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As of late 2020, the Trump administration had initiated almost one hundred rollbacks of U.S. environmental regulations. A careful assessment of the benefits and costs of rolling back an existing regulation can and should inform such decisions. When assessing the potential rollback of an existing regulation, analysts can often learn from the regulation’s implementation through retrospective analysis as well as from advances in scientific knowledge. We discuss recent actions concerning the Mercury and Air Toxics Standards (MATS) to illustrate the potential lessons from doing so. In the case of MATS, advances in science have shed light on broader exposure pathways and previously unquantified health effects, suggesting that the benefits of reducing mercury emissions may exceed previous estimates. At the same time, changes in the energy sector have altered the mix of fuels used to produce electricity, which impacts both the benefits and costs of the regulation.

Greenhouse gas mitigation efforts in the electricity sector have emphasized accelerated deployment of energy efficiency (EE) measures and renewable energy (RE) resources. We evaluate renewa...

The ability of automakers to improve the fuel economy of vehicles using engineering design modifications that compromise other performance attributes, such as acceleration, is not currently considered when setting fuel economy and greenhouse-gas emission standards for passenger cars and light trucks. We examine the role of these design tradeoffs by simulating automaker responses to recently reformed vehicle standards with and without the ability to adjust acceleration performance. Results indicate that acceleration tradeoffs can be important in two respects: (1) they can reduce the compliance costs of the standards, and (2) they can significantly reduce emissions associated with a particular level of the standards by mitigating incentives to shift sales toward larger vehicles and light trucks relative to passenger cars. We contrast simulation-based results with observed changes in vehicle attributes under the reformed standards. We find evidence that is consistent with firms using acceleration tradeoffs t...

About 40% of all coal mined in the United States is extracted from lands owned by the federal government, under leases managed by the U.S. Department of the Interior (DOI). Burning that coal accounts for 13% of U.S. energy-related greenhouse gas (GHG) emissions ( 1 ). With the largest and lowest-cost reserves in the United States, federal coal alone—estimated at nearly 10% of the world's known reserves—has potential to contribute substantially to atmospheric CO2 concentrations ( 2 ). In response to calls for reform, DOI has issued a moratorium on new leases while it develops a Programmatic Environmental Impact Statement to guide the first major reform of the program since 1982. We review existing knowledge of key issues relevant to reform, highlighting the social costs of coal extraction, the extent of substitution away from federal coal induced by raising additional leasing revenue, the lack of competition in the leasing auctions, and the incentives inherent in the current leasing program structure. We then turn to critical areas of research that can be done in the near term and would contribute to more informed debate and policy development.

We study default effects in the context of a residential electricity pricing program. We implement a large-scale randomized controlled trial in which one treatment group is given the option to opt-in to time-based pricing while another is defaulted into the program but allowed to opt-out. We provide dramatic evidence of a default effect – a significantly higher fraction of households defaulted onto the time-based pricing plan enroll in the program, even though opting out simply involved making a phone call or clicking through to a website. A distinguishing feature of our empirical setting is that we observe follow-on behavior subsequent to the default manipulation. Specifically, we observe customers’ electricity consumption in light of the pricing plan they face. This, in conjunction with randomization of the default provision, allows us to separately identify the electricity consumption response of “complacent” households (i.e., those who only enroll in time-based pricing if assigned to the opt-out treatment). We find that the complacent households do reduce electricity use during higher priced peak periods, though significantly less on average compared to customers who actively opt in. However, with complacents comprising approximately 75 percent of the population, we observe significantly larger average demand reductions among consumers assigned to the opt-out group. We examine the extent to which the behavioral responses we observe are consistent with a standard model of switching costs, or with alternative mechanisms including inattention, and preferences constructed based on contextual features of the choice setting.

