, along with renewables and efficiency investments,” said Lewis Milford, president of Clean Energy Group, a national nonprofit that works on peaker replacement issues. “In addition to its importance in this New York region, this study gives other cities and states a good roadmap on how to replace the hundreds of dirty, expensive fossil-fuel peakers that now pollute environmental justice communities in other parts of the country.”

“Fossil-fueled peaker plants are dirty, expensive and disproportionately harm environmental justice communities. This study shows what we’ve long known to be true – New York can replace its pollution emitting peaker plants with emissions-free energy storage while saving consumers money. It’s a win-win. Achieving New York’s nation-leading climate goals requires that we go all-in on clean energy solutions, and fast. Scaling-up energy storage must be part of New York’s climate strategy – not only on Long Island, but all across the state,” said Chris Casey, Senior Attorney at NRDC.

The full Report can be viewed here https://www.strategen.com/reports-1/ny-longisland-peaker.

Key results of this study show: 

• It is feasible and cost-effective to replace 1,116 MW of Long Island’s fossil-fueled peaker plants with energy storage by 2023 and over 2,300 MW by 2030.
• Potential savings of up to $393 million of savings can be achieved for LIPA customers over the next decade by retiring and replacing aging fossil assets.
• Replacing peakers with storage will eliminate 2.65 million metric tons of CO2, 1,910 tons of NOx, and 639 tons of SO2 of emissions annually, resulting in societal benefits of $163 million annually.
• Of the 2,300 MW of fossil peaker plant replacements, 334 MW could be retired and replaced immediately, and another 782 MW could be phased out by 2023, coinciding with the implementation of local emission control regulations and the expiration of existing LIPA long-term contracts.
• In the East End of Long Island there is a near-term opportunity for up to 90 MW of fossil peakers to be displaced with energy storage, and additional opportunities over time as local constraints are addressed.

The New York Battery and Energy Storage Technology (NY-BEST) Consortium www.ny-best.org is a non-profit corporation and industry-led consortium with more than 185 organizational members. NY-BEST’s mission is to catalyze and grow the energy storage industry and establish New York State as a global leader in the energy storage industry. 

Press Release dated October 28, 2020

Building Performance Standards: Lessons from Carbon Policy

Summary:

This paper reviews the relevant design elements of carbon and environmental markets and explores how they could influence the design of Building Performance Standards (BPS) programs. Carbon and environmental markets have existed for more than three decades, giving policymakers experience with scope and target setting and the design of flexibility provisions. The paper also sketches out how the sector-specific BPS programs overlap and interact with existing cross-sectoral programs—state-level clean energy and renewable portfolio standards (RPS), the Regional Greenhouse Gas Initiative (RGGI), electricity markets, and transport electrification.

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Discussion

BPS programs can use several design options pioneered in the carbon markets— multiyear compliance periods, absolute or benchmarked targets, and various flexibility mechanisms—to provide flexibility, help balance environmental goals and compliance costs, and even generate revenues to fund related building efficiency programs. Initially focusing on the largest buildings or largest emitters allows a program to capture the bulk of the relevant emissions or energy consumption while lowering the administrative burden. Because BPS programs have a small geographic scope, leakage is a risk: the highest emitters, notably data centers and industrial sites, would have an incentive to exit the city if compliance costs become significant. This risk can be mitigated with tailored baselines, special allocation provisions, or a broader geographic scope—all strategies that have been used in carbon markets.

Understanding how trading of compliance obligations affects building owners’ retrofit decisions, compliance costs, and savings opportunities requires knowledge of the building sector’s abatement options and costs. Including tradable markets in a BPS design increases compliance flexibility, both across entities and across time when allowance banking is permitted. However, for a market to work effectively, building owners must have a clear understanding of the cost and the energy or emissions savings of various retrofit packages for their properties. The benefits of trading within a corporate bubble versus across all covered entities is difficult to gauge without an indepth understanding of the ownership structure of the city’s covered building stock.

