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2013 | 2012 | 2011
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December 2011

December 6, 2011


Climate Talks in Durban

The 17th UNFCCC Conference of the Parties (COP) has begun in Durban, South Africa. Hopes for significant progress toward a global climate agreement are muted, especially in comparison to predictions before the Copenhagen talks two years ago. Sandwiched between Copenhagen and next year’s 20th anniversary Rio Earth Summit, Durban seems in many ways anticlimactic. There are some important issues on the agenda, however, such as the fate of the Kyoto Protocol.

RFF University Fellow Robert Stavins asks whether the Durban talks can succeed, concluding that it depends on how success is defined. Long term, incremental progress toward lasting institutions, such as the global trade negotiations that led to the creation of the World Trade Organization, should be the measure of success, not empty pronouncements. If sharp divisions of opinion on the future of Kyoto can be finessed, progress toward the other goals Stavins identifies seems more likely, and the talks could be called successful by his standards.

Kivalina and EPA

The path to U.S. climate policy appears to run through a small Alaskan town, the Ninth Circuit Court of Appeals, and the U.S. Environmental Protection Agency (EPA). Residents of the town of Kivalina, arguing that rising sea levels and loss of protective sea ice will soon force residents to move away, sued major energy firms including BP and Exxon Mobil. Oral arguments in the case were heard November 29. Most analysts think the town is unlikely to prevail, in large part because the Supreme Court rejected similar claims by Connecticut and other states earlier this year, on the grounds that EPA action on climate under the Clean Air Act displaced any remedy available in the courts. But the key piece of EPA’s program, performance standards for coal plants and refineries, has been repeatedly delayed—though there is hope that they will be proposed soon.

RFF experts have studied the possibilities for Clean Air Act carbon regulation for the past two years, and their latest research will be presented at an RFF First Wednesday event this week. Fellow Joshua Linn and others have found opportunities for improving efficiency in the existing fleet of coal plants, providing a plausible target for new rules. Senior Fellow Dallas Burtraw and his team looked at the merits of flexible, market-oriented coal standards, finding that they would be less costly overall and have a smaller impact on electricity prices. And my own new paper looks beyond such tradable standards to more ambitious tools, such as international and forest offsets, but finds that these are likely incompatible with the Clean Air Act. Register online to attend the event in person, or watch live via webcast and tweet your questions to #AskRFF.

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November 2011

November 21, 2011

Which Low-Carbon Energy Source is Cheapest?

In a recent interview on The Daily Show, former President Bill Clinton claimed that wind and solar power are cheaper than coal, considering the latter’s social costs, and that they are “both cheaper than nuclear right now.”

Relying in part on the expertise of RFF Senior Fellow Joel Darmstadter, the St. Petersburg Times’ Politifact checked Clinton’s claim. The conclusion: half right. Evidence suggests that at least some wind power is cheaper than nuclear, but, as Darmstadter notes, "It’s common and convenient to couple solar and wind in offhand references, but solar-based electricity remains, for now, appreciably costlier than wind." Darmstader also cautioned that such simplistic cost comparisons are dangerous, in part because the effects of government support are hard to quantify and compare.

Looking Back at Cash for Clunkers

Was “Cash for Clunkers”—the federal government’s $3 billion 2009 car-buyback program—successful? It depends on how you measure success, but new and newly revised research suggests we should be skeptical. Research by RFF’s Joshua Linn, Shanjun Li, and Elisheba Spiller indicates that the program probably did little to stimulate the economy via new car sales. About 45 percent of the payments went to consumers who would have bought new cars anyway and simply shifted their purchases into the program window. Linn notes that the program did have some benefits: it “got clunkers off the road and gave some stimulus to the new vehicle market that was suffering at that time.” But, he continues, “the downside is the $3 billion could have been used to stimulate the economy in other ways.”

New Car Fuel Economy Standards

EPA and the U.S. Department of Transportation formally proposed plans to impose ambitious new fleet fuel economy (CAFE) standards for 2017–2025 model year cars. The 54.5 mpg standard would, the agencies claim, cut oil consumption by 4 billion barrels and greenhouse gas emissions by 2 billion metric tons over the life of the covered vehicles. These standards will follow tightened 2012–2016 standards that the administration has already put in place.

When these standards—and industry support for them—were originally announced in August, I noted RFF’s history of research in this area. RFF experts have analyzed the standards, including a study on their cost to consumers by RFF Fellow Joshua Linn and Thomas Klier of the Federal Reserve Bank of Chicago. In another paper, RFF’s Ian Parry and Carolyn Fischer, along with others, looked at the costs of fleet standards and compared them to alternative policies like “feebates.”

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November 14, 2011

EPA and the News Cycle

Conventional wisdom in Washington is that agencies are likely to make announcements, particularly unpopular ones, when media coverage is likely to be sparse: Fridays, holidays, or days with other major news events. The phenomenon even has a name: the “Friday night dump.” But is it real?

New research by a team led by RFF’s Lucija Muehlenbachs indicates that, at least for EPA, it is indeed real. The group looked at over 21,000 EPA press releases since 1994 and found that a disproportionate number of them were released on Fridays and before holidays. The authors suggest that this is a missed opportunity for EPA to make its announcements more influential. There is another interpretation, however: the strategy may be intentional. Many EPA decisions have vocal opponents, and announcing these decisions at times when coverage is likely to be limited also limits the platforms available to critics.

Big Jump in Carbon Emissions

The federal Carbon Dioxide Information Analysis Center announced that global carbon emissions jumped by a record amount in 2010, putting the world on a path worse than the “worst-case” scenario offered by the Intergovernmental Panel on Climate Change as recently as 2007. Sharp increases in Chinese emissions were the biggest driver of the global increase. The International Energy Agency also concluded in its annual report that the chance to prevent dangerous climate change (over 2.5 degrees C) will soon be “lost forever” due to rapidly rising atmospheric carbon concentrations. Despite all this, international negotiations are stalled and few countries (Australia being a notable recent exception) appear likely to adopt new climate policies.

Nevertheless, RFF research on cost-effective climate policy options continues. For example, a recent RFF/Peterson Institute conference examined carbon taxes. A body of recent RFF research has also considered U.S. options for supporting forest carbon projects, even while comprehensive policy is stalled. When and if broader debate on climate policy starts again, RFF research will be there to support it.

New Offshore Drilling Plan

President Obama released a new five-year offshore oil and gas drilling plan that focuses new development on the Gulf and areas of the Arctic, while blocking development of the Atlantic and Pacific coasts. This is a partial reversal of the president’s 2010 plan, which would have opened the southeast Atlantic coast to new exploration. The policy change is no surprise, of course: the 2010 Deepwater Horizon spill in the Gulf forced a reassessment of offshore drilling.

RFF’s research for the President’s Oil Spill Commission was part of that reassessment. But it is unclear whether President Obama’s new plan would (or without support from Congress, could) require implementation of the recommendations for improving safety culture, well containment, and risk management.

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November 7, 2011

Climate Adaptation

The White House Council on Environmental Quality has released a report on U.S. climate policy—not on indefinitely stalled efforts to reduce emissions, but on policies to adapt to a changing climate. The report recommends that adaptation be made a “standard part of agency planning” and focuses in particular on the federal role in managing fresh water resources.

RFF has been active in adaptation research for some time. Reforming Institutions and Managing Extremes: U.S. Policy Approaches for Adapting to a Changing Climate, a summary report of this research, was issued earlier this year and includes highlights from several studies. Papers by Alan P. Covich of the University of Georgia and Mark Landy of Boston College focused on fresh water adaptation issues. RFF Senior Fellow Winston Harrington also wrote on the advantages—and disadvantages—of the U.S. federalist system in adapting to climate change. Harrington specifically advocated increased federal support for state-level adaptation policies, a recommendation echoed by the White House report.

Shale Gas Update

Hydraulic fracturing for shale gas remains—along with the Keystone XL pipeline—one of the most controversial current environmental issues. Some local communities have banned the practice, pointing to concerns over groundwater pollution and other potential environmental damage (these bans may not be legal, however). New York is moving toward lifting a statewide ban, but has proposed stringent new regulations. EPA plans to issue national rules for hydraulic fracturing-related wastewater and a study of effects on drinking water—but not until 2014. Fracturing has also recently been linked to small earthquakes in Oklahoma and Britain, prompting further calls to ban or at least slow development. But others claim the resource is economically crucial, that environmental concerns can be managed, and that cheap natural gas will have environmental benefits because it will displace coal.

What to make of all of this? RFF’s Center for Energy Economics and Policy has launched a major project to identify the risks associated with shale gas and make recommendations for responsible development and policy. The project will be launched on Monday, November 14, at an event featuring experts from inside and outside RFF. The group will provide context for the surge in interest in shale gas, an overview of the development process, a discussion of several potential risks, and a presentation of the initial stages of the RFF project. Register online or watch via webcast.

