Archive for the ‘Environmental policy’ Category

Older Entries »
h1

Links to Adler guest posts at The Atlantic, and a related Stavins post

May 31, 2012

Lynne Kiesling

As a follow-up to my earlier post on Jonathan Adler’s first two guest posts at The Atlantic: Jonathan has helpfully compiled links to all five of his guest posts in one handy-dandy location. Here they are:

- Property Rights and the Tragedy of the Commons

- Property Rights and Fishery Conservation

- How Property Rights Could Help Save the Environment

- Is Washington, D.C., Really the Environment’s Savior?

- A Conservative’s Approach to Combating Climate Change

I keep reiterating my enthusiasm because Jonathan articulates very well my overall analyses and positions on common-pool resources, property rights, the value of polycentric and layered institutions in addressing CPR problems in complex systems, and the tough issues in climate change. My only real quibble is that he is more willing than I am to accommodate the false model and the nomenclature of the right-left political spectrum, which I reject resolutely.

In a related post, Robert Stavins of Harvard argues for the combination of a carbon price and government technology R&D subsidies. I don’t agree with his characterization of the EU ETS carbon permit “market” as a success story, and I wish he’d provide more specifics about the nature of the R&D subsidies he envisions (including how to avoid The Solyndra Problem, if he thinks it’s possible). But I think his political economy point about subsidies vs. taxes is an important one to incorporate into our thinking about institutional design: given the reality of political institutions and their embedded incentives, politicians like to give out stuff rather than impose explicit costs, so analyzing and thinking about how to design effective R&D subsidies has to be part of the low-carbon discussion. I am sure that I’ll have more to say about this essay, particularly on the question of whether or not his perceived R&D gap/”market failure” is true or not.

 

Posted in Economics, Environmental policy | 5 Comments »

h1

Jonathan Adler on common-pool resources

May 25, 2012

Lynne Kiesling

Case Western law professor Jonathan Adler (someone to whom I link frequently here) is guest blogging for Megan McArdle at the Atlantic right now, and he’s sharing some valuable insights from his research in environmental and administrative law. His first post lays a foundation by summarizing and analyzing Garrett Hardin’s seminal “tragedy of the commons” work and the important relationship between property rights and the ability and incentive to overuse a common-pool resource. One thing that Jonathan’s analysis incorporates into Hardin’s is a recognition of the public choice/political economy dynamics that affect the incentives and ultimate outcomes in resource policy:

One thing that Hardin overlooked is that the political process often replicates the same economic dynamic that encourages the tragedy of the commons — a dynamic fostered by the ability to capture concentrated benefits while dispersing the costs. Like the herder who has an incentive to put out yet one more animal to graze, each interest group has every incentive to seek special benefits through the political process, while dispersing the costs of providing those benefits to the public at large. Just as no herder has adequate incentive to withhold from grazing one more animal, no interest group has adequate incentive to forego its turn to obtain concentrated benefits at public expense. No interest group has adequate incentive to put the interests of the whole ahead of the interests of the few. The logic of collective action discourages investments in sound public policy just as it discourages investments in sound ecological stewardship. This, in addition to the pervasiveness of special-interest rent seeking, explains many of the failings of centralized regulation. So despite the environmental gains of the past half-century, real challenges remain, and the tragedy of the commons is still with us.

This insight leads directly into his second post, which applies this foundation to fisheries. Many fisheries are in grave threat because of poor management and the failure of both governments and fishery trade associations to establish policies that define use rights within the common-pool resource; the impending collapse of the Atlantic bluefin tuna fishery is the appalling poster child for this problem.

It does not have to be this way. Even before Hardin wrote his essay fishery economists had diagnosed the problem and explained how property rights in fisheries could solve the problem. Specifically by recognizing property rights in a percentage of the catch for a given species (or, in some cases, by recognizing rights in fishing territories), the “race to catch” could be eliminated and fishing crews could be given an incentive to husband the resource. The creation of property rights in the underlying resource aligns the incentives of those who work in the fishery with the health of the fishery. As owners of a share in the catch year-after-year, the fishers have a stake in ensuring there are more fish tomorrow than there are today.

Jonathan’s two posts capture nicely the theoretical and practical issues in devising use rights to enable sustainability in a common-pool resource, and the extensive research that has been done on the effect of catch shares in various fisheries (his discussion of the Alaska crab fishery and the TV show The Deadliest Catch is illustrative).

Highly recommended reading, with a few more posts to come from him during his guest stint.

