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The Social Cost of Carbon
Options for Applying a Metric in Flux
Many states and other jurisdictions are grappling with how to value greenhouse gas emission reductions and trying to understand the rapidly developing climate economics and science involved in this task. Frequently, state governments and other jurisdictions value greenhouse gas emissions in policymaking using a tool known as the social cost of carbon.
While applying the social cost of carbon is conceptually simple, the appropriate value to place on the metric is in flux. In late 2022, the federal government released new, updated values of the social cost of carbon in draft form which, for now, remain unfinalized. So what estimates of the social cost of carbon should states and other entities use during this transition period? This policy brief explores the available options.
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Wildfire, Power Shutoff, and Residential Energy Storage Adoption
This study investigates residential solar plus storage (SS) adoption decisions in California amid the dual risks of wildfires and the associated power outages. Using city-level monthly data from 2018 to 2020, I show that a one-percent increment in Public Safety Power Shutoff (PSPS) events led to a 0.057-0.088% rise in applications for SS system and a 0.29- 0.518% cost uptick in the following two months. Outside of High Fire Threat Districts (HFTD), individuals mainly adopted third-party-owned SS systems as short-term solutions to perceived power outage risks, whereas their responses were deterred by the intensity of concurrent wildfires. As latent wildfire hazards increase in HFTD, recent wildfires conveyed less new risk information to dissuade individuals’ averring behavior, while the concerns about power outage risks were overshadowed by preexisting perceptions of latent wildfire threats. -
Regional Planning for Just and Reasonable Rates
Reforming Gas Pipeline Review
Natural gas plays an outsized role in the U.S. economy. Under the Natural Gas Act, the Federal Energy Regulatory Commission (FERC or the Commission) is responsible for overseeing the orderly development of interstate natural gas pipelines, which facilitate the transmission of natural gas throughout the country. FERC can approve the pipeline only if it finds that it is required by the “public convenience and necessity.” Although FERC should consider a range of factors to determine whether a pipeline will serve the public interest, in practice, it looks primarily to the contracts between a developer and its customers for the purchase of pipeline capacity. If a developer can demonstrate that there is a party willing to pay to use its pipeline, FERC rarely asks questions and almost always finds “public” need. This pipeline-by-pipeline approach to natural gas transmission build-out leads to the construction of unnecessary, underused pipelines, which in turn increases ratepayer costs and decreases consumer welfare. Climate change further increases the risk that pipelines will become obsolete as cities and states move toward electrification. Relying on economic theory, legal history, and policy analysis, we make the case for FERC’s adoption of regional gas transmission planning.
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Targeted Regulation for Reducing High-Ozone Events
Working paper
Nitrogen oxides (NOx) are a precursor to ground-level ozone, a pernicious pollutant that is harmful to human health and ecosystems. Despite decades of regulations and a sharp decline in NOx emissions, episodic high-ozone events prevent many areas from attaining air quality standards. Theoretically, spatially or temporally differentiated emissions prices could be more cost effective at reducing such events than a uniform price. To test this prediction, with data from EPA and NOAA spanning 2001–2019, this working paper uses novel empirical strategies to estimate (1) the link between hourly emissions and high-ozone events and (2) hourly marginal abatement costs. These estimates form the basis for simulations that compare uniform and differentiated emissions pricing. Consistent with economic theory, differentiated pricing is substantially more cost effective at reducing high-ozone events, but this advantage depends on the accuracy of the estimated NOx–ozone relationship.
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The Obligation to Serve in Massachusetts
Gas Service and the Energy Transition
In Massachusetts, achieving the state’s decarbonization target in a cost-effective manner will likely require the refusal of new gas service in addition to the termination of existing gas service in certain buildings and its replacement with electric service. The scope of utilities’ legal obligation to serve their customers will be central to those efforts. This brief analyzes the contours of this obligation by examining the relevant Massachusetts statutes, regulations, Public Utility Commission decisions, and case law.
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