BPS policies target both electricity and energy consumption and thus interact with other environmental programs. These interactions can take different forms, which are not always intuitive:

• The environmental benefits can be additive. For example, the New York City BPS should create demand for local renewable energy that is supplemental to the state’s Clean Energy Standard since New York State RECs can be sold only to compliance entities.

• Program-related emissions reductions could be offsetting. That might be the case with RGGI if emissions reductions tied to a BPS reduce the compliance burden for RGGI generators but not the RGGI cap.

• Buildings might be subject to conflicting measures if, for example, the state RPS drives emissions reductions that are not fully factored into a city BPS program’s algorithms used to calculate emissions, or if electric car charging stations increase electricity consumption covered by the program.

Although that list reveals potential policy and market interactions with BPS policies, further quantitative analysis is required to understand the magnitude of these interactions and their effects on emissions. As they develop future policies and modify current designs, municipal officials should recognize these interactions and adapt policy designs as necessary to counter or limit adverse consequences.

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Scope

The first carbon market design question is, Which entities should be covered? The answer must balance two goals: capturing as much of the sector’s emissions as possible while keeping the number of compliance entities reasonable. Carbon markets therefore do not cover individual homes or vehicles but set the point of compliance at the power plant, refinery, or point of fuel distribution. BPS program designers must choose whether to regulate entities based on their size or based on their consumption or emissions level.

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Price Formation

Regulatory programs entail compliance costs that can be expressed as cost per unit of emissions or energy consumption reduced. These compliance costs are reasonably transparent in tradable programs, which have transactable prices, and they are implicit in nontrading programs. This section uses a very simple conceptual model to illustrate price formation and trading dynamics in BPS programs.

Our hypothetical program targets energy reductions, which can be translated into carbon reductions. It has five buildings and two owners. All buildings face a 10 percent reduction target in the first phase of compliance. Each building has three abatement options: a lighting retrofit, the addition of window films, and an HVAC retrofit; not all options are available to all buildings (Table 3).

In reality, buildings have many options to reduce consumption and emissions. The Department of Energy’s Scout16 building efficiency software has close to 30 built-in commercial energy efficiency measures. The Tokyo program lists 20 distinct measures that span demand-side management and operational measures, appliance and lighting efficiency, heating and cooling systems, software, and sensors. Organized from lowest to highest cost per unit of avoided consumption or cost per unit of avoided emissions, these measures form the buildings’ marginal abatement cost (MAC) curve. In our conceptual example, lighting retrofits cost $0.90 per square foot for an assumed 12 percent reduction in building consumption. Using average office building consumption data, this represents a cost of $0.10 per Btu reduced: it is the most cost-effective option. Window film abatement costs are $0.13 per Btu, and HVAC upgrades’ cost-effectiveness is $0.44 per Btu. Our example builds an abatement cost curve in units of dollars per thousand Btu reduced; however, it could also be translated into dollars per ton of greenhouse gas reduced, given information on emissions rates and time of use for various energy forms, electricity in particular. The MAC curve is built by aggregating the effectiveness of the available measures over the building stock (Figure 1). For the five buildings at hand, the three measures can reduce consumption by almost 2 mmBtu, which represents 30.2 percent of the total consumption.

Carbon Tax Adjustment Mechanisms (TAMs): How They Work and Lessons from Modeling - Tax adjustment mechanisms can significantly decrease emissions uncertainty under a carbon tax while only modestly increasing the cost of emissions reductions.

Carbon taxes can provide powerful incentives for businesses and households to reduce greenhouse gas emissions. Setting a tax, however, does not on its own guarantee a particular level of future emissions because it is impossible to predict exactly how a complex economy will respond to any given price level. To provide greater assurance about environmental performance, environmental integrity mechanisms (EIMs) can be built into carbon tax legislation. These innovative provisions have already been included in several recent US carbon tax proposals, including the MARKET CHOICE Act and the Energy Innovation and Carbon Dividend Act (both introduced in the 115th Congress and updated and reintroduced in the 116th Congress) and the Stemming Warming and Augmenting Pay (SWAP) Act and the Climate Action Rebate Act (both introduced in the 116th Congress). 

