Common Resources

What Do State Renewable Portfolio Standards Mean for Carbon Intensity?

In the last two decades, 31 states have passed renewable portfolio standards (RPS) into law that are aimed at increasing the portion of state energy that is sourced from renewable, typically non-carbon-emitting, resources. In many states, such standards were not explicitly meant to reduce greenhouse gas (GHG) emissions, although given the energy sources they promote (solar and wind, for example), emissions reductions are an expected result. The environmental economics literature, however, points out that RPS are far from the most efficient policy to reduce carbon emissions. In fact, previous econometric studies on early RPS implementation suggest that the standards have failed to decrease GHG emissions or even significantly increase renewable energy deployment. However, in a new RFF discussion paper, with RFF University Fellow Brent Sohngen of Ohio State University, we find that RPS actually have reduced carbon emissions in the United States by around 4 percent at present, and that figure is increasing.

We used data between 1997 and 2010 to identify the drivers of state carbon intensity, measured in tons of carbon dioxide emissions per dollar of gross state product. After accounting for differences in economic structure and environmental factors, we find that RPS implementation reduces state carbon intensity, mainly through an increase in electricity prices, with a $0.01/KWh increase in electricity prices leading to an approximately 1 percent decrease in state carbon intensity. The relationship between the price of electricity and carbon intensity is slightly smaller but still significant in states that have passed RPS because these states already have lower initial carbon intensities than states without RPS, causing them to be less sensitive to additional changes in the price of electricity. In addition, the standard itself also has an effect on the carbon intensity, although the effect is statistically insignificant.

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Twitter Q&A Roundup: Exploring the Local Impacts of Shale Gas Development

On April 10, RFF hosted a seminar on the benefits and costs of shale gas development as experienced by local communities, titled “Exploring the Local Impacts of Shale Gas Development.” As moderator of that event, I’ll attempt to tackle some of the questions posed by our Twitter audience during the event that we were unable to address during the live seminar due to time constraints.

#AskRFF How did you determine the truck trips associated with Shale Gas wells to be between 890 and 1,340? Is that one-way or roundtrip?

— Susan (@abrightidea) April 10, 2014

Our calculations for numbers of round trips were determined primarily by dividing the amount of water needed to frack a well by the amount of water a single truck can hold.

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RFF ON THE ISSUES: Mercury regulations upheld; Beijing pollution; Local shale impacts

Mercury Regulations Upheld

Last week, the US District Court of Appeals for the DC Circuit upheld the US Environmental Protection Agency’s (EPA’s) authority to enforce its Mercury and Air Toxics Standards (MATS). The court ruled that the standards are “substantively and procedurally valid,” despite concerns that the rules would severely increase electricity rates.

Various studies have attempted to predict the potential impacts of MATS. RFF’s Blair Beasley, Matt Woerman, Anthony Paul, Dallas Burtraw, and Karen Palmer attempted to reconcile the results of this research and found that the “studies that most closely match the regulatory requirements as laid out in the final MATS rule and do not include other proposed EPA regulations . . .[demonstrate] less severe impacts on the electricity market.”

Beijing Pollution

The rapid growth of Beijing’s economy, population, and energy use—along with pollution from surrounding provinces—is to blame for the city’s continued air quality problems, according to the Beijing Environmental Protection Research Institute. China’s government has drafted ambitious plans to cut future coal consumption, but challenges remain, including “big polluting industries and growth-obsessed local authorities.”

In an interview with Resources magazine, RFF Visiting Fellow Mun Ho suggests that changes in China’s demographics have facilitated support for more restrictive pollution policies: “[F]or a long time now, given the large-scale, low-income situation in China, growth has been the key priority. This is changing, now that China is developing more of a middle class. The emphasis now is on the quality of life. The quality of the environment, accordingly, is much higher on the agenda, but it is a difficult problem.”

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This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:

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The End of China’s Coal Boom: 5 Facts You Should Know
Global greenhouse-gas emissions may peak before 2020 if China achieves a plan to drastically cut its coal use, reducing carbon production equivalent to Australian and Canadian output combined, Greenpeace says. — via Greenpeace

Fueling a New Order? The New Geopolitical and Security Consequences of Energy
The paper Fueling a New Order? The New Geopolitical and Security Consequences of Energy examines impacts of the major transformation in international energy markets that has begun. The United States is poised to overtake Saudi Arabia and Russia as the world’s largest oil producer and, combined with new developments in natural gas, is on track to become the dominant player in global energy markets. Meanwhile, China is in place to surpass the United States… — via Brookings Institution

