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.
The SAFE Rule’s Overstated Estimates of Vehicle-Price Impacts
This report is part of a series that documents how the assumptions underlying The Safer Affordable Fuel Efficient (SAFE) Vehicles Final Rule for Model Years 2021–2026 Passenger Cars and Light Trucks are skewed to make the rule look less harmful than it actually is. In the SAFE Rule, the Environmental Protection Agency and the National Highway Traffic Safety Administration have significantly rolled back the greenhouse gas emission and fuel economy standards for light vehicles established under the Obama Administration. This report highlights three critical problems in the agencies’ assumptions about vehicle prices.
Barriers to Infrastructure Development and Federal Policy Solutions
Most categories of American infrastructure—from transportation and water systems to public school buildings and electricity meters—are in dire need of modernization, and climate change is compounding this challenge. Our report provides policy recommendations at each stage of the infrastructure lifecycle, from project planning and analysis, through financing, construction, and maintenance. We explain how a realigned approach to infrastructure can boost the economy while addressing threats from climate change and prioritizing social equity goals.
The Department of the Interior has yet to develop a comprehensive plan to accurately account for, manage, and mitigate the greenhouse gas emissions that result from the extraction and combustion of fossil fuels from public lands and waters. This document describes immediate and longer-term actions that Interior’s Bureau of Land Management and Bureau of Ocean Energy Management should take to reform public lands management consistent with climate change, conservation, and fiscal reform priorities.
Near-Term Steps to Address Climate Change
The Federal Energy Regulatory Commission should take an active role in better aligning regulatory practices with climate policies, speeding up development of necessary transmission infrastructure, and reforming energy market rules. This report details the specific policy reforms that federal policymakers should pursue to take advantage of important opportunities energy markets can provide to combat climate change while ensuring an economically efficient and speedy clean energy transition.
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