This brief focuses on one type of EIM, a Tax Adjustment Mechanism (TAM), by which the carbon tax price path is automatically adjusted if actual emissions do not meet specified emissions reduction goals. As the TAM concept gains acceptance by the policy community and Congress, research and analysis are needed to evaluate how different TAM designs will affect emissions and economic outcomes. For example, how frequently should a tax adjustment be triggered—on the basis of annual or cumulative emissions, or both? How large should the adjustment be? And how far from a desired trajectory must emissions be before it is triggered? These design choices should be grounded in rigorous analysis with an understanding of their implications for environmental performance and cost.

In response to this critical need, Resources for the Future (RFF), in collaboration with Environmental Defense Fund (EDF), has developed new modeling capacity designed to quantify the range of emissions uncertainty in carbon taxes and to evaluate the effectiveness of different TAM designs. This analysis finds that TAMs can significantly reduce emissions uncertainty and increase the probability of hitting particular emissions targets—often with very modest cost increases—but design details matter considerably in terms of both effectiveness and efficiency.

Coal Plant https://en.wikipedia.org/wiki/Carbon_tax

Results suggest that a TAM can reduce emissions uncertainty in several ways:

by reducing the likelihood of very high emissions outcomes;

by reducing expected emissions and the range of potential expected emissions; and/or

by increasing the probability of meeting a specific emissions target.

This reduced uncertainty comes at a potential cost. By increasing the price if emissions goals are not met, TAMs generally increase expected costs of abatement. 6 These cost increases, however, are often quite modest compared with the reduction in emissions uncertainty.

The performance of a TAM ultimately depends on the design details. For example, the modeling indicates that the TAM included in the 2018 MARKET CHOICE Act (which would increase the carbon tax by $2 every two years if cumulative emissions goals are not met) reduces the upper bound of possible emissions outcomes (as measured by the 97.5th percentile of the distribution) by about 3 percent, reduces expected total cumulative emissions by 1 percent, reduces the standard deviation of the distribution by 17 percent, and increases the probability of achieving the bill’s cumulative emissions target from 54 to 72 percent. The increased certainty over emissions outcomes that the TAM provides results in an additional modest cost of approximately $1 per ton of emissions reduced (Hafstead and Williams 2020b, Table 3).

Economic And Clean Energy Benefits Of Establishing A Southeast U.S. Competitive Wholesale Electricity Market

Executive Summary

Seven Independent System Operators (ISOs) or Regional Transmission Operators (RTOs) serve close to 70 percent of all United States electricity consumers. One region of the country, the Southeast, is particularly devoid of this type of market competition. This report details the impacts of enhancing competition for wholesale electricity transactions through a theoretical organized market in the Southeast region. We use a combined production-cost and capacity expansion model of the electric power system in seven Southeastern states (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee) out to 2040. ...

We find that a competitive Southeastern RTO creates cumulative economic savings of approximately $384 billion by 2040 compared to the business-as-usual (BAU) case. In 2040, this amounts to average savings of approximately 2.5¢ per kilowatt-hour (kWh), or 29 percent in retail costs compared to BAU. 2040 retail costs in the RTO scenario are 23 percent below today’s costs. In the RTO Scenario, carbon emissions fall approximately 37 percent relative to 2018 levels, and 46 percent compared to the IRP Scenario, in which emissions increase. Other major criteria pollutants impacting human health, such as NOX, SO2, and PM2.5, drop dramatically, largely as a result of eliminated coal generation. Emissions gains are driven by a vast deployment of renewable energy resources replacing coal.