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October 2011

October 31, 2011

California Cap-and-Trade

On October 20, California became the first U.S. state to formally adopt a carbon cap-and-trade program. Starting in 2013, emitters will have to cut their greenhouse gas emissions or buy credits from those that do. The program aims to reduce the state’s carbon emissions to 1990 levels by 2020, as required by the California Global Warming Solutions Act (AB 32), passed in 2006. RFF University Fellow Robert Stavins gives an overview of the California program and its significance in his blog.

The California program is a landmark development, implementing what were once chalkboard ideas on pricing externalities in an economywide fashion for the first time. RFF researchers have contributed to the ideas and research behind carbon pricing for decades. Also relevant and worth a look is the new paper by Joseph Aldy and Robert Stavins mentioned recently in this space.

The success of California’s program is not assured, of course. It appears to have already survived political and legal challenges, but more are likely. It will also now have to confront the practical challenges of implementation. One area in which these problems seem particularly acute is incorporation of international offsets. RFF’s Daniel Morris, Anne Riddle, and I have written an issue brief explaining these plans and the legal and practical obstacles they are likely to face.

Aviation Emissions

The EU recently moved unilaterally to include transatlantic flights in its Emissions Trading System. This action was somewhat unpopular with the U.S. House of Representatives, which has passed legislation not only opposing the move, but making it illegal for U.S. airlines to comply. At this point, the endgame for the dispute is unknown. Some have predicted a trade war, whatever that means.

Michael Keen of the IMF and Jon Strand from the World Bank argued in favor of taxing international aviation in a 2010 RFF policy commentary. As they put it, “the case for stronger and sharper use of taxes on international aviation makes sense not only from the environmental perspective, but also in terms of the pressing need to find relatively efficient ways to close the substantial fiscal gaps that many countries now face.” Whether Keen and Strand would support the EU’s move is unclear—because many of the emissions allowances would be given away, the plan appears unlikely to generate much revenue.

RFF Board Member and retired CEO and chairman of the Global Environment Facility Mohammed El-Ashry also spoke in favor of international taxes in a recent interview with RFF’s Daniel Morris, concluding that modest taxes on aviation and maritime fuels could raise $16–20 billion for climate-related expenses (or other goals).

Look for more from RFF on international aviation in the future: what it means for carbon policy and the aviation industry, and where the dispute is likely to go.

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October 24, 2011

Illegal Wood

The recent federal raid on Gibson Guitar has brought back to the national agenda the issue of illegally obtained wood. This week, lawmakers began to look at revisions to the Lacey Act, a conservation law that protects plants and wildlife, to provide greater protections to small businesses and guitar lovers. But illegal logging has impacts beyond business; it also results in global deforestation.

On November 2, join RFF for a First Wednesday seminar that will explore the complex issues and changing regulations of illegal forest products. Led by Roger Sedjo, director of RFF’s Center for Forest Economics and Policy, the panel will explore the role of third-party forest certification in forest trade and discuss some of the tools available to help buyers avoid illegal forest products. Register for the event online or watch live via webcast at www.rff.org/live.

Fuel Standards for Heavy Duty Vehicles

This fall, the National Highway Traffic Safety Administration and the Environmental Protection Agency jointly published new regulations mandating improvements in fuel economy and reductions in carbon dioxide emissions by heavy-duty commercial vehicles. The EPA has said that the fuel savings will be “tremendous” and fuel-savings technology investments will have an 18–24 month payback. However, RFF’s Winston Harrington noted that “questions remain about the overall effectiveness and efficiency” of these regulations.

“The basic problem with these standards . . . is that they regulate the design and initial performance of vehicles rather than their use,” he said. In a new RFF Policy Commentary, Harrington outlines three possible perverse effects that could occur, including an increase in demand for transportation due to lower costs per mile.

Climate Change and Politics

As nations around the world increase efforts to combat climate change, the New York Times reports that “America has turned agnostic on the issue.” Research by RFF experts has shown that a large fraction of the American public is skeptical about the idea of human-induced climate change, compared to other countries. With the national election cycle gearing up, the issue has been drawn to the forefront.

At a recent RFF seminar, Jon Krosnick, an RFF University Fellow from Stanford, discussed how American public opinion on climate change affects voting in national elections. Audio, video, and slides from the event are now available online.

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October 17, 2011

Natural Gas Vehicles

Honda will expand distribution of its 2012 Civic Natural Gas, the only consumer light-duty vehicle fueled by compressed natural gas (CNG) available in the United States, from 4 states to 38. CNG fuel is much cheaper than gasoline, leading to around 30 percent fuel-cost savings, and also burns much cleaner. Some states also provide tax incentives or allow CNG vehicles to access HOV lanes. It remains to be seen whether the Civic Natural Gas or other CNG vehicles will become popular with consumers, however.

RFF’s Alan Krupnick has written on the prospects for natural gas vehicles, both consumer CNG models like the Civic and trucks fueled by liquid natural gas. Krupnick estimates the overall ownership cost of the 2011 Civic Natural Gas, concluding that it is significantly more expensive than hybrid- or gasoline-model Civics, ignoring subsidies. Once subsidies are considered it has a slight ($100/year) advantage.

Carbon Taxes

Australia’s lower chamber narrowly voted to approve the Labor government’s carbon tax proposal. If the measure also passes the upper chamber, Australia will be the largest economy to institute such a tax (though the policy will morph into a cap-and-trade system over time).

Could it happen here? Political prospects seem dim—but a carbon tax could appeal to deficit hawks as well as environmentalists, and has the appeal of simplicity. An RFF conference on October 18, Fiscal Reform and Climate Protection: Considering a U.S. Carbon Tax, will address how and whether carbon taxes can fit into larger changes to fiscal policy. Economists have long argued that a tax (or other policy that puts a price on carbon, like cap-and-trade) is the most cost-effective way to reduce emissions. RFF experts continue to study carbon taxes: RFF Nonresident Fellow Joseph Aldy and University Fellow Robert Stavins, both at Harvard, have written a new paper examining the theory of pollution pricing policies and changes in political perceptions of pollution pricing over the past two decades.

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October 11, 2011

Privatizing Flood Insurance

Cash-strapped FEMA has very large risk exposure via the National Flood Insurance Program (NFIP). More than five million policyholders pay into the scheme, but their premiums are only sufficient to cover years with modest flooding. Many NFIP policies are underpriced, and a large disaster could rapidly deplete NFIP funding. Now, Congress is considering allowing FEMA to privatize part of this risk by purchasing reinsurance.

RFF’s Carolyn Kousky noted that this wouldn’t solve the underlying problem with the NFIP. Its premiums have never been raised to take catastrophic risk into account, preventing the program from building up a reserve. For the same reason, NFIP doesn’t have money to buy additional reinsurance coverage. The reinsurance proposals in Congress recognize this by allowing 20 percent rate increases on some premiums.

EPA Shows Its Hand on Ozone

Last month, President Obama suspended EPA’s plan to tighten national air quality standards for ozone, pointing to concerns about its effect on the economy. Now, EPA has released what would have been its final rule had the president not axed the plan. The rule would have set the ozone standard at 70 parts per million, and includes a benefit-cost analysis estimating between $14 billion in net costs and $18 billion in net benefits.

RFF Visiting Scholar Randall Lutter and I discussed the implications of the president’s decision in a recent RFF Policy Commentary. President Obama was able to consider the economic impact of the standard because it was an unusual and discretionary off-cycle revision—normally costs can’t be considered at all. We argue that the president’s decision suggests it may be time to reconsider this limitation.  

Ocean Zoning

The president’s National Ocean Policy, created by executive order in 2010, has become controversial in Congress. The policy attempts to reduce conflicts among ocean users, and among those users and various regulatory bodies by coordinating regulation through “a regionally based planning process.” The White House and Republicans disagree about what the policy means in practice, with the former calling it a “smart,” “practical,” and “common-sense” policy, while the latter claims it is the vanguard for new and burdensome regulation. These critics frame the policy as “ocean zoning,” a label the White House rejects.

But RFF scholars, including Nonresident Fellow James Sanchirico, have embraced the label and argued that ocean zoning can be a good policy. Sanchirico asserts that “zoning would give all parties with a stake in the seas the security of knowing certain spaces are designated for their desired uses. Commerce benefits because environmental groups are less likely to block industry on a case-by-case basis. Marine ecosystems benefit because conservation finally gets an equal seat at the planning table with the fishing and petroleum industries.”