National Environmental Policy Act: Little Information Exists on NEPA Analyses
Little information exists on the costs and benefits of completing NEPA analyses. Agencies do not routinely track the cost of completing NEPA analyses, and there is no governmentwide mechanism to do so, according to officials from CEQ, EPA, and other agencies GAO reviewed… — via U.S. Government Accountability Office

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Mixing and Matching Electricity Sector Policies

A number of concerns have emerged over the last decade about climate change, energy security, and energy efficiency, inspiring an equally long list of proposed policy fixes. The majority of these options, including renewables subsidies, performance standards, and emissions pricing schemes, apply directly to the power sector. Lawmakers can also choose to implement multiple policies in tandem, as the European Union did in its 20/20/20 by 2020 targets—a 20 percent reduction in emissions, a 20 percent share of renewables in total energy consumption, and a 20 percent improvement in energy efficiency. Similarly, California, in adopting an emissions cap-and-trade system, is retaining renewable energy mandates and subsidies, as well as energy conservation policies. Despite the growing interest in using this mix-and-match approach, little research has been done to explore how cost-effectiveness and technological innovation are affected by interactions between coexisting policies.

In general, to address the damages posed by greenhouse gas emissions, economists recommend placing a price on those emissions, such as with a carbon tax or a cap-and-trade program. Many are skeptical of the need for additional policies, noting that once an emissions cap is in place, additional policies to expand renewable energy, for example, produce no new emissions reductions. (See a recent post by RFF University Fellow Rob Stavins of Harvard for more on this topic.) However, concerns about additional market failures, such as spillovers from innovation or the undervaluation of energy efficiency improvements, can justify additional interventions. Read More

New Issue of Resources Magazine

A dramatic rise in world oil prices and skyrocketing domestic gas prices resulting from the 1973–1974 oil crisis prompted a recognized need for a national energy policy in the United States. One challenge is that the policies we put in place today will likely outlive the context in which they were created—and for quite a long time. Joel Darmstadter’s retrospective on the energy crisis, Stephen Brown and Charles Mason’s examination of lifting the oil export ban, and Joseph Aldy’s argument for eliminating domestic fossil fuel subsidies in the latest Resources magazine illustrate this point. Other articles from this issue include:

Do Driving Restrictions Reduce Congestion? Lessons from Beijing
Ping Qin and Jintao Xu
Pro-environment business behaviors are driven by a rich set of political and social factors that affect profitability—all of which conservation advocates can use as leverage to motivate change.

Groundwater Markets: Managing a Critical, Hidden Resource
Yusuke Kuwayama
Although 95 percent of usable freshwater comes from underground, withdrawals of this water are largely unmonitored and unregulated in the United States. By developing groundwater markets, governments can provide an incentive for more sustainable pumping of this critical resource.

Private Funding of Public Parks: Assessing the Role of Philanthropy
Margaret A. Walls
Private donations account for an increasingly large percentage of city parks’ revenue stream, but a new survey of park directors reveals a discrepancy between how this funding is used and the most pressing needs of today’s parks.

To view all articles from this issue of Resources, visit our website or download the Resources app for iPad, iPhone, or Android.

RFF ON THE ISSUES: Regulations for new power plants; European shale gas

Note: There is still time to register for the April 17th seminar, “From the Gulf to the Arctic: What Have We Learned since the Deepwater Horizon Spill?” Join RFF for two distinguished panels featuring experts from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, the National Oceanic and Atmospheric Administration, the Bureau of Ocean Energy Management, the US Department of Energy, and more.

Regulations for New Power Plants

US Environmental Protection Agency (EPA) Administrator Gina McCarthy said last week that although the new regulations for existing power plants will not be “aspirational standards,” they will allow emissions targets to be achieved through a combination of strategies. This may signal a different direction from the rules for new power plants, and could provide states the flexibility needed to keep many older facilities open.

In a comment to EPA, RFF’s Nathan Richardson explains why separating regulations for new coal and gas plants, as EPA is currently proposing, could sharply limit the flexibility available under rules for existing plants. He writes: “Here’s hoping EPA has combined the categories. If they have not, I do not see how the agency can fulfill its promise to preserve existing [flexible] state climate programs.”
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This Week in the RFF Library

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:

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Does Size Matter? ["Chaos" article arguing for downsizing of the power grid to reduce blackouts]
In a study published online Tuesday by the journal Chaos, two physicists and an engineer say the nation’s electrical distribution system would face a lower risk of severe outages if it were divided into scores of gridlets rather than the three major grids that exist today for the East, the West and a large chunk of Texas. — via Chaos: An Interdisciplinary Journal of Nonlinear Science