Employment benefits begin accruing immediately after the RTO comes into operation, as lost jobs in coal and natural gas generation are replaced by construction jobs related to wind, solar, and battery deployment. By 2040, the RTO scenario creates 285,000 more jobs relative to the business-as-usual scenario, owing to the construction of 62 gigawatts (GW) of solar, 41 GW of onshore wind, and 46 GW of battery storage.

Our BAU case relies on the Integrated Resource Plans of the major investor-owned utilities in these states, in which utilities prescribe a coordinated set of new generating and transmission capacity necessary to meet future load projections. Vibrant Clean Energy’s WIS:dom®-P model then optimizes operations for these projected resource additions and retirements based upon historical dispatch estimates, assuming no further public policy intervention. In this case, the model assumes that each utility must meet its specified load projections and planning reserve margins independently, assuming limited import/export capacity from neighboring utilities and limited transmission expansion.

We compare this scenario to a fully competitive wholesale electric market, in which an RTO administered open market determines the most cost-effective capacity mix and resource dispatch, regardless of where that generation is located or who owns it. The RTO scenario assumes an integrated transmission planning scheme in which all seven Southeastern states share resources and expand transmission in order to meet one regional planning reserve margin at least cost. The competitive RTO Scenario modeled here grants planners and operators in the region the opportunity to co-optimize generation, distribution, and transmission benefits while planning to meet capacity in the most economically efficient way. 

A companion policy report additionally details key policies to help achieve competition’s benefits in the Southeast region. We focus on incremental policies that introduce competition into regional dispatch and utility resource planning and procurement. We cover principles for market design to help ensure a regional market is compatible with a cost-effective variable resource mix.

We outline policies that enable regional utilities with net-zero carbon goals to meet those goals effectively while respecting and supporting the fossil-dependent communities that supported economic development in the region.

Despite the fact that new renewable energy and battery storage resources are the least-cost forms of generating electricity, the Southeast region is largely beholden to monopoly utilities that rely on existing coal fleets and new gas-fired power plants to meet consumer electricity needs. This report finds that these utilities continue to inefficiently plan the power grid at great expense to consumers. Wasted excess capacity leads to wasted consumer dollars while stifling clean energy deployment, employment gains, and public health benefits.

Policymakers considering a regional market or state-level competitive procurement should be encouraged by this analysis to keep pressing in legislative and regulatory forums. State stakeholders where utilities block competitive reforms now have new quantitative findings to challenge the assumption that the way utilities have traditionally done business is in the public’s best interest. 

By Eric Gimon and Mike O'Boyle, Taylor McNair, Christopher T M Clack, Aditya Choukulkar, Brianna Cote and Sarah McKee

https://energyinnovation.org/publication/economic-and-clean-energy-benefits-of-establishing-a-southeast-u-s-competitive-wholesale-electricity-market/

Energy Innovation https://energyinnovation.org/  August, 2020

"To Rid The Grid Of Coal, The Southeast U.S. Needs A Competitive Wholesale Electricity Market" by Sarah Spengeman in Forbes on August 23, 2020 https://tinyurl.com/y67co45m notes that:

The Southeastern United States, one of the country’s only regions without a competitive wholesale electricity market, is dominated by monopoly utilities, which have favored expensive and polluting fossil fuel generation over cheap clean energy. Nearly all Southeast coal plants cost more to run than replacing them with new wind and solar, so continuing to run these uneconomic resources forces customers to foot the bill and inhale dirty air. ...

Competitive wholesale electricity markets, or Regional Transmission Operators (RTOs) and Independent System Operators (ISOs), are public-benefit corporations serving 70% of U.S. electricity customers that arose from electricity restructuring during the late 1990s-early 2000s to cut costs and encourage innovation.

Competition in these markets has reduced wholesale energy costs while creating an entry point for low-cost renewable energy to provide power to the grid. They have also been critical to integrating variable renewable energy – wind and solar – and capitalizing on resource diversity over larger geographical areas. ...