Posted in Economics, Environmental policy | 4 Comments »

h1

New Jersey solar installers seek “Endless Summer” at ratepayer expense

May 20, 2012

Michael Giberson

A crisis is coming for the New Jersey solar power installation industry. Stringent solar power purchase requirements imposed on electric utilities (i.e. on electric utility ratepayers) has turned the state into the nation’s second largest for solar power capacity installed, behind only sunny California.

But now that installed capacity is sufficient to meet current requirements, the installation business is expected to drop way off.  (The purchase requirements actually increase each year through 2021, but the rate of growth is slowing.) That expected drop off has lobbyists for both the solar power industry and unionized solar installers descending on the state capital, pleading for imposition of still higher purchase requirements on electric power consumers. The rallying cry has been to “save the jobs” created by the solar power purchase mandate.

Here is one report, “NJ looking to rescue ailing solar industry“:

New Jersey has long been known as the Garden State, but during the last five years, it could have easily been known as the Solar State from all the sunlight-absorbing panels that have cropped up nearly everywhere.

They’re on the roofs of schools, churches, municipal buildings and sewage treatment plants. They’re in farm fields and attached to utility poles. Even one of New Jersey’s trademark diners recently went green and installed panels.

But all is not well with New Jersey’s once-thriving solar industry, which has grown so big, so fast, that it’s now in danger of collapsing on top of itself.

The industry’s future could hinge on the work of the state Legislature during the next several months as lawmakers look to craft a bailout bill that rescues the solar market and the thousands of jobs it created.

A bailout bill was approved by the Senate Environment and Energy Committee on Thursday, but Bill S 1925’s chances of becoming law are far from certain as it relies largely on making power companies buy more electricity from solar generators.

Critics warn that doing so could mean higher bills for the state’s ratepayers. Supporters say without government help the entire industry will likely collapse.

“We have a crisis, and the crisis is this: If the market stays the way it is, there will be no new projects in the future, and the ones out there now will fail,” Sen. Robert Smith, D-17th of Piscataway, said Thursday at the onset of the lengthy hearing on the bill, which drew hundreds to the Statehouse, many of them union members who work in the industry.

At issue is the market for the electricity that solar panels produce, which has crashed during the last year because of an oversupply of solar development.

Under state law, utilities must obtain part of their electricity from solar generation. To do so, most must buy solar renewable energy credits, or SRECs, from solar panel owners.

The market for the credits originally boomed and helped New Jersey become the nation’s second-largest solar power producer behind California. All that development caused a glut in the market that has seen SREC prices decline from $650 or more in 2010 to less than $100 at times this year.

“We’ve become a victim of our own success,” Smith said. “We’ve had so much solar built in New Jersey that the market for SRECs has crashed.”

Historical SREC values are charted at the Flett Exchange.

The crash in the value of an SREC has cut into revenues projected for private businesses and public schools that have had solar panels installed. Banks have become less willing to loan for solar projects as subsidy revenues have dropped off.

A bill circulating to bail out the industry would both increase the mandated purchases, cap the size of solar projects built, and require projects gain approval from state regulators before they are built. The bill has failed, or at least stalled, on the issue of regulator review – the industry wants all existing projects exempted from regulatory review while the Governor’s office and some others insisted on no exemption.

All hope is not lost for the industry, even should the legislature fail to raise the cost imposed on ratepayers in order to bail out the New Jersey solar industry. The chairman of the New Jersey Board of Public Utilities has said if legislators don’t act then the BPU might simply impose a higher solar mandate on its own authority.

BACKGROUND: For an extended assessment of solar power incentives in state Renewable Portfolio Standards see Ryan Wiser, Galen Barbose, and Edward Holt, “Supporting Solar Power in Renewable Portfolio Standards: Experience from the United States,” Lawrence Berkeley National Laboratory, Berkeley CA, October 2010. LBNL-3984E.

Posted in Electricity, Energy markets, Environmental policy, Regulation | Tagged , , | 5 Comments »

h1

Green urban infrastructure can save green(backs)

May 4, 2012

Lynne Kiesling

Some of the best environmental projects also save money. This post at The Atlantic’s Cities blog highlights urban green infrastructure such as permeable pavement projects, including a recent study finding that they can also be economical:

Looking at 479 case studies of green infrastructure projects around the U.S., the report finds that the majority of projects turned out to be just as affordable or even more so than traditional “grey” infrastructure. About a quarter of projects raised costs, 31 percent, kept costs the same and more than 44 percent actually brought costs down.