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October 3, 2011

Framing the Climate conversation

In a 2004 paper, Princeton’s Robert Socolow and Steve Pacala divided the emissions reductions needed to prevent big climate changes into manageable “stabilization wedges” based on existing technology. The metaphor became arguably the most popular for discussing climate policy options. Socolow has now revisited the topic in an essay, ”Wedges Reaffirmed” He argues that the wedge metaphor is useful, but criticizes other aspects of how climate discussions are framed. He claims that stating targets in degrees rather than more concrete emissions targets is not helpful, and that further work is needed on “how unwelcome news is received,” on the limitations of climate science, and on the costs of aggressive emissions reduction.

RFF President Phil Sharp was among a group of top environmental policy figures asked to respond to the essay. Sharp agrees with Socolow that climate advocates should talk in terms of risk management, not absolutes. Sharp further argues that economic conditions and a “know-nothing” approach cannot "push climate change off the front pages” indefinitely—when the climate conversation reemerges, the work of Socolow and others will help to frame it.

Loan Guarantees

The collapse of solar panel firm Solyndra has put federal loan guarantee programs in the media and political spotlights. But these programs continue. The Department of Energy has issued new guarantees to other solar firms (though it has dialed back others). Much larger loan guarantees for nuclear plant construction are pending as well.

Are loan guarantees a good policy tool? What are they intended to achieve, and are they successful? RFF’s Joel Darmstader and Joshua Linn address these and other questions in a new policy commentary. They note that loan guarantees are inherently risky, so some failures should be expected. But they suggest that loan guarantee programs should provide more data so they can be evaluated. Darmstadter and Linn also note that even though loan guarantees directly target commercialization of new technologies, “it is not clear why [they] are the best form of investment subsidy, much less the best policy for meeting the broader objectives of promoting new technology, green industry, and employment.”

Satellites and Climate Data

The Government Accountability Office (GAO) has issued a report warning of a potential gap in future climate data from U.S. satellites. A “demonstration satellite” is scheduled to be launched next month, before being replaced by the Joint Polar Satellite System (JPSS) around 2018. But the GAO questioned whether the 2018 launch is realistic. If JPSS is not launched on time, the U.S. would be left without valuable data, which could “significantly impact the nation's ability to obtain advanced warning of extreme weather events such as hurricanes” and make it more difficult to measure climate change over time.

Research by RFF’s Molly Macauley has highlighted the value (and limitations) of publicly provided information on global conditions, especially that generated by satellites. In a new Resources article, Macauley draws attention to the value of satellite monitoring for agriculture, public health, and as an early warning system for abrupt climate change.

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September 2011

September 26, 2011

Arctic Drilling

EPA has granted Royal Dutch Shell a permit for the Discoverer, a drilling ship the company plans to use for exploratory wells in Arctic waters off the north coast of Alaska. The permit was issued after Shell agreed to limit the vessel’s emissions, but it only covers air quality impacts, one of many environmental risks. The Department of the Interior must still decide whether to allow the drilling operation, taking into account other risks—most notably that of a spill. It has agreed to decide by October 2.

In June, Alan Krupnick, Director of RFF’s Center for Energy Economics and Policy, looked at the benefits and risks from expanded Arctic oil drilling. He concluded that drilling would be unlikely to affect gas prices or improve energy security very much, but that it would result in large private benefits for drilling firms. But some risks are also lower in the Arctic, he added, since there is less economic activity than in other oil-rich regions such as the Gulf of Mexico.

Assigning Blame for the Oil Spill

The Bureau of Ocean Energy Management, Regulation and Enforcement released a major report on the BP Deepwater Horizon oil spill. Among other findings, it concluded that mismanagement before the spill, and inadequate response and containment after, were the cause of the spill, deadly fire, and ensuing environmental damage. The report puts blame for these failures on BP, but also on its contractors Transocean and Halliburton. It also identifies violations of federal regulations, which make it more likely that these firms will face criminal charges, find it more difficult to defend civil suits, or both.

Working with the President’s Oil Spill Commission, RFF experts recommended policy changes that would improve industry safety culture, incorporate risk analysis, and upgrade well containment capability— addressing many of the failures identified in the report.

EPA Rules and Jobs

EPA’s suite of upcoming rules primarily affecting coal power plants is under continuing criticism. House Republicans and industry advocates claim the planned rules on mercury, greenhouse gases, ozone, and sulfur dioxide will hurt electricity reliability and cost jobs. Environmentalists and some Democrats in Congress claim the president’s decision to delay the ozone and greenhouse gas rules is a mistake that will sacrifice public health.

A key point of disagreement is the effect of tighter environmental regulations on jobs. RFF Senior Fellow Richard Morgenstern has studied the issue along with others at RFF and summarized his view in a recent interview: “The effects on jobs are negligible. They’re not job-creating or job-destroying on average.” This is partly due to job losses being offset by creation of jobs in pollution-control industries.

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September 19, 2011

EPA delays carbon rules

The EPA will not release new proposed rules limiting carbon emissions from power plants by the end of September as it had promised. The rules had already been pushed back from July. It’s not clear when the rules will be proposed, though EPA says a schedule will be announced “soon.”

The rules are probably the largest single part of EPA’s effort to regulate carbon under the Clean Air Act. But the delay means it will be even longer before we know how stringent EPA’s power plant carbon rules will be. Research by RFF’s Dallas Burtraw, Art Fraas, and me, among others, has tried to determine what legal options EPA has, model their effects, and predict what the agency will do.  But we won’t know anything for sure until the agency shows its hand.

Australia's carbon tax

Australia’s Labor government, led by Julia Gillard, is moving ahead with its plans to implement a carbon price. The proposal was submitted to Parliament last week. Frank Jotzo of Australia’s National University discussed the policy on RFF’s Weathervane.  As he explains, it will start with a fixed carbon price of A$23 per ton of carbon dioxide, then shift to a cap-and-trade scheme with international trading in 2015. Jotzo speculates that these and other design elements, including the use of price floors and ceilings, could provide a model for a future carbon pricing policy in the United States.

Farm waste and energy

Google announced it will invest in a Duke University experimental power generation project in exchange for carbon offsets, as part of a larger effort to increase its use of clean energy. The project’s source of power: hog waste.

RFF Fellow Jhih-Shyang Shih along with Dallas Burtraw, Karen Palmer, and Juha Siikamäki suggested both carbon offsets and market incentives for energy from farm waste as tools to reduce carbon and ammonia pollution and capture the value of this resource back in 2006. Google’s involvement seems likely to encourage these projects to grow beyond the pilot phase—though a price on carbon is ultimately needed to generate incentives.

Solyndra Bankruptcy

Solar panel manufacturer Solyndra recently declared bankruptcy despite receiving over $500 million in loan guarantees from the federal government. This has sparked debate and political controversy over the future of green energy in the United States and the role of government in promoting it.

RFF’s Joshua Linn spoke to Greenwire about Solyndra, noting that "there's a lot of turmoil in the solar industry." Solyndra claims competition from state-subsidized Chinese firms is behind its troubles, but Linn notes that American solar firms can thrive if they differentiate themselves from commodity competitors, noting that some firms that have done so “have been very successful and have grown very rapidly.”

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September 12, 2011

More on Ozone Standards and Jobs

President Obama’s decision to postpone revising and strengthening Clean Air Act tropospheric ozone standards has sparked blunt criticism from environmentalists and relief from industry.

The key complaint of industry critics is that strengthening the standards would have been costlier than EPA estimated and, relatedly, would have increased unemployment. As RFF Visiting Scholar Randall Lutter noted in testimony to Congress earlier this year, “there has been relatively little scholarly, empirical economics research about the effects of environmental regulations on employment” (with two noted exceptions—work by MIT’s Michael Greenstone and research by Richard Morgenstern and other RFF scholars). Lutter also noted that EPA analysis of its own regulation is inconsistent, with the agency sometimes failing to estimate job impacts at all. This is in part because there is little guidance from the Office of Management and Budget (OMB) on how to estimate job effects, a gap Lutter called on OMB to rectify.

Benefits of Chesapeake Cleanup

EPA regulations under the Clean Water Act limit pollution reaching the Chesapeake Bay, but EPA is not required by law to estimate the costs and benefits of these regulations. Under pressure from Congress, however, EPA has agreed to do a cost-benefit analysis of the rules. A cleaner estuary undoubtedly has benefits—for fishing, recreation, property values, clean water supplies, and “nonuse” values.  But evaluating costly policy requires measuring these benefits, to the extent possible.

This will not be easy, write RFF’s Maureen Cropper and William Isaac in a new Discussion Paper. Existing studies may estimate benefits to recreational fishing and property values, but getting a handle on other benefits will probably require either guesses based on studies in other environments or entirely new research. Much of the existing literature is dated and would need, at least, to be updated to account for the region’s growth.