Despite ambitious long-term climate announcements, Southeast utilities are still heavily reliant on expensive-to-run coal plants and are doubling down on risky new gas infrastructure investments, instead of clean technologies of the future. ...

Comparing a competitive regional Southeast market through 2040 to a business-as-usual scenario based on existing monopoly utility Integrated Resource Plans reveals remarkable findings. Introducing a Southeast regional competitive market that optimizes regional transmission and shares resources (key features of other RTOs) would save $384 billion dollars with approximately $17.4 billion average yearly savings through 2040 - 23% lower electricity costs compared to today.

These enormous savings come from cheaper wind, solar, and storage displacing more expensive-to-run coal, along with an RTO-led regional transmission planning scheme where all seven states share power resources and expand transmission to most efficiently meet regional electricity demand. VCE’s WIS:dom model also incorporates electricity distribution infrastructure savings from deploying distributed storage and solar resources.

The Bar graph above shows cost reductions reach nearly 32% by 2040 in the competitive scenario compared to just 10% compared to business-as-usual. 

In contrast, the current utility-led planning regime is an inefficient patchwork system. Monopoly utilities plan their electric grids independently from their neighbors and impose fees called “wheeling charges” to ship power across successive utility transmission systems. This incentivizes monopolies to over-build power plants, thereby increasing profits for their shareholders. Together, this significant duplication and overbuild of infrastructure costs customers billions....

An online data explorer https://energyinnovation.org/2020/08/25/southeast-wholesale-electricity-market-rto-online-data-explorer/ allows users to compare scenarios and understand state-level impacts:

Co-Benefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations

This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency over the period 1997-2019, we show that (1) co-benefits make up a significant share of the monetized benefits; (2) among the categories of co-benefits, those associated with reductions in fine particulate matter are the most significant; and (3) co-benefits have been pivotal to the quantified net benefit calculation in exactly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: co-benefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of co-benefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting.

https://en.wikipedia.org/wiki/Air_pollution#/media/File:AlfedPalmersmokestacks.jpg

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The EPA regulatory program consistently delivers the greatest monetized benefits and imposes the largest costs of any federal regulatory agency’s actions (e.g., OMB 2019). To provide context for an assessment of co-benefits, Figure 2 illustrates the net social benefits for the CAA regulations in our database. The median rule has about $4.1 billion in net social benefits, based on the average of the lower and upper bounds of benefits and costs for that regulation’s snapshot of a full-implementation year. Every rule has positive net social benefits, with five exceptions: (1) the 1997 NAAQS for ozone (RIN 2060-AE57), with an estimated -$6 billion in net social benefits; (2) the 1997 medical waste incinerator standards (RIN 2060-AC62), with an estimated -$125 million in net social benefits; (3) the 2008 NAAQS for lead (RIN 2060-AN83), with an estimated -$90 million net social benefits15; (4) the 2005 mercury power plant rule (RIN 2060-AJ65), with an estimated -$1 billion in net social benefits; and (5) the 2016 new source performance standards for methane at oil and gas operations (RIN 2060-AS30), with an estimated -$200 million in net social benefits.

We find that co-benefits account for about 46 percent of the monetized benefits on average across all RIAs. As Figure 3 illustrates, this average masks considerable heterogeneity among the rules. Some rules have no monetized co-benefits, such as the 2013 fine PM NAAQS and the 2014 Tier 3 motor vehicle and emissions standards, which targeted both fine PM and ozone. Other rules, especially several of those focused on HAPs, have zero monetized benefits for the targeted pollutant. In these cases, fine PM pollution reductions are the primary, if not exclusive, source for monetized benefits. For the three joint EPA-NHTSA regulations targeting carbon dioxide emissions and fuel economy (RINs 2060-AP61, 2060-AQ54, and 2060-AS16), we consider reduced fuel costs one of the target benefits of the regulation, given NHTSA’s statutory authority. If, however, we were to consider reduced fuel costs a co-benefit from the standpoint of EPA under its Clean Air Act authority, then about $130 billion of benefits over 2011-2016 would shift and several of the dark gray bars at the bottom of Figure 3 would fall substantially.