Here’s the logic: suppose you are, as Chicago is doing, using permeable concrete now when repaving alleys. Permeable concrete is more expensive than traditional concrete, but because it allows rainwater to return to groundwater, it reduces the water flow into storm drains, the sewer system, and wastewater treatment facilities. So you have to evaluate the higher construction costs versus the lower wastewater treatment cost and other reduced costs of storm runoff, including lower operating and maintenance costs. As reported in the post:

The costs of traditional infrastructure are especially pronounced in cities and regions with combined sewer systems that collect both sewage and stormwater. During heavy rainfall, these systems are often overwhelmed, pouring sewage-laden water into drinking water sources and greatly increasing water treatment costs.

Technologies like permeable pavements and rain gardens can capture, naturally treat and filter stormwater back into the ground, preventing overflows and reducing reliance on treatment centers. Chicago’s existing green infrastructure, including its green alleys, diverted about 70 million gallons of stormwater from treatment facilities in 2009, according to the report.

I can attest to the existing strains on the sewer/storm runoff system in Chicago; we live just off of a main north-south surface street, and after a heavy rain like last night’s there are substantial pools of water backed up onto the street around several of the storm drains (my neighborhood hasn’t had our alleys repaved yet). Moreover, this runoff frequently overflows from the sewer system into Lake Michigan, leading to beach closures on the days following rainstorms. I could channel my inner John Whitehead to do a travel-cost estimate of the value of the lost recreation, which reinforces the value of permeable concrete. One thing we don’t know yet, though, is if it’s as durable as traditional concrete, or if it depreciates more quickly.

All of this reminds me that I have to get the KP Spouse moving on that rain barrel …

Posted in Chicago, Economics, Environmental policy | Tagged , , | 1 Comment »

h1

If you must subsidize energy, subsidize wisely

April 25, 2012

Michael Giberson

Earth Track has dedicated itself to uncovering the government policies that it finds harmful to the environment, with a particular focus on the effects of energy subsidies. From various quotes in the press from Earth Track founder Doug Koplow, I gather I may not always agree with his views of public policy and the world. But a casual review of the extensive work Earth Track has done on subsidies suggests that its work is, as it aims to be, pretty thorough and reasonably unbiased.

Koplow, noted for his criticism of energy subsidies, reports being asked which kinds of energy subsidies he does favor. His response – “So which forms of energy should we subsidize?” – notes that while he is not opposed to energy subsidies in principle, in practice there are many reasons to be cautious.

The realism exhibited with respect to the ways policymaking actually works is refreshing.

Posted in Energy markets, Environmental policy, Politics | Tagged , | Comments Off

h1

Pat Wood: The Texas Tribune Interview

April 23, 2012

Michael Giberson

Pat Wood, the former FERC chairman and former Texas PUC chairman, was interviewed recently by The Texas Tribune. Wood is surely one of KP‘s favorite ex-regulators, so of course we’re linking to the interview. Here’s just one bit:

Wood: … There is also a lot that can be done, particularly on the energy demand side. By that I mean more aggressive conservation programs where you let market signals encourage customers that have the ability to shut down for a certain small amount of hours in the day to get paid to do so.

TT: Do you mean even individual consumers can potentially do more — or be helped to do more — to save energy?

Wood: They could, but if you went from the current penetration we have today, which is focused on the largest customers, to then focus on the medium-sized customers  — and by that I mean grocery stores, shopping centers, Target, customers like that — you can pick up a whole lot more responsive load before you need to get to the residential customer. The residential customers comprise about 40 percent of the [electrical] load at peak. Industrial and commercial are each about 30 percent. That’s a lot of lower-hanging fruit to pick before you get to residential.

And in discussing this, I’m not saying that Target would have to bid to shut down a store to get paid; it would maybe curtail 20 percent of its demand from 4 to 6 pm [when electricity usage peaks].

This capacity tightening may force that day to come sooner rather than later, which I think is a great thing for Texas, to latch onto this smart-grid investment that we’ve been making statewide over the past couple of years into a level of demand responsiveness that really moves our grid to 21st century capability well ahead of the other states.

Wood also addresses the lack of incentives to build new plants in Texas, the prospects for wind and solar in the state, energy storage, and among other things the role of the Public Utility Commission after the state “moved the dial from 10 to 4 in terms of regulation.”