Space Debris

Space junk poses a serious and increasing threat to satellites and spacecraft, warns a new report from the National Research Council. Over 20,000 large pieces (that is, greater than 10cm) of debris are currently tracked, but much greater numbers of smaller particles are also extremely dangerous at orbital speeds. The report calls on NASA to focus efforts on managing this problem, both alone and in cooperation with other spacefaring nations.

RFF Vice President for Research and Senior Fellow Molly Macauley, one of the report’s co-authors, notes the lack of good economic data on the costs of the debris problem and the failure to think of it as a long-lived environmental issue. Without good data on costs, it is impossible to determine how much to spend to clean up debris or at least prevent it from increasing. In other work, Macauley has argued for fees on space operations to pay for debris management.

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September 6, 2011

Ozone Standards

On Friday, President Obama announced EPA would not strengthen and reissue Clean Air Act ozone air quality standards originally issued by the Bush administration in 2008, as the current administration had promised environmental groups it would. This has sparked fury from environmentalists and cheers from critics, who claim revised standards are excessive and unwise given current economic conditions. In particular, critics claim that environmental regulation costs jobs.

The New York Times looked at evidence for these claims. There is relatively good information about the cost of environmental regulation—it must be estimated before regulations are issued and, as RFF’s Dallas Burtraw points out in the Times report, real-world costs are often much lower than estimated. Job impacts, however, are harder to assess. Richard Morgenstern, Billy Pizer, and Jhih-Shyang Shih looked at one aspect of this question 10 years ago and found “environmental spending generally does not cause a significant change in industry-level employment.”

Earthquakes and Nuclear Power

Washington and much of the east coast were recently struck by the strongest earthquake on record in central Virginia, also among the strongest known to have hit the east coast. The North Anna nuclear plant, less than 20 miles from the quake’s epicenter, briefly shut down, with the Nuclear Regulatory Commission (NRC) later finding that seismic effects exceeded the design limits of the plant. Fuel storage casks were also shifted by the quake. It is somewhat surprising that the shutdown was not more widely reported, considering the earthquake and tsunami in Japan that led to nuclear disaster in Fukushima is still fresh in the popular memory.

Shortly after Fukushima, RFF President Phil Sharp discussed its implications for nuclear policy in the United States. Sharp indicated that seismic risks were already a focus of NRC attention, noting that it “has already made it clear that it’s going to go back to the drawing board on the seismic calculations for various power plants around the country . . . considering Fukushima was miscalculated, it’s important to go back and check these things.”

In a new RFF Policy Commentary, Lucas Davis of the University of California, Berkeley asks whether a “nuclear renaissance” in the United States is realistic. He is skeptical, citing (among other factors) the high costs of new plant construction, due in part to expected increases in regulatory oversight to address risks highlighted by the Fukushima disaster.

Hurricanes and Insurance

The east coast was hit by a much more deadly and costly blow later the same week: Hurricane Irene. Early damage estimates vary from $2.5 billion to $20 billion, with some predicting a decent chance of even higher figures. $20 billion in damages would make Irene the seventh costliest disaster worldwide since 1970, in the same class as the 1994 Northridge earthquake, 1992’s Hurricane Andrew, or the September 11th attacks.

“Who should pay?” asks RFF’s Carolyn Kousky in the Baltimore Sun. Sometimes wind damage is covered by private insurers, but in many states they have been effectively forced out of the market and replaced by state insurance plans. Kousky questions whether these plans are effective and fair: “Should all taxpayers help homeowners rebuild? Or should those who run the risk of locating in a high-risk area bear all the costs of that choice?” And that’s just wind damage. In addition, few property owners on the east coast have flood insurance. This leaves the National Flood Insurance Program (and ultimately taxpayers) with the bill. The program was already in debt before Irene and Kousky notes in the LA Times, "this huge debt is going to have to be forgiven to keep the program going."

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August 2011

August 29, 2011

Parks and Recreation

Planning to spend the Labor Day holiday in one of America’s state parks? You’re not alone. As of 2007, the average American spends about a half-hour per week – or about one day per year enjoying the outdoors. Even at these modest levels, state parks provide real recreational benefits—but they’re also expensive to maintain.

RFF Fellow Juha Siikamäki asks in a recent paper whether state parks are worth the cost. He estimates that state parks provide $14 billion in annual recreational benefits, compared to a $2.3 billion annual operating cost. Parks therefore look like a good deal, even without considering their environmental and other benefits. This makes a strong case for parks at a time when many states under fiscal pressure are cutting park budgets.

Water in Texas

Texas is drier than ever before. In its tenth month of drought, the state looks certain to continue to break records. The drought has imposed huge losses on farmers and even disrupted power plants, with just not enough water to go around. The traditional solution to water shortages—which has largely been Texas’s policy of choice—is to ration water with restrictions, by limiting certain uses (lawn watering only on some days, for example) or banning them outright.

But there’s another way—treat water like any other commodity. When supply decreases, price increases, and consumers switch to substitutes where they can. Erin Mansur of Dartmouth and RFF’s Sheila Olmstead argue that pricing water is superior to imposing restrictions when drought strikes. They estimate benefits of around $100 per household every summer from a move to pricing. Put differently, large cities are potentially wasting millions of dollars by depending on restrictions.

Chinese Solar Policy

China has implemented a feed-in tariff to promote solar power. Under the policy, new solar generators will receive a subsidized and guaranteed price of 1 to 1.15 yuan (16 to 18 cents) per kilowatt-hour produced.  A similar policy for Chinese wind generation has played a role in rapid growth of that industry. Feed-in tariffs are a popular form of clean electricity policy in Europe too, but U.S. states tend to favor renewable portfolio standards.

Confused by these different policies? I collaborated with RFF’s Joshua Linn (who is also working with MIT on a study about powering a city by a solar grid) to develop a newly updated and revised clean electricity policy primer. It describes the different types of policies and gives a preview of (and links to) RFF’s growing library of relevant economic analysis on clean electricity options.

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August 23, 2011

Truck Emissions Standards

Newly issued EPA standards will require American truck and bus fleets to become more efficient in coming years, reducing fuel consumption by up to 23 percent and cutting fuel costs, oil use, and carbon emissions (though by how much is subject to debate).

RFF Associate Research Director and Senior Fellow Winston Harrington argues that the new standards could work in some ways, but they are far from an ideal tool. Narrowly, this is because the regulation “attacks the fuel intensity, rather than fuel use itself.” More efficient trucks are cheaper to operate and will therefore be driven more, cutting into the rule’s benefits—the “rebound effect.” Harrington’s broader argument is that efficiency, whether the result of regulation or natural technological progress, has not led to a reduced use of resources. As he puts it, “petroleum (as well as other fossil fuels) is a valuable and versatile resource, and as long as its price remains low, its demand is likely to remain high.”

The Keystone XL Pipeline

The State Department will soon decide whether to approve construction of the Keystone XL pipeline, which would deliver oil from Canada’s Athabasca tar sands to the United States. Environmentalists are outraged over the high carbon emissions of oil derived from tar sands and dangers to the plains (and aquifer) over which the pipeline will be built. Others claim the oil will be extracted and burned anyway, and that rejecting it is foolish, or could even increase environmental damage as a result of marine spills.

RFF Senior Fellow Joel Darmstadter calls attention to EPA’s rejection of the State Department’s environmental analysis, particularly over risks to the Ogalalla aquifer. He also points out that “the addition of 900,000 barrels per day of Canadian oil sands to this market of some 90 million barrels a day may reduce the price of a gallon of gasoline by a few cents, but don’t look for a bonanza.”

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August 15, 2011

Invasive Species

Brown marmorated stink bugs suck profits from fruit growers and annoy gardeners and homeowners. As the Washington Post reports, the insects are a recent accidental import from Asia, and a lack of predators has led to a population explosion in the Mid-Atlantic states. The stink bug is just one example of a wider problem, as species accidentally or intentionally released thrive and become invasive, hurting ecosystems and the economic activity that depends on them.

Controlling invasive species is hard. RFF’s Rebecca Epanchin-Neill and James Wilen of UC Davis argue in a recent paper that the geometry of species invasions matters—that is, the cost and likelihood of success in fighting invasions depends on the size and shape of the area being invaded. If that shape can be changed or natural features used to shrink the invasion’s edge, or if invasions can be cut off from areas where they will spread fastest, control becomes somewhat easier.

Northwest Forest Carbon

In 1994, the federal government sharply curtailed logging in federal lands in the Northwest, largely to preserve the endangered spotted owl. While the decision remains controversial, it has had an unanticipated benefit—Oregon forests have become large carbon sinks, sequestering perhaps as much as half of the state’s carbon emissions.

The Pacific Northwest is obviously not the only place where forests act as major carbon sinks. RFF’s Forest Carbon Index compiles and displays global data, cataloging the geophysical, geographical, and economic state of forest carbon around the world, enabling policies that reduce deforestation and, as the Oregon example illustrates, can pull a lot of carbon out of the atmosphere.

