Quantifying the rebound effects of residential solar panel adoption

Customers who adopt solar panels can reduce their energy bills and lower the effective average electricity prices they pay. When the price falls, a solar consumer might consume more electricity than before – a solar rebound effect. We provide the first empirical evidence of residential solar rebound effects in the U.S. We use household level hourly and daily electricity meter data as well as hourly solar panel electricity generation data from 277 solar homes and about 4000 non-solar homes from 2013 to 2017 in Phoenix Arizona. Using matching methods and a fixed effects panel regression approach, we find that when solar electricity generation increases by 1 kWh, solar homes increase their total electricity consumption by 0.18 kWh. This indicates that solar rebound effects are estimated at 18%. Building upon our theoretical framework, the increase in consumer surplus from solar panel adoption is estimated at $972/yr.     

Do environmental right-to-know laws affect markets? Capitalization of information in the toxic release inventory

This paper investigates how information contained in the U.S. Environmental Protection Agency's Toxic Release Inventory (TRI) program, one of the largest environmental right-to-know programs, affects prices in the housing market. I use a strengthening of the reporting requirements for the chemical lead in 2001 as exogenous variation to test for housing price changes near existing firms who must now report. Using a difference-in-differences specification, I find that listing an existing firm in the Toxic Release Inventory lowers housing prices up to 11% within approximately 1 mile. The results suggest that housing market participants do capitalize into prices at least some information conveyed by the TRI program.     

Fishing quota markets

In 1986, New Zealand responded to the open-access problem by establishing the world's largest individual transferable quota (ITQ) system. Using a 15-year panel dataset from New Zealand that covers 33 species and more than 150 markets for fishing quotas, we assess trends in market activity, price dispersion, and the fundamentals determining quota prices. We find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased. We also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices, ecological variability, and market interest rates. Controlling for these factors, our results show a greater increase in quota prices for fish stocks that faced significant reductions, consistent with increased profitability due to rationalization. Overall, this suggests that these markets are operating reasonably well, implying that ITQs can be effective instruments for efficient fisheries management.     

A ban on one is a boon for the other: Strict gasoline content rules and implicit ethanol blending mandates

Ethanol and methyl-tertiary butyl ether (MTBE) were close substitutes in the gasoline additives market until MTBE was banned due to the concerns about groundwater contamination, leading to a sudden and dramatic substitution toward ethanol as an alternative oxygenate and octane-booster. We use variation in the timing of MTBE bans across states to identify their effects on gasoline prices. We find that state bans increased reformulated gasoline prices by 3–6 cents in non-Midwestern states for which the bans were binding, with larger impacts during times of high ethanol prices relative to MTBE and crude oil. We find qualitatively similar, yet smaller effects for conventional gasoline. We argue on the basis of a simple conceptual model and supporting empirical evidence that these bans functioned as implicit ethanol blending mandates in areas that were previously using MTBE to comply with strict environmental constraints. Overall, our results are consistent with the theoretical prediction that mandating a minimum market share for a more costly alternative fuel—either directly, or implicitly through a ban on the preferred conventional fuel—will inevitably increase fuel prices in a competitive market.     

Externalities, Market Power, and Resource Extraction

This article analyzes the effect of market power in the presence of dynamic and biological externalities. When several countries harvest fish in international waters the evolution of fish population is affected by their joint action, thus generating a biological and a dynamic externality. If there is trade, the market-clearing prices depend on the harvesting and consumption in all countries. Therefore, market-clearing prices also generate an externality. We find a subgame perfect Cournot–Nash equilibrium and study the conditions under which it may be efficient. We also analyze the role of different externalities in generating inefficiency.     

Cost pass-through to higher ethanol blends at the pump: Evidence from Minnesota gas station data

We examine the pass-through of wholesale prices to retail prices in the market for E85, which contains 51%–83% ethanol, and in the much larger market for E10, which contains 10% ethanol. We use a panel dataset consisting of monthly observations from 2007 to March 2015 on wholesale and retail prices for 274 Minnesota gas stations that sell both E10 and E85. Consistent with prior research, the cumulative pass-through coefficient for E10 is 1.00 after one month. In contrast, the E85 market is sparse, and although pass-through increased over time, we estimate it to be only 0.53 statewide from 2012 to 2015. Pass-through is higher at stations with more local E85 competitors. In the Twin Cities, which has a high density of E85 stations, pass-through is nearly complete, but outside the Twin Cities slightly less than half the wholesale discount of E85, relative to E10, is passed on to the consumer.     

Is energy efficiency capitalized into home prices? Evidence from three U.S. cities

We test for evidence that energy efficiency features are capitalized into home prices in three U.S. metropolitan areas. Using hedonic regressions and multiple matching procedures, we find that Energy Star certification is associated with higher sales prices in two of the markets: the Research Triangle region of North Carolina and Portland, Oregon. We find that local “green” certifications in Portland and in Austin, Texas, are also associated with higher prices and that the estimated price impacts are larger than those from Energy Star. Matching on observables proves to be important in some cases, reducing the estimated impacts compared with models without matching. We calculate the implied energy savings from the estimated premiums and find that, in the Research Triangle market, the Energy Star premiums approximately equal the savings that program is designed to achieve, but in Portland, the premiums are slightly greater than the program's savings due to low energy costs in the region.     

Equilibrium Prices in a Vertically Coordinated Fishery

Competition among