by Joseph E. Aldy, Matthew Kotchen, Mary F. Evans, Meredith Fowlie, Arik Levinson and Karen Palmer

https://www.nber.org/papers/w27603
National Bureau of Economic Research (NBER) www.NBER.org
https://www.nber.org/papers/w27603
NBER Working Paper No. 27603; Issued in July 2020

China's Unconventional Nationwide CO2 Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy

China is planning to implement the largest CO2 emissions trading system in the world. To reduce emissions, the system will be a tradable performance standard (TPS), an emissions pricing mechanism that differs significantly from the emissions pricing instruments used in other countries, such as cap and trade (C&T) and a carbon tax. We employ matching analytically and numerically solved models to assess the cost-effectiveness and distributional impacts of China’s forthcoming TPS for achieving CO2 emissions reductions from the power sector.

We find that the TPS’s implicit subsidy to electricity output has wide-ranging consequences for both cost-effectiveness and distribution. In terms of cost-effectiveness, the subsidy disadvantages the TPS relative to C&T by causing power plants to make less efficient use of output-reduction as a way of reducing emissions (indeed, it induces some generators to increase output) and by limiting the cost-reducing potential of allowance trading. In our central case simulations, TPS’s overall costs are about 47 percent higher than under C&T. At the same time, the TPS has distribution-related attractions. Through the use of multiple benchmarks (maximal emission-output ratios consistent with compliance), it can serve distributional objectives. And because it yields smaller increases in electricity prices than a comparable C&T system, it implies less international emissions leakage.

https://chinapower.csis.org/china-greenhouse-gas-emissions/

https://www.nber.org/papers/w26537

by Lawrence H. Goulder, Xianling Long, Jieyi Lu and Richard D. Morgenstern

National Bureau of Economic Research (NBER) www.NBER.org

NBER Working Paper No. 26537; Issued in December 2019

Looking Back at Fifty Years of the Clean Air Act - After major expansion in 1970, the Clean Air Act led to substantial emissions reductions and health improvements—as well as some unintended consequences.

Abstract

Since 1970, transportation, power generation, and manufacturing have dramatically transformed as air pollutant emissions fell significantly. To evaluate the causal impacts of the Clean Air Act on these changes, we synthesize and review retrospective analyses of air quality regulations. The geographic heterogeneity in regulatory stringency common to many regulations has important implications for emissions, public health, compliance costs, and employment. Cap-and-trade programs have delivered greater emission reductions at lower cost than conventional regulatory mandates, but policy practice has fallen short of the cost-effective ideal. Implementing regulations in imperfectly competitive markets have also influenced the Clean Air Act’s benefits and costs.

NYC Smog 1966 https://en.wikipedia.org/wiki/1966_New_York_City_smog

Key Findings

• Spatially varying regulations can impose substantial costs on local economies.
• Current applications of market-based mechanisms may fall short of cost-saving expectations.
• Varying fuel content regulations across the United States may impose unnecessary costs on consumers in separated markets.
• Regulatory flexibility for fuel content rules doesn’t always yield cost-effective results.
• Unanticipated costs arising from overly optimistic technology projections are an important issue in the design of renewable fuel requirements.

The SO2 program has been subject to extensive research, with a number of papers focusing on the early years (such as Carlson et al. 2000 and Ellerman et al. 2000) and some recent synthesis and review papers which combine ex-ante and ex-post papers (such as Schmalensee and Stavins 2013). The ex-ante analyses all suggest large cost savings based on a comparison of the least cost solution of achieving the cap to the command-and-control uniform performance standard case. Carlson et al. (2000) note that this cost reduction reflected dramatic declines in their estimated marginal abatement cost functions for sulfur dioxide emissions resulting from changes in technology and low-sulfur coal prices over 1985-1995.