Major Fracking Report Released

A committee of advisers to Energy Secretary Steven Chu has released a draft report on measures to reduce the environmental impacts from shale gas hydraulic fracturing (fracking). The committee, chaired by RFF Board Vice Chair John Deutch, completed the report in only 90 days. Among its findings are calls for methane emissions standards and for providing more information to the public, including the composition of drilling fluids.

Commenting on the report in Science, RFF President Phil Sharp said, "It's a remarkable report . . . [from] a balanced, high-caliber group with public input. The report is remarkable in having honest, actionable proposals in it. What they say will get attention."

Look for upcoming research from RFF’s Center for Energy Economics and Policy on managing and reducing the risks of shale gas development.

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August 8, 2011

Global Climate Policy Choices

A joint Deutsche Bank/Columbia University report criticizes the United States for failing to enact meaningful climate policy, while praising policies in China, the United Kingdom, and Germany. The report argues that these and other countries’ adoption of verifiable clean electricity policies and direct subsidies for clean technology make them more attractive to investors. The report also estimates environmental results, concluding that emissions reductions from all countries’ policies are still short of a CO2 stabilization target of 450 ppm by 2020.

It’s difficult to explain why countries’ climate policy choices are so different, but popular attitudes are a piece of the puzzle. A recent study by RFF’s Alan Krupnick and others assessed attitudes toward climate change—and willingness to pay to avoid it—in the United States, Sweden, and China. The study found that Americans tend to have the most skepticism about climate change and, along with the Chinese, a lower willingness to pay to reduce emissions than Swedes. The study has several interesting findings—check out the infographic for a quick look.

Biomass or Carbon Capture?

Can coal be cost-effectively clean? Recent evidence points in both directions. First, utility American Electric Power recently shut down its Mountaineer experimental clean coal plant—which was using technology for carbon-capture and storage (CCS)—in West Virginia, citing uncertainty over congressional climate policy. Second, a new RAND study for the Department of Energy compared CCS (or at least DOE cost estimates) to an alternative emissions control option for coal plants: biomass co-firing. The study found that locally sourced wood biomass could be significantly cheaper than CCS, at least for the first 5 percent of fuel input.

Some claim biomass would lead to little—if any—net emissions reductions over its lifecycle. RFF’s Roger Sedjo has pointed out that this disagreement is in part due to different time horizons. Over the long run, he argues, “biomass carbon is a zero sum game”—but that for short periods and individual sites, the question is more complex.

Energy in Congress after the August Recess

Will Congress get back to policymaking—in particular, energy issues—in September? Maybe. Senate Majority Leader Harry Reid has promised to revisit energy legislation in the Senate, but there’s no evidence of support from Senate Republicans. House Republicans appear likely to renew efforts to cut funding or authority for EPA air quality rules (including upcoming carbon emissions limits)—but Senate Democrats would likely block such moves. Renewed efforts to end tax breaks for oil companies or ethanol subsidies, both of which were considered earlier this year, might be more likely to pass.

If you’re looking for related reading material during your own August recess, consider:

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August 1, 2011

Tighter Standards for Car Emissions

Last year, the federal government issued tighter emissions standards for cars and trucks as part of a compromise with states and auto manufacturers. These went into effect this year, but negotiations over the next round of tighter standards—to go into effect after 2016—have since been underway. A new compromise has been announced, with an even tighter target of 54.5 miles per gallon by 2025.

RFF researchers have analyzed—and sometimes criticized—standards for fleet fuel economy and vehicle emissions many times in recent years. A 2003 foundational paper by RFF’s Paul R. Portney, Ian W.H. Parry, and Winston Harrington, with coauthor Howard K. Gruenspecht, is a good place to start. At a recent RFF First Wednesday seminar (video), scholars debated the 2010 changes to the standards. And Senior Fellow Carolyn Fischer has argued that gallons per 100 miles—not miles per gallon—is the right way to measure fuel economy.

Clean Energy Standards

Though Congress remains otherwise occupied, interest in clean energy standards (CES) like those debated last year (and promoted by the president in his State of the Union) continues. The Congressional Budget Office (CBO) has released a report comparing seven CES proposals. The headline findings aren’t surprising: the policies would result in more clean electricity and somewhat higher average electricity prices. But different policies would lead to different energy mixes, and price increases would also differ among policies and areas of the country (with some customers even seeing price decreases).

RFF researchers have modeled CES policies too. Researchers Karen Palmer, Anthony Paul, and Matt Woerman released their results in a new paper, with findings broadly similar to the CBO: lots of new clean energy at the expense of dirty coal, with price impacts that vary across the country. Palmer, Paul, CBO researchers, and others in this field discussed their findings at an RFF workshop on clean energy standards last week. Confused about what clean energy standards are, and how they fit in the policy picture? Check out RFF’s primer, written by Joshua Linn and me.

Budget Battles Threaten EPA and Interior

House Republicans are seeking to limit the powers and funding of environmental regulators in the appropriations process. The proposals would cut funding for EPA and the Department of the Interior, forbid EPA from regulating greenhouse gases under the Clean Air Act, and prevent Interior from listing new endangered species. This latter part of the proposal was struck when some Republicans refused to support it.

These cuts seem unlikely to become law—indeed some were defeated on Friday. But do critics of these environmental regulations have a point? Maybe, but at least for their biggest targets, RFF research suggests the programs can work. Recent work by scholars Dallas Burtraw, Anthony Paul, and Matt Woerman indicates EPA carbon regulations need not be nearly as costly as critics claim. And RFF’s Lynn Scarlett argued in 2010 that the Endangered Species Act can be effectively reformed by focusing on ecosystems.

Update: Australia’s Carbon Tax

Some readers have asked if the Australian AU$23 per-ton carbon tax mentioned recently in RFF on the Issues referred to tons of carbon or carbon dioxide (CO2). Frank Jotzo of Australian National University (and author of the RFF Policy Commentary on the topic) clarifies here that it’s a price per ton of CO2.

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July 2011

July 25, 2011

The Future Energy Mix

Predicting the future mix of energy technologies is a challenge. Some claim that carbon capture-and-storage (CCS) can allow continued use of cheap coal. But utility American Electric Power recently announced it would cancel a major CCS project in West Virginia due to high costs. Wind power is another touted option, with experimental turbines suggesting great improvements in efficiency (h/t Paul Krugman). Forbes is not as optimistic, however. Making energy predictions is made even more difficult by the fact that future prospects (whether, when, and what) for federal climate policy are unclear. Investors and innovators face significant risk.

RFF has consistently tried to address this uncertainty by modeling the effects of various energy and climate policies. On Wednesday, RFF's Center for Climate and Electricity Policy and the U.S. Environmental Protection Agency are co-hosting a one-day workshop to present current analysis of a federal clean energy standard that diversifies U.S. electricity generation in a manner that promotes clean and renewable energy.

Assessing Shale Gas Risks

The extraction of natural gas from shale deposits—fracking—has dominated headlines in recent months. Advocates promise relatively cheap, clean energy, but environmental effects on groundwater are troubling. The New York Times has covered the issue in a multi-part series, though the Times’ own public editor criticized one recent story critical of fracking, saying it “painted its subject with an overly broad brush” and "didn’t include dissenting views.” Much controversy and commentary exist, but few hard facts or independent views.

RFF is conducting a major new research project to fill some of that gap. With support from the Alfred P. Sloan Foundation and leadership from RFF Center for Energy Economics and Policy Director Alan Krupnick, the project will be the first independent, broad assessment of expert opinion and public perception of the risks associated with the shale gas development process.

BP Self-Regulates

In a letter to federal regulators, BP announced plans (PDF) to voluntarily improve safety measures in its Gulf operations. The measures include a commitment to using blowout preventers (BOPs) with dual shear rams, regular testing of BOPs, and improved spill response plans.

Whether these moves are real improvements in safety or just a charm offensive isn’t clear. But this action is not surprising. In a recent report, RFF’s Mark Cohen, Joshua Linn, Madeline Gottlieb, and I found that damage to firms’ reputations might induce them to increase safety on their own, but that policy changes, such as increased liability caps and third-party insurance requirements, are needed to consistently promote safety.

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July 18, 2011

Australia’s Carbon Price

Last week Australia announced plans to tax carbon emissions from 500 of the country’s heaviest polluters. The tax is set at A$23 (US$24) per ton starting in 2012, and aims to reduce emissions to 5 percent below 2000 levels by 2020. The program will make Australia the largest economy to implement a carbon tax—though it is also the largest per capita emitter among developed countries. Carbon taxes have long been the subject of RFF research. Frank Jotzo of Australian National University recently discussed Australia’s policy options in an RFF Policy Commentary. The differences between the hybrid tax–trading scheme Jotzo discusses and the tax that will be implemented illustrate the speed at which Australian policy and politics on this issue are moving. But the key question Jotzo asks—what to do with revenues—remains relevant.