Posted in Electricity, Energy markets, Environmental policy, Regulation | Tagged , , , , , | Comments Off

h1

Catch shares and sustainable fishing

April 23, 2012

Lynne Kiesling

Yesterday was Earth Day, and here’s a good way to observe it: Andrew Langer and Iain Murray argue for catch shares as a sustainable free-market fisheries policy.

The idea is simple: give fishermen an ownership stake in a particular fishery through the assignment of quotas, which can be traded. The quotas give individual fishermen — not bureaucrats — responsibility for managing each fishery. They, in turn, will work to maximize the longevity of that fishery, as it is in their long-term interest to do so. …

For an example of how successful this approach can be, look to New Zealand. There, the value of fishing exports has increased from $469 million in 1986, when the program began, to $923 million today. Fish landings have significantly increased. Almost all the fish stocks originally included are now above sustainable levels.

Given how abysmally some other fisheries are faring, the successes of catch shares are striking and worth trying. Particularly in Atlantic bluefin tuna, where the species is on the verge of extinction and the fishery trade association hasn’t mustered the gumption to stand up to Japan to reduce quotas. The position of the Japanese fishers is mystifying — would they really rather have the short-term tuna harvests in return for making the species extinct, forever? How high a discount rate must they have to hold that narrow a perspective? How sure are they that they’ll find other jobs in a couple of years once they’ve destroyed their livelihood?

Posted in Economics, Environmental policy | Tagged , , | Comments Off

h1

How green is your EV?

April 18, 2012

Lynne Kiesling

On Monday the Union of Concerned Scientists released an analysis estimating the MPG equivalence of electric vehicles. The point of the analysis is this: taking as given an objective of greenhouse gas emission reduction, how do electric vehicles compare to internal combustion vehicles in that dimension? To do such an analysis requires comparing the GHG emissions across the two types of engines, taking into account that the electricity generation fuel mix varies across the country. Here’s how they did that:

Most drivers are familiar with the concept of miles per gallon (mpg), the number of miles a car can travel on a gallon of gasoline. The greater the mpg, the less fuel burned and the lower your global warming emissions. But how can such consumption be figured for electric vehicles, which don’t use gasoline? One way is by determining how many miles per gallon a gasoline-powered vehicle would need to achieve in order to match the global warming emissions of an EV.

The first step in this process is to evaluate the global warming emissions that would result at the power plant from charging a vehicle with a specific amount of electricity. Then we convert this estimate into a gasoline mile-per-gallon equivalent—designated mpgghg, where ghg stands for greenhouse gases. If an electric vehicle has an  mpgghg value equal to the mpg of a gasoline-powered vehicle, both vehicles will emit the same amounts of global warming pollutants for every mile they travel.

For example, if you were to charge a typical midsize electric vehicle using electricity generated by coal-fired power plants, that vehicle would have an  mpgghg of 30. In other words, the global warming emissions from driving that electric vehicle would be equivalent to the emissions from operating a gasoline vehicle with 30 mpg fuel economy over the same distance (Table 1.1).3 Under this equivalency, the cleaner an electricity
generation source, the higher the mpgghg . When charging an EV from resources such as wind or solar, the mpg equivalent is in the hundreds (or thousands) because these resources produce very little global warming emissions when generating electricity.

This map, from a New York Times feature on the report, summarizes the results:

The results reflect the regional variety in electricity generation fuel mix — hydro power in the Pacific Northwest increases the mpgghg there, as does the predominance of nuclear around Chicago. The results suggest that even in the coal-intensive Midwest and plains states, electric vehicles using coal-generated electricity outperform the standard 4-door 27 MPG sedan in the greenhouse gas dimension.

I found this analysis useful and informative. Frankly, I often take UCS analyses with a grain of salt, because they are an advocacy group and generally start their analyses with presumptions of catastrophic global warming that directs their conclusions, while I think it’s more scientific to make assumptions that weaken your conclusion so that you don’t bias your analysis toward your desired conclusion. This analysis, while still a piece of advocacy, presents the calculations and mpgghg comparisons in a more dispassionate fashion that I found informative. The New York Times also had an article on Sunday summarizing the report.

Posted in Economics, Energy markets, Environmental policy | Tagged , , | 2 Comments »

h1

Measuring success by how much you spent on the program: A renewable energy example

April 10, 2012

Michael Giberson

In general, in public policy analysis, you’d like to judge ultimate success or failure of a program by its net results, by actual benefits less the costs involved in achieving those benefits. Admittedly sometimes benefits are hard to measure, but ultimately the point of a policy change is to bring about some improvement in something somewhere. Ultimately it would be nice, once a program is done, to try to find and measure that improvement.

