On the Role of Externalities and Subsidies (Working Paper)
In our latest working paper, we use economic modeling to analytically show the relationship between generation subsidies and energy and capacity markets. We show that the feared capacity price suppression can happen only under limited circumstances and that in the short-run, the subsidies will tend to increase capacity prices. We also demonstrate that while subsidies cannot produce the first-best outcomes, there exists a range of welfare-enhancing subsidy rates and designs that improve welfare, such that regulators should think of subsidies as one of the tools available for increasing electricity market efficiency.
Forthcoming in the Michigan Journal of Environmental & Administrative Law
Under the National Environmental Policy Act, agencies must consider the environmental impacts of major federal actions before they can move forward. But agencies frequently downplay or ignore the climate change impacts of their projects in NEPA analyses, citing a slew of technical difficulties and uncertainties. This article, forthcoming in the Michigan Journal of Environmental & Administrative Law, aims to highlight best practices so that agency offices can learn from one another, fulfill NEPA’s mandate, and begin to provide leadership in the fight against climate change.
Markets, Externalities, and the Federal Power Act: The Federal Energy Regulatory Commission’s Authority to Price Carbon Emissions
Article revised for the Environmental Law Reporter
This article, excerpted from Davis Noll and Unel’s article in the NYU Environmental Law Journal, provides a comprehensive economic framework to show that addressing the CO2 externality through a carbon price falls within FERC’s authority to ensure an efficient market.
Using Survey Responses to Address Positive and Normative Uncertainties in Climate-Economic Models
The social cost of carbon (SCC) and the climate-economic models underlying this prominent US climate policy instrument are heavily affected by modeler opinion and therefore may not reflect the views of most climate economists. To test whether differences exist, we recalibrate key uncertain model parameters using formal expert elicitation: a multi-question online survey of individuals who have published scholarship on the economics of climate change. Read the article, published in Climatic Change.
Modernizing the U.S. power grid to advance the clean energy transition, to increase the deployment of new technologies such as smart and controllable appliances, electric vehicles, and energy storage, and to reduce emissions is the mainstream discussion in today’s utility regulation. Policymakers around the country are implementing various types of reforms ranging from technology mandates to new tariffs aimed at unlocking competitive forces to achieve their policy goals. We briefly overview the potential information problems that can arise, discuss the importance of information in energy policy design for DER deployment, and then conclude by suggesting directions for future policy research.
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