Making Independent Agencies Better

The Obama administration has previously attempted to increase efficiency at executive branch agencies, ordering a review of regulations earlier this year and promising careful analysis of future rules. Now, the president has requested similar reviews and cuts in red tape at independent agencies. Would it make sense to go further, and require these agencies to do economic analysis of their decisions? RFF’s Art Fraas and Randall Lutter asked this question in a recent paper. They found that independent agencies generally do only the minimum level of analysis required by law, and concluded that more extensive and careful evaluations would likely both improve the quality of regulation and increase accountability.

A Bad Year for Natural Disasters

Reinsurer Munich Re has calculated that 2011 is already the costliest year for natural disasters on record. Although the Japanese earthquake drives much of the total, smaller but still devastating disasters such as tornado outbreaks in the United States make a sizeable contribution. Munich Re cited increased population in disaster-prone areas and an upswing in weather-related disasters (which it linked to climate change) as key factors.

In a 2009 article, Are Catastrophes Insurable? ,RFF’s Roger Cooke and Carolyn Kousky identified many of the same trends as Munich Re. They also pointed to statistical aspects of disaster damages—fat tails, tail dependence, and microcorrelation—that make writing insurance policies and determining the role of government difficult.

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July 11, 2011

China Loses WTO Case over Limits on Rare Earths Exports

In 2009 and again in 2010, China restricted exports of rare earths—minerals that are necessary for many high-tech devices and (as the name indicates) are quite rare. The United States, European Union, and Mexico sued China, claiming that the move violated World Trade Organization rules. The WTO recently agreed, ruling that China could not impose such limits without imposing similar limits on domestic users. If China does not remove the restrictions (or win on appeal), retaliatory tariffs would be allowed, possibly sparking a trade war.

In a new Issue Brief, RFF Senior Fellow Joel Darmstadter noted that rare earths, copper, and oil, show different patterns of price fluctuations that can lead to international tension over resources and spark “resource wars.” Darmstadter warns that the rare earths controversy may be “a harbinger, and maybe a healthy one, of more widespread trade and investment dilemmas that deserve to be addressed.” He cautions, however, that not all shortages or disputes are crises that demand sweeping responses. 

California Delays Cap and Trade

California’s environmental regulators announced that the state would delay its AB32 cap-and-trade program, previously scheduled for next year, until 2013. Suits by environmental justice groups may have played a role in the delay, but concerns over market manipulation were cited as the primary reasons. Regulators claim that the program’s goal—to reduce state emissions to 1990 levels by 2020—will still be met, and have scheduled hearings on proposed changes to the program.

RFF Darius Gaskins Senior Fellow Dallas Burtraw advised on the AB32 planning process as a member of the California Market Advisory Committee. Recently he and RFF Senior Fellow Ian Parry studied what to do with auction revenues: whether to return them directly to households or to fund government and reduce taxes. They suggest that tax reductions would be more efficient, but that direct payments have some political and philosophical advantages—and could be made more efficient by combining them with energy-efficiency incentives.

EPA Releases Final Cross-State Air Pollution Rule

On July 7, EPA released its final rule imposing new, strict limitations on sulfur dioxide and nitrogen oxide emissions from coal plants. The rule is a replacement for the Bush administration’s Clean Air Interstate Rule, which was struck down by courts in 2008. Although the environmental benefits are clear, RFF Visiting Scholar Art Fraas and I criticized some parts of the rule when it was proposed last year—above all the agency’s decision to discard emissions allowances banked for future use while CAIR was in effect. Be on the lookout for RFF analysis of the final rule in coming weeks.

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July 6, 2011

Canadian Oil Sands

Recently, the Canadian government awarded Royal Dutch Shell a grant of US $876 million for a large-scale carbon capture and storage (CCS) project. Aside from the environmental benefits of the project, investing in CCS could be good news for Canada’s oil sands industry, according to RFF Senior Fellow Joel Darmstadter. In a previous RFF Policy Commentary, he noted that the long-term viability of the oil sands “may depend on success in managing the significant carbon dioxide emissions” from their production.

Fracking Facts

A recent Duke University study on fracking, which garnered significant attention because of its conclusions about methane-polluted water, “failed to note that researchers sampled a mere 68 wells” and had “no baseline data,” according to the Wall Street Journal. RFF experts Alan Krupnick and Lucija Muehlenbachs, along with University of Alberta Professor Karlis Muehlenbachs, reviewed the Duke study, noting that “Apart from requiring a baseline sample of water wells prior to drilling and during drilling, a baseline database of production gases is also needed.

Adapting to Rising Sea Levels

This month EPA published its first report on balancing coastal development with rising sea levels “based on the premise that eventually the land must give way to the rising sea.” Retreating from eroding shorelines can help protect infrastructure as well as coastal ecosystems, says research by RFF Nonresident Fellow James Sanchirico and coauthor David Kling. They write that "the question of if and when to retreat needs to be in the forefront of the dialogue on adaptation policies.”

Transit Accessibility

Last week the Senate Banking Subcommittee on Housing, Transportation and Community Development held a hearing to promote broader public transportation access to the aging and disabled. Although opinions differ on the groups’ demand for public transportation, a new RFF Policy Commentary by Jonathan Levine explains that the drive for increased mobility (and resulting traffic congestion) has hindered increased accessibility because people move to “open territory in search of uncongested roadways.”

Prizes for Climate Innovation

Offering prizes as incentives for innovation in sustainable climate technology is drawing attention in policy communities. In an RFF Discussion Paper comparing prizes versus patents as incentives, RFF’s Timothy Brennan and Molly Macauley, with colleague Kate Whitefoot, note that an advantage of prizes is that they are targeted toward achieving a particular goal and risk is shared between the investor and the researcher.

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June 2011

June 28, 2011

Fuel Efficiency Standards

A coalition of former Republican officials recently sent a letter to President Obama, asking him to "set aggressive motor vehicle fuel efficiency and emission standards to help relieve the United States from its dangerous dependence on foreign oil." If lawmakers could overcome a shared distaste for taxes, raising taxes on oil could be a far more effective (and cost-effective) approach to reducing consumption, according to RFF research. If taxes are out of the question, RFF Senior Fellows Ian Parry and Carolyn Fischer (with coauthors Soren Anderson and James Sallee) note that "feebate" programs may be a viable alternative to fuel-efficiency standards because they can allow for uncertainty in fuel prices and technological advancements.

Supreme Court Rules on Greenhouse Gas Suit

Last week the Supreme Court rejected a lawsuit that would force major electric utilities to reduce their greenhouse gas emissions. Justice Ruth Bader Ginsburg wrote that the issue of greenhouse gases must be addressed by EPA, not the courts. I discussed this issue—"displacement"—in a previous Weathervane post about four plausible reasons for dismissing the case.

GAO Report Calls for National Climate Plan

A new GAO report released by Rep. Ed Markey's (D-MA) office calls for increased funding for federal climate-related research and efforts. The report also notes the need for "a government-wide strategic planning process that promotes a shared understanding among agencies of strategic priorities by articulating what they are expected to do within the overall federal response to climate change." RFF's Center for Climate and Electricity Policy recently released a report that addresses the important role of the federal government in facilitating adaptation to climate change. Specifically, the report calls for the implementation of a National Adaptation Planning Act to focus on how environmental changes may affect agency missions and require coordinated planning to mitigate potential harm.

Opportunities for Outdoor Recreation

On Wednesday, the House Natural Resources subcommittee on National Parks, Forests and Public Lands held a hearing to review the opportunities for and economic benefits of outdoor recreation on federal lands. In a comprehensive assessment of outdoor recreation, RFF's Margaret Walls and Juha Siikamäki surveyed the supply and demand for such resources and identified related challenges. They noted a significant decline in the Land and Water Conservation Fund (LWCF) state grants, which totaled only $25 million in 2008, compared to $370 million at the program's peak in 1979. On Thursday, Senate Democrats introduced a bill that would use oil and gas revenue to permanently fund the LWCF, which is set to expire in 2015.

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June 20, 2011

Senate Votes to End Ethanol Subsidies

The Senate approved an amendment on Thursday to end the $6 billion per year in federal subsidies to farmers for corn ethanol production; however, the bill still faces an uphill battle to becoming final. Opposition to ethanol subsidies is widespread among economists, who find them inefficient and likely to generate unwanted side effects, like higher food prices. RFF’s John Anderson pointed out that ethanol subsidies are ineffective at increasing use of biofuels. Since federal law already mandates more biofuel usage than the industry produces, subsidies are, in effect, just a payment from taxpayers to farmers, without any overall benefit.