What we often get instead, however, is an attempt to infer a benefit based on the expenditures on the program: how much money was spent, how many people were employed, how many miles of ditches were dug, and so on. This is, more or less, what we see this week from the U.S. Department of Energy in the study it commissioned from the National Renewable Energy Lab on the impact of the Section 1603 Treasury Grant Program.

The Section 1603 grants were payments made to qualifying renewable power projects in lieu of those projects claiming the Investment Tax Credit or Production Tax Credit subsidies for which the projects would have otherwise qualified for. The NREL study looked at the $9.7 billion in program spending up through November 10, 2011; by the time the program ended it’s three-year run in December 31, 2011 over $11 billion in federal funds had be committed.

The DOE asked NREL to estimate the effects of the 1603 program on jobs and economic expenditures. In NREL’s report they explicitly state that their work is an estimate of “gross jobs, earnings, and economic output.” This means that they don’t consider any private sector crowding out, any disincentives from the taxation needed to support the program, any consequences from duplication of other government incentive programs, and so on. They simply treat the federal resources as if it were manna falling from the heavens, and the jobs, capital, and industries that became involved in building renewable power plants would have otherwise sat idle. (Note that I’m not criticizing NREL in performing just a piece of the overall analysis, they just did the work that DOE asked for and paid them to do.)

But note that this is primarily a study which just measures the expenses of the program and a part of what the expenditures bought. So, it is a partial study of the costs of the Section 1603 program, and not any kind of estimate of any of the benefits of the program.

Nonetheless, in the DOE press release accompanying publication of the study, they said the study found “the program has been a huge success.” How does it justify its claim of success? By noting how much was spent, how many people were employed, and how many things were subsidized by the program.

The DOE is not the only one to claim success. At Climate Progress, Stephen Lacey’s assessment is titled, “Grant Program Supported Up To 75,000 Wind And Solar Jobs: Congress Killed It Anyway.” Lacey’s post does mention some of the construction activity might have happened even without the grants, and he observes it estimates just the gross impact (and, by implication, doesn’t reflect any negative effects due to the crowding out of unsubsidized economic activity). But along the way Lacey keeps claiming the program was a success. How does he know? Well, he summarizes from the NREL report: the government spent a lot of money, hired a lot of people, and subsidized the purchase of a lot of things.

Great, but resources consumed is not a measure of success. Any fool can spend money, but spending it well can be a challenge. Is there any evidence in the NREL report that the money was well spent?

If the answer to that question is “no,” then we can’t conclude that the program was a success.

ADDITIONAL LINKS: Reactions to the NREL report from North American Windpower, Solar Industry magazine, and Clean Technica. Rep. Ed Markey (MA) cited the report in calling for Republicans to support “revisions to the tax code that level the playing field for clean energy.”

Posted in Energy markets, Environmental policy, Politics, Regulation | Tagged , , | 3 Comments »

h1

Net metering in Indiana sees exciting 50 percent growth

April 3, 2012

Michael Giberson

From the Indianapolis Star, “More Hoosiers reap benefits of generating their own electricity“:

[M]ore and more people around Indiana are starting to generate their own electricity, motivated by environmental concerns and feelings of energy independence.

The arrangement is known as “net metering,” allowing customers to offset part of their energy costs and feed the excess back to the utility for credit.

From 2010 to 2011, the number of Indiana customers taking part in net metering rose from 199 to 298 — a 50 percent increase, according to the Indiana Utility Regulatory Commission.

Sounds exciting, right? Okay, granted that in a state with about 2.6 million eligible retail electric customers, a move from  0.7 one-hundredths of one percent up to 1.2 one-hundredths of one percent of customers is not exactly a big deal.

The “big” jump in participation came mostly because the state allowed commercial and industrial customers to participate along with residential customers.

But at least a few customers are getting a great deal, right?

The system was expensive, about $30,000, or about as much as a new car. And so far, the savings are relatively modest, a few hundred dollars a year. So even with federal tax credits and a small grant from IPL, the system will take decades to pay for itself.

Decades to pay for itself, for a system with a projected lifespan of maybe two and a half  or three decades tops.

Posted in Electricity, Environmental policy, Regulation | Tagged , , | 2 Comments »

Older Entries »
Follow

Get every new post delivered to your Inbox.

Join 50 other followers