AERE Summer Conference

Mineral and Energy Economics Faculty Dr. Harrison Fell, Dr. Jared Carbone, Dr. Pete Maniloff and PhD Students Matt Doyle and Jacquelyn Pless presented at the 2015 AERE Summer Conference. 

2015 AERE Summer Conference Abstracts

Beneficial Leakage: The Effect of the Regional Greenhouse Gas Initiative on Aggregate Emissions

Harrison Fell and Peter Maniloff

Abstract: Subglobal and subnational policies aimed at reducing greenhouse gases are often thought to be less effective than more geographically comprehensive policies as production, and thus emissions, of trade exposed industries may move from the regulated to the unregulated regions. This so-called leakage may negate all emission reductions from the regulated regions and, even worse, may lead to an overall increase in emissions if the unregulated regions has equally or more emissions intensive production. However, if the unregulated regions have less emissions intensive production, the regional regulation may prompt more switching to the relatively cleaner producers than would otherwise occur, creating a type of beneficial leakage. We use detailed electricity generation and transmission data to show that this might be the case for the Regional Greenhouse Gas Initiative (RGGI), a CO2 cap-and-trade program for the electricity sector in select Northeastern U.S. states. We find evidence that electricity generation did leak out of the RGGI region to surrounding state, but electricity generation in the non-capped jurisdictions is less emissions intensive than in the RGGI region, resulting in a net decrease in aggregate emissions. Back-of-the-envelope calculations suggest that one-tenth to one-quarter of apparent emissions reductions actually leaked but that this served to reduce total combined emissions by an additional three to five percent.

 

An Evaluation of the Performance of Applied General Equilibrium
Models on the Impacts of a Carbon Tax

Jared C. Carbone, Nicholas Rivers (U of Ottawa), Akio Yamazaki (U of Calgary), Hidemichi Yonezawa (ETH, Zurich)

Abstract: Applied general equilibrium (or CGE) models are widely used to evaluate the impacts of prospective environmental policies. Yet the large number of maintained assumptions required to construct and quantify these models also leads researchers to question the validity of their results. In this paper, we treat the implementation of the carbon tax in British Columbia (BC) as a natural experiment and compare it to the results of a CGE model developed for the analysis of prospective climate policies in Canada.

 

Fuel Prices, Restructuring, and Natural Gas Plant Efficiency

Harrison Fell and Matthew Doyle

Abstract: Increasing the thermal efficiency (energy generated per unit of energy burned) of fossil fuel fired electricity generation plants has been identified as a way of achieving meaningful emission reductions. Indeed, the Environmental Protection Agency (EPA) has used the possibility for efficiency improvements in coal-fired plants as one of their “building blocks” to determine the CO2 emissions intensity rates (emissions per MWh of generation) of states’ electricity generation sectors under the proposed Clean Power Plan. While, deservedly, much of the EPA’s, as well as several recent academic studies, attention has been focused on the potential for efficiency improvements in coal-fired plants, much less work has been directed toward incentives for efficiency gains from natural gas-fired plants. Although gas plants emit roughly 0.5 tons of CO2 per MWh as coal, the share of gas generation has increased dramatically in the U.S. over the last five years, with an increasing share predicted over the coming decade. We therefore take a focused look at drivers of thermal efficiency improvements among gas-fired plants in the U.S.

Our study examines the fuel-price responsiveness across gas plant technology and, importantly, across the market structures in which the plants operate. We find that the heat rate (an inverse measure of thermal efficiency) of combined cycle gas plants in restructured states have a statistically significant negative reaction to coal prices. Alternatively, we find that heat rates of simple cycle plants and combined cycle plants in regulated states do not have statistically significant responses to coal prices. Furthermore, heat rates of both plant technologies, combined cycle and simple cycle, across both market region types, regulated and restructured, do not have statistically significant responses to natural gas prices.

 

Bribes, Bureaucracies, and Blackouts: Towards Improving Electricity Reliability by (Re)Defining Electricity as a Common-Pool Resource

Jacquelyn Pless and Harrison Fell

Abstract: Electricity access is not only about a physical connection to the grid—the reliability of electricity reaching end-users matters as well. Improving reliability, however, is not strictly an issue of wealth invested in system improvements. Rather, power crises are symptoms of much deeper problems that are intimately tied to areas such as governance, corruption, and political institutions. This paper focuses on how one of these factors—corruption—affects electricity reliability by estimating the impact of bribery of firms on power outages and their related commercial losses. We match detailed firm-level bribery and electricity reliability data to country-level demographic and governance measures to form a dataset of repeated cross sections. We first estimate pooled OLS regressions and instrument for the potential endogeneity of bribery. We then create a means-based pseudo-panel and include cohort and time fixed effects while still instrumenting for the endogeneity of bribery. The results consistently show that bribes have a statistically significant negative impact on electricity reliability. In other words, increased illegal connections to the power grid that are not managed by the power supplier are related to more power outages. As a ‘tragedy of the commons’ story unfolds, this paper empirically reinforces the notion that electricity exhibits common-pool resource characteristics. These findings can help inform electricity sector governance, such as by suggesting the potential for decentralized governance and property rights in the context of improving electricity reliability. 

Dr. Harrison Fell, Dr. Pete Maniloff, Matt Doyle, Jaqulyn Pless & Dr. Jarod Carbone

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