Wildfires

The largest wildfires in Arizona’s history have consumed more than 400,000 acres of forest and are proving difficult to contain. At a Senate hearing on the fires, U.S. Forest Service Chief Tom Tidwell cited drought and longer fire seasons as factors increasing the risk of wildfire. Others, including Senator Lisa Murkowski (R-AK), blamed Forest Service mismanagement. The director of RFF’s Center for Forest Economics and Policy, Roger Sedjo, rejected this assertion, noting that "there's nowhere near enough funding in the Healthy Forests Act to fund all of the national forests … it's not so much a fault of managed maintenance; it's in the fact that fires are a part of many natural systems."

EPA Delays Rules for Power Plant Carbon

EPA announced that proposed rules for carbon emissions from fossil fuel power plants will be delayed until September instead of July. These rules will be the first federal limits on the largest source of U.S. carbon emissions and, arguably, the key component of the first real national climate policy. Research I conducted with RFF’s  Dallas Burtraw and Art Fraas has shown that EPA can allow for compliance flexibility in the performance standards, and that doing so would reduce cost and increase environmental benefits. We won’t know until September whether EPA will allow such flexibility.

Experts Urge Congress to Reconsider EIA Funding Cuts

Prominent figures in academia and policy circles—including former Senator and Governor Bob Graham, former EPA administrator William Reilly, and former Secretary of Energy Bill Richardson—have written to Congress, urging it to restore funding for the Energy Information Administration (EIA). As part of Congress’ 2011 budget cuts, EIA is facing a cut of 14 percent, or $15.2 million. EIA plans to eliminate the GHG inventory and halt upgrades to its National Energy Modeling System, among other cutbacks. These and other tools are critical inputs for energy policy research at RFF, and their elimination would thwart comprehensive assessment of policies to reduce oil imports and greenhouse gas emissions (see the spiffy new website here).

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June 14, 2011

Germany Turns Its Back on Nuclear—Do Nukes Have a Future?

The German government recently announced it would end use of nuclear power by 2022—relying instead on offshore wind energy and natural gas—and maintain its goal of cutting carbon emissions by 40 percent over the same period. The future of nuclear power in other rich countries remains uncertain, above all in Japan and the United States. Though Senator Jeff Bingaman (D-NM) has called the German decision “a mistake,” some suggest the United States could take a similar route.

RFF President Phil Sharp spoke about the future of nuclear power on WAMU’s The Kojo Nnamdi Show last week. Sharp noted that safety worries are only one concern—rising costs and cheap shale gas could make nuclear economically unattractive. The impact of Germany’s decision remains uncertain, Sharp argued, since its effect on emissions and energy prices will not be felt for another decade.

Forests—We Don’t Know as Much as We Thought

Though tropical deforestation continues, a recent study claims that the amount of carbon stored in the planet’s trees may be increasing—not because forests are expanding, but because they are getting denser. Measuring the area of forests (or the area being lost) isn’t enough—knowing carbon content requires knowing the types of trees and their size, which is more difficult.

Research at RFF’s Center for Forest Economics and Policy has highlighted this need for better information on forests, with further work focusing on present and future technical capabilities, sources of uncertainty, and policy relevance. Even though prospects for forest offsets under the Clean Air Act seem dim for the near future, forest carbon is firmly on the international agenda.

Natural Gas Vehicles

Interest in natural gas (LNG) as a fuel for vehicles continues, with the Senate Energy and Environment Committee holding hearings last week. LNG vehicles could, in principle, reduce dependence on petroleum and, to some extent, carbon emissions. Trucking fleets seem to be the best opportunity, at least initially.

RFF’s Alan Krupnick says that LNG vehicles will indeed be in our future, and notes that a good number of LNG vehicles are already the road. His analysis suggests that “LNG trucks can, under certain conditions, be a good deal for society in reducing oil and CO2 emissions with reasonably competitive cost-effectiveness, even without government subsidies or mandates.” Krupnick argues that expanding LNG to consumer vehicles would be more difficult, probably requiring a carbon price or other government incentive.

How Renewable Energy Can Save Antarctica

Don’t miss RFF’s Policy Leadership Forum on June 15th featuring polar explorer and renowned sustainability leader Robert Swan. In this unique event, Swan will tell how he experienced the life-threatening effects of climate change as the first person to walk to both the North and South Poles.

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June 6, 2011

Improved Fuel Economy Standards

The CEO of Ford met recently with U.S. Speaker of the House John Boehner and White House officials to urge the implementation of a single fuel- efficiency standard, citing concerns about a potential “patchwork of regulations” developed by states. A better indicator of fuel economy than miles per gallon could be gallons per hundred miles, notes RFF Senior Fellow Carolyn Fischer. In an RFF Issue Brief, Fischer says that this would give consumers a constant measure by which to compare fuel values across different vehicles.

Oil in Alaska

Last week, the House Natural Resources Subcommittee on Energy and Mineral Resources held an oversight hearing to discuss the development of oil and natural gas resources in Alaska. Proponents argued that without development, communities in the Arctic Slope may not survive and the Trans-Alaska pipeline may be shut down. In a new RFF Policy Commentary, Research Director Alan Krupnick explained that the economic benefits must be weighed against the social costs, such as potential harm to Arctic ecosystems. Krupnick writes that “Not all of these issues seem to be equally important, but very little is known about the full scope of the costs and benefits of offshore drilling in Alaska.”

Shrinking Carbon Markets and the Importance of Forests

A new report from the World Bank showed that the global carbon market shrank for the first time in 2010, possibly due to stalled conversations on emissions-trading programs in countries like the United States. Research by RFF Visiting Scholar Nigel Purvis to develop the Forest Carbon Index highlights the importance of forest conservation—especially in the tropics—as an important part of climate policy. “When you look at the expected price of carbon . . . forests provide an opportunity to be 25 percent of the climate solution between now and 2020,” Purvis stated in a special RFF virtual presentation.

Ocean Zoning to Balance Fishing and Conservation

NOAA scientists concluded that the Atlantic bluefin tuna is not in danger of extinction. This decision received cheers from the fishing industry, but spurred concern from environmentalists about overfishing and damage to fish populations from the oil spill in the Gulf of Mexico. A regulatory approach known as “ocean zoning” would divide the ocean into specific-use areas, such as commercial fishing, recreation, and oil development. RFF Nonresident Fellow James Sanchirico pioneered this method, citing both economic and ecological benefits.

RFF Launches Climate Center Website

Don’t forget to visit the new website for RFF’s Center for Climate and Electricity Policy and read the new report on federal adaptation policy, Reforming Institutions and Managing Extremes: U.S. Policy Approaches for Adapting to a Changing Climate, released at RFF’s June First Wednesday seminar. 

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May 2011

May 31, 2011

Extreme Weather and Climate Impacts

April 2011 was the most active month for tornadoes in U.S. history. May has given no respite, as a powerful EF5 storm killed more than 100 and caused widespread destruction in Joplin, Missouri. Further storms caused deaths and damage in Oklahoma, Kansas, and Arkansas. The three largest U.S. tornado outbreaks of all time have all hit, unbelievably, within the last 45 days. RFF experts Roger Cooke and Carolyn Kousky noted in a 2009 paper that large damages from natural disasters can clump in “fat tails.” This and other recurring idiosyncrasies of damage distributions appear to be underappreciated and likely result in underestimation of risks.edtiions of RFF on the Issues by selecting a month and year below:

Although there is no evidence linking recent floods and tornadoes to climate change, many scientists predict that a warmer future will bring more extreme weather. Tomorrow’s RFF First Wednesday seminar, Reforming Institutions and Managing Extremes: U.S. Policy Options for Adapting to Climate Change, will feature an expert panel discussing polices for reducing risk and damage from extreme weather, drought, sea level rise, and other climate impacts. Also, don’t miss a special week covering climate adaptation issues on Weathervane, RFF’s climate policy blog.

The Challenges of Shale Gas

Alan Krupnick, RFF Research Director and Director of RFF’s Center for Energy Economics and Policy, discussed the implications of shale gas in a recent news conference at the National Press Club. Krupnick noted that cheap shale gas would displace more expensive renewables and nuclear unless a clean energy standard or other policy to promote these technologies was implemented. He stated that gas is a flimsy “bridge” to an all-clean future—but concluded that “To give up on this low-cost resource would be premature.”

Biomass for Electric Generation

Burning biomass to generate electricity has attracted interest in both the U.S. and Europe as a relatively low-cost carbon-cutting option, but critics claim that net carbon emissions are understated and that biomass reserves cannot meet demand without negative effects on ecosystems. Director of RFF’s Center for Forest Economics and Policy Roger Sedjo notes that “biomass carbon is a zero-sum game, in the long run.” Sedjo’s research on cellulosic biofuels finds that if the cellulosic mandates of the Energy Act are met solely by wood, U.S. and world prices for raw wood would be about 15 percent higher in 2015.