The only true ex post study of the program’s benefits and costs is by Chan et al. (2018), which finds much smaller cost savings than predicted ex ante. In part, this is the result of decisions of several power plants—in concert with their state public utility commissions—to install scrubbers rather than comply by purchasing allowances and/or using low sulfur coal, a decision that Chan et al. estimate increased annual compliance costs by nearly $100 million. Focusing on 2002 as a Phase II year before the transition to a period of regulatory uncertainty and using a mixed logit model of the firm’s compliance decision, the authors find that the SO2 program reduced compliance costs by about $200 million (1995$) and increased public health benefits by roughly $170 million. Chan et al. examine a performance standard that delivers the same aggregate emission outcome as the Acid Rain Program in 2002, which had much higher emissions than the cap due to use of banked allowances. Thus, the cost-savings of the two instruments may be smaller than they would have been under the statutory cap for 2002. Chan et al. also find that the prevailing pattern of allowance trading— from western generating units in sparsely populated areas to eastern generating units in more densely populated areas—increases public health damages by about $2 billion relative to a no-trade counterfactual.

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The Chan et al. paper builds on the insights in Muller and Mendelsohn (2009), which illustrated through an integrated assessment model how the location of an emission source relative to a downwind population could dramatically affect the monetized damages of a ton of sulfur dioxide emitted at that source. In their counterfactual analyses, Muller and Mendelsohn estimated that trading ratios, based on the relative damages associated with a ton of emissions for a pair of locations, could improve social welfare by nearly $1 billion per year compared to the ton-for-ton trading in the SO2 program as implemented. However, such differentiation in cap-and-trade implementation raises questions about administrative feasibility and accuracy in estimating ratios, especially in the presence of a complicated atmospheric chemistry that could induce negative ratios for NOx (Fraas and Lutter 2012). 

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While overall coal prices fell during the latter half of the 1990’s, Busse and Keohane found that delivered prices rose for plants covered by Phase I of the SO2 cap-and-trade program relative to those still operating under command-and-control regulation, and prices rose more at plants near a low-sulfur coal source. Overall, they estimate that railroads enjoyed an increase in annual producer surplus of more than $40 million, which represented about 15 percent of the economic surplus created by the cap-andtrade program....

Bold Climate Action Could Deliver US$26 Trillion to 2030, Finds Global Commission

A ... report released by the Global Commission on the Economy and Climate finds that we are significantly under-estimating the benefits of cleaner, climate-smart growth. Bold climate action could deliver at least US$26 trillion in economic benefits through to 2030, compared with business-as-usual.

The Report finds that over the last decade there has been tremendous technological and market progress driving the shift to a new climate economy. There are real benefits to be seen in terms of new jobs, economic savings, competitiveness and market opportunities, and improved wellbeing for people worldwide. Momentum is building behind this shift by a wide range of cities, governments, businesses, investors and others around the world, but it is not yet fast enough.

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Unlocking the Inclusive Growth Story of the 21st Century is being presented to the United Nations Secretary-General António Guterres ... at a global launch at UN headquarters in New York City. The report arrives just one week before the Global Climate Action Summit in San Francisco..

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The Report highlights opportunities in five key economic systems – energy, cities, food and land use, water, and industry. It demonstrates that ambitious action across these systems could deliver net economic gains compared with business-as-usual and:

• Generate over 65 million new low-carbon jobs in 2030, equivalent to today's entire workforces of the UK and Egypt combined. 
• Avoid over 700,000 premature deaths from air pollution in 2030. 
• Generate, through just subsidy reform and carbon pricing, an estimated US$2.8 trillion in government revenues per year in 2030 - equivalent to the total GDP of India today - funds that can be used to invest in other public priorities or reduce distorting taxes. 