The benefits and costs of increasing solar electricity generation depend on the scale of the increase and on the time frame over which it occurs. Short-run analyses focus on the cost-effectiveness of incremental increases in solar capacity, holding the rest of the power system fixed. Solar’s variability adds value if its power occurs at high-demand times and displaces relatively carbon-intensive generation. Medium-run analyses consider the implications of nonincremental changes in solar capacity. The cost of each installation may fall through experience effects, but the cost of grid integration increases when solar requires ancillary services and fails to displace investment in other types of generation. Long-run analyses consider the role of solar in reaching twenty-first-century carbon targets. Solar’s contribution depends on the representation of grid integration costs, on the availability of other low-carbon technologies, and on the potential for technological advances. By surveying analyses for different time horizons, this article begins to connect and integrate a fairly disjointed literature on the economics of solar energy.

An advantage of cap-and-trade programs over more prescriptive environmental regulation is that compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, when markets (versus regulators) determine where emissions occur, it becomes more difficult to assure that mandated emissions reductions are equitably achieved. We investigate these issues in the context of Southern California's RECLAIM program by matching facilities in RECLAIM with similar California facilities also in nonattainment areas. Our results indicate that average emissions fell 20 percent at RECLAIM facilities relative to our counterfactual. Furthermore, observed changes in emissions do not vary significantly with neighborhood demographic characteristics. (JEL H23, L51, Q53, Q58)

This article presents the results of the first large-scale mail survey of non-residential green power customers in the United States. The survey explored the motivations, attitudes, and experiences of 464 business, non-profit, and public-sectorcustomers that have voluntarily opted to purchase - and frequently pay a premium for - renewable electricity. Results of this study should be of value to marketers interested in targeting these customer segments, to policymakers interested in fostering and understanding non-residential demand for green power, and to academics pondering the motivations for firms to engage in such voluntary environmental initiatives.

A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern California's RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.

For political, jurisdictional and technical reasons, environmental regulation of industrial pollution is often incomplete: regulations apply to only a subset of facilities contributing to a pollution problem. Policymakers are increasingly concerned about the emissions leakage that may occur if unregulated production can be easily substituted for production at regulated firms. This paper analyzes emissions leakage in an incompletely regulated and imperfectly competitive industry. When regulated producers are less polluting than their unregulated ounterparts, emissions under incomplete regulation can exceed the level of emissions that would have occurred in the absence of regulation. Converseley, when regulated firms are relatively more polluting, aggregate emissions under complete regulation can exceed aggregate emissions under incomplete regulation. In a straightforward application of the theory of the second best, I show that incomplete regulation can welfare dominate complete regulation of emissions from an asymmetric oligopoly. The model is used to simulate greenhouse gas emissions from California's electricity sector under a source-based cap-and-trade program. Incomplete regulation that exempts out-of-state producers achieves approximately a third of the emissions reductions achieved under complete regulation at more than twice the cost per ton of emissions abated.

Author(s): Auffhammer, Maximilian; Blumstein, Carl; Fowlie, Meredith | Abstract: The key finding of an influential paper that received the International Association for Energy Economists' Best Paper Award (2004) is that utilities have been overstating electricity savings and underestimating costs associated with energy efficiency demand side management (DSM) programs. This claim is based on point estimates of average DSM-related savings and costs implied by an econometric model of residential electricity demand. In this response we first argue that the choice of test statistics, by not weighting estimated savings and costs by utility electricity sales and DSM expenditures respectively, biases results in favor of rejecting the null hypothesis that utility-reported electricity savings reflect true values. We also note that utility estimates of average program savings and costs are rejected based on point estimates alone; no attempt is made to evaluate the uncertainty surrounding these estimates. We use the same data and econometric model to estimate the appropriate test statistics. We then construct nonparametric bootstrap confidence intervals. We fail to reject the average electricity savings and DSM program costs reported by utilities using both the weighted and unweighted test statistics. Our results suggest that the evidence for rejecting utility estimates of DSM savings and costs should be re-interpreted.