The Future of U.S. Nuclear Power

As countries around the world begin to react to the nuclear fuel meltdowns in Japan, the president’s Blue Ribbon Commission on America’s Nuclear Future continues to research innovative policies for nuclear waste storage and disposal. In a special interview, RFF President Phil Sharp, a member of the commission, discussed how the events in Fukushima might affect the development of nuclear energy in the United States.

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May 23, 2011

Natural Gas-Fueled Truck Fleets

This week the Wall Street Journal discussed proposals to switch U.S. truck fleets to natural gas (LNG) fuel. Proponents argue that this would reduce U.S. carbon emissions and dependence on petroleum, favoring federal subsidies to speed adoption.

RFF’s Alan Krupnick, director of the Center for Energy Economics and Policy, analyzed a move to LNG trucks, among other policies, in a major RFF report, Toward a New National Energy Policy: Assessing the Options. The study found that aggressive new natural gas heavy-duty truck penetration (10 percent initially, rising to 100 percent over 10 years) would reduce U.S. oil consumption by more than 2 million barrels a day—and could be achieved at a lower cost per barrel than a variety of oil-reducing policies examined. However, carbon benefits were more modest and relatively less cost-effective compared to other carbon-reducing options examined. Be on the lookout for Krupnick’s forthcoming issue brief that includes natural gas implications for light duty vehicles.

Mississippi Flooding—Continued

The Mississippi remains at historic flood levels. The Army Corps of Engineers’ decision to open the Morganza Spillway may spare Baton Rouge and New Orleans, but at the cost of flooding farmland and communities in the Atchafalaya basin. Many property owners do not have flood insurance, and RFF Fellow Carolyn Kousky argues that the National Flood Insurance Programis in need of reform. RFF colleagues Howard Kunreuther and Erwann Michel-Kerjan recommend that policies have 30-year terms, matching the life of most mortgages. This would, they claim, reduce costs for both policyholders and taxpayers, who ultimately bear much of the risk from floods. Michel-Kerjan will be discussing RFF’s recommendations for domestic climate adaptation policy at next week’s RFF First Wednesday seminar on Reforming Institutions and Managing Extremes: U.S. Policy Options for Adapting to Climate Change.

Post-Deepwater Horizon Oil Spill Policy

The Senate Committee on Energy and Natural Resources held hearings last week to discuss possible changes to U.S. offshore drilling policy. In his testimony, Interior Secretary Ken Salazar called on Congress to make specific reforms aimed at reducing the likelihood of future spills, including eliminating liability caps for damages from offshore drilling. RFF experts Mark Cohen, Joshua Linn, and I cited liability caps as a key reason why drillers lack adequate incentives to avoid offshore spills and recommended that caps be significantly increased—a recommendation echoed by the President’s Oil Spill Commission.

A Plan for Clean Energy

Last week, RFF Nonresident Fellow Joseph Aldy presented a policy proposal to drive down greenhouse gas emissions over the next 20 years as part of the Hamilton Project at the Brookings Institution. RFF’s research on clean energy notes that a clean energy standard would achieve cumulative CO2 emissions reductions of roughly 30 percent, or 20 billion tons, between 2013 and 2035.

 

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May 13, 2011

Mississippi Flooding, Insurance, and the Many vs. the Few

Damages from the 2011 floods have already reached more than $2bn, ranking among the top 10 costliest U.S. flood disasters since 1980. Who will pay these costs depends in large part on flood insurance coverage. Experts have long been advocating for reform of the National Flood Insurance Program (NFIP). RFF research says certain reforms could provide greater financial stability for homeowners, while reducing costs to all parties.

A related question is who pays when land is flooded not by nature, but by the government—as is the case with Missouri farmland flooded after the Corps of Engineers broke the Birds Point levee. RFF Fellow Carolyn Kousky has studied this issue, and proposed that government should enter into option contracts for such “contingent takings” as a method of compensating property owners.

Endangered Species Reform

Congress recently placed a limit on the reach of the Endangered Species Act (ESA) by compelling the Fish and Wildlife Service to “delist” western gray wolves. The ESA and Department of Interior have been the target of increased criticism, with some arguing that the ESA unwisely conflates scientific and policy decisions, while others claim Interior is processing listing decisions too slowly.

RFF Visiting Scholar Lynn Scarlett has argued for ESA reform, pointing to collaborative programs and holistic ecosystem-based listing actions as important tools for improving the law’s implementation.

Eliminating U.S. Oil Subsidies

As the Senate continues to battle over oil industry subsidies, oil executives have expressed strong opposition to cutting these tax breaks, citing that eliminating the subsidies would “undercut job creation and economic growth.” However, RFF Nonresident Fellow Stephen P.A. Brown found that “eliminating oil and gas company tax preferences is unlikely to have a significant effect on overall U.S. GDP or employment in the long run,” and that eliminating distortionary taxes could stimulate economic activity.

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May 9, 2011

Energy Subsidies

Congress is debating subsidies to the oil and gas industry, and legislation to end many such subsidies may soon reach a vote. RFF Vice President for Research Mark Cohen and Director of the Center for Energy Economics and Policy Alan Krupnick recently gave their perspectives on this issue, arguing that subsidies should be cut because “they cost taxpayers money and distort energy markets, giving artificial advantages to some companies or some forms of energy at the expense of others.”

Investing (or not) in Information?

Earth-observing satellites appear to be a potential victim of 2011 budget cuts. NOAA funding was cut by $140 million, forcing launch delays for satellites that would have observed changes in climate and sea level. In a recent article, RFF Research Director and Senior Fellow Molly Macauley noted that these and other satellites provide key data for climate scientists and policymakers.

NASA and NOAA are not alone. The Energy Information Administration (EIA) is also facing a 14 percent cut—or $15.2 million in dollar terms.  EIA plans to eliminate the GHG inventory and halt upgrades to its National Energy Modeling System (NEMS), along with other cutbacks. Among other research projects, RFF’s major report on policies to reduce oil imports and carbon emissions, Toward a New National Energy Policy, utilized the NEMS model.

Climate Change and Agriculture

According to a study published in Science, higher global temperatures have depressed world agricultural output and raised prices.  So far, U.S. agriculture has been spared, especially in comparison with Mexico, China, and Russia—but that could change in the long term. Eventually, farmers may be required to adapt to a changing climate, but there exists insufficient information on how to do so cost-effectively, according to RFF research on U.S. adaptation policy .

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May 3, 2011

Incentives for Innovation in Oil Spill Containment

Are the oil spill containment systems recently developed by the Marine Well Containment Corporation (MWCC) and the Helix Well Containment Group sufficient to limit damage from future spills? Maybe not, say RFF researchers Molly Macauley and Mark Cohen (read full articles here and here). As they point out, the primary concern is that containment systems currently protect against only a specific kind of spill, and they might, in fact, be useless in other cases. Innovation is needed, they argue, but, as Cohen puts it, “What is the incentive for MWCC and Helix to spend money to figure out ways to fight a spill that's never happened? I don't see one right now.”

Raising or even eliminating liability caps for oil spills is one way to strengthen incentives for innovation, although there are concerns about the impacts on smaller drilling firms.  Cohen and Macauley’s insights are based on major work by RFF researchers focusing on spill containment and industry safety culture, including the effect of liability caps on industry incentives and ways to address the interests of small operators.

Supreme Court Arguments in AEP v. Connecticut

Recently, the Supreme Court heard arguments in AEP v. Connecticut, involving a claim that greenhouse gas emissions are a “public nuisance” that courts can remedy. Based on the justices’ questioning, most commentators seemed to think the court was very unlikely to let the states’ nuisance claims go ahead. What might this mean for climate policy? I explored this question on Weathervane.

The court’s decision may depend on whether EPA is already moving fast enough on greenhouse gases. Assuming the case is blocked, the Clean Air Act may be the unrivalled path for federal climate policy. RFF research by Dallas Burtraw, Art Fraas, and others (myself included), has studied what this regulation will look like and what its effects will be.

Developing a Clean Energy Standard

President Obama’s State of the Union address and recent energy speeches promoted a clean energy standard (CES), under which a certain percentage of U.S. electricity (the president suggests 80 percent by 2035) would be required to come from “clean” energy sources. Senators Jeff Bingaman (D-NM) and Lisa Murkowski (R-AK) of the Senate Committee on Energy and Natural Resources have requested input on CES policy design and impacts.

RFF experts responded to this request with an extensive report, indicating that a CES would likely lead to expansion of carbon capture and storage and nuclear capacity, with wind power as the next best approach. Significant retirements of existing coal capacities would also be likely, and electricity price increases would vary across the country.

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