“We can now see that this new growth story embodies very powerful dynamics: innovation, learning-by-doing, and economies of scale. Further, it offers us the very attractive combination of cities where we can move, breathe, and be productive; sustainable infrastructure that is not only clean and efficient, but also withstands increasingly frequent and severe climate extremes; and ecosystems that are more productive, robust, and resilient,” said Lord Nicholas Stern, I G Patel Professor of Economics and Government at the LSE and Co-Chair of the Global Commission. “Current economic models fail to capture both the powerful dynamics and the very attractive qualities of new technologies and structures. Thus we know we are grossly underestimating the benefits of this new growth story. And further, it becomes ever more clear that the risks of the damage from climate change are immense and tipping points and irreversibilities getting ever closer.”

The Global Commission calls on governments, business, and finance leaders to urgently prioritise actions on four fronts over the next 2-3 years:

• Ramp up efforts on carbon  pricing and move to mandatory disclosure of cliamte-related financial risks; 
• Accelerate investment in sustainable infrastructure; 
• Harness the power of the private sector and unleash innovation; and 
• Build a people-centred approach that shares the gains equitably and ensures that the transition is just. 

...

Read the report at www.newclimateeconomy.report/2018/

[Other highlights include:

Smarter urban development: More compact, connected, and coordinated cities are worth up to US$17 trillion in economic savings by 2050[1] 2 and will stimulate economic growth by improving access to jobs and housing. They can strengthen resilience to physical climate risks and could deliver up to 3.7 gigatons per year of CO2e savings over the next 15 years, just shy of the total emissions of the European Union (EU) today.

Sustainable land use: The shift to more sustainable forms of agriculture combined with strong forest protection could deliver over US$2 trillion per year of economic benefits; generate millions of jobs, mainly in the developing world; improve food security including by reducing food loss and waste (a third of all food produced is lost or wasted along the food chain); and deliver over a third of the climate change solution.7 At the same time, restoration of natural capital, especially our forests, degraded lands, and coastal zones, will strengthen our defences and boost adaptation to climate impacts, from more extreme weather patterns to sea-level rise.

Wise water management: Today, 2.1 billion live without readily available, safe water supplies at home, and 4.5 billion live without safely managed sanitation.8 Water will also be where climate change impacts will be felt most keenly. Water scarce regions, notably the Middle East, the Sahel, Central Africa, and East Asia could see gross domestic product (GDP) declines of as much as 6% by 2050 as a result of climate change, spurring migration and sparking conflict.9 There are enormous opportunities to curb these impacts by using water better, whether though deployment of improved technology (from drip irrigation to remote sensors to water-efficient crops), planning and governance, use of water prices with targeted support to the poor, or by investing in public infrastructure. Today, poorly managed and often under-priced water results in the over-use and misallocation of resources across the economy. Addressing the water-energy-food nexus will be critical, particularly in increasingly water-stressed regions.

A circular industrial economy: From 1970 to 2010, annual global extraction of materials grew from almost 22 to 70 billion tonnes.10 Each year, at least eight million tonnes of plastics leak into the ocean, contributing to a major new challenge for the 21st Century.11 Microplastics have been discovered in 114 aquatic species, many of which end up in our dinners.12 This challenge, however, is not just a social or environmental issue; it is also economic. Today, 95% of plastic packaging material value—as much as US$120 billion annually—is lost after first use.13 Policies which encourage more circular, efficient use of materials (especially metals, petrochemicals and construction materials) could enhance global economic activity, as well as reduce waste and pollution. Shifting to a circular industrial economy, combined with increasing efficiency and electrification, including for hard-to-abate sectors and heavy transport, could decouple economic growth from material use and drive decarbonisation of industrial activities.

Jobs: The Report also finds that taking ambitious climate action could generate over 65 million new low-carbon jobs in 2030, equivalent to today’s entire workforces of the UK and Egypt combined, as well as avoid over 700,000 premature deaths from air pollution compared with business-as-usual.

Subsidy reform and carbon pricing alone could generate an estimated US$2.8 trillion in government revenues per year in 2030 – more than the total GDP of India today – much needed funds that can be used to invest in public priorities.