The Economic Case for Restoring Coastal Ecosystems
This report analyzes the economic benefits provided by 3 of the 50 coastal restoration projects that the National Oceanic and Atmospheric Administration, or NOAA, funded with grants from the American Recovery and Reinvestment Act, or ARRA, of 2009 and finds that each dollar invested by taxpayers returns more than $15 in net economic benefits for the three projects. — via Center for American Progress

Shifting Gears: A New Approach to Reducing Greenhouse Gas Emissions from the Transportation Sector
In 2007, Congress passed the Energy Independence and Security Act, which requires a certain percentage of biofuels like ethanol to be blended with the regular gasoline supply each year. A central goal of the Act was to take a bite out of the climate-changing pollution emitted from the tailpipes of motor vehicles. The transportation sector is second only to the electricity sector in its volume of carbon pollution, so targeting it for reductions makes good sense. — via NYU School of Law, Institute for Policy Integrity

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Flexibility and Cost-Effectiveness in Proposed Climate Policies

Achieving the goal of an 83 percent reduction in US carbon dioxide (CO₂) emissionsfrom 2005 levels by 2050 will require the electricity sector—which accounts for roughly 40 percent of US CO₂ emissions—to make an enormous pivot away from fossil fuels toward non-emitting sources. Policy will be required to achieve this goal. In a recent RFF discussion paper with coauthor Matt Woerman, we analyze the economic and social welfare consequences of four CO₂ emissions reduction policies, including a carbon tax, a tradable CO₂ emissions rate performance standard (TPS), and two versions of a clean energy standard (CES). The analysis examines a way to tailor a CES to improve its efficiency. The Haiku electricity market model is employed in the analysis.

Although a carbon tax is fairly straightforward, the other policies that we explore may require some explanation. A clean energy standard is similar to a renewable portfolio standard but with a broader scope. A CES imposes a requirement that a minimum amount of electricity sold in the market must be generated using low- or non-CO₂ emitting technologies, such as renewables, nuclear, or natural gas combined cycle units. Each kilowatt hour of electricity produced by these technologies receives some credit under the CES and these credits must add up to the minimum amount required under the policy. Under a technology-based CES, crediting of generation depends on technology alone, with renewables and non-emitting generators receiving full credit toward the standard and generation for other emitting sources (such as natural gas combined cycle plants) getting partial credit. For an emissions rate–based CES, crediting of emitting sources varies depending on their CO₂ emissions rate and thus more efficient natural gas combined cycle generators can earn more credits. The last climate policy we examined, a tradable performance standard, imposes a maximum average CO₂ emissions rate across all generators and allows generators that have a CO₂ emissions rate below the average to sell credits to generators that emit at higher than the average rate.

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Preserving Flexibility

Decisions EPA is making today will have a major impact on the cost-effectiveness of its planned move to regulate carbon emissions from existing power plants. The agency has proposed and will soon finalize performance standards for new power plants. These new-source standards are a prerequisite for the planned existing-source standards, but are ostensibly otherwise unrelated - existing source standards can and will be less stringent, and will be ultimately imposed and enforced by states, not EPA directly. But, as I argue in a new comment to EPA, important structural elements of the new source standards - the “source categories” into which emitters are divided for regulatory purposes - will persist into the existing-source standards, with major implications.

From the comment, here’s the short version of how the connection works:

• EPA’s decision to separate coal and gas power plants into different regulatory categories for its proposed New Source Performance Standards (NSPS) has little effect on those standards, but has important implications for upcoming existing source standards (ESPS).

• The approach—split or combined categories—that the agency uses for its NSPS will almost certainly persist for ESPS.

• Other research indicates that switching from coal to gas generation is the largest and lowest-cost emissions reduction opportunity in the power sector.

• Combined categories are therefore crucial to the cost- and environmental effectiveness of ESPS. Trading between coal and gas that could incentivize this fuel switching is almost certainly legal if categories are combined, and almost certainly illegal if they are not.

• Combining coal and gas into a single category, as the agency did in its first NSPS proposal in 2012, would not reduce EPA’s freedom to set standards, increase the rule’s complexity or add any significant legal risk.

• EPA should therefore combine coal and gas into a single source category in its final NSPS rulemaking.

Just last week, EPA submitted its proposed ESPS to the Office of Management and Budget for review. The decision on whether to combine source categories has therefore likely already been made, at least for purposes of the proposal. Here’s hoping EPA has combined the categories. If they have not, I do not see how the agency can fulfill its promise to preserve existing state climate programs, many of which (like the cap and trade programs in California and the Northeast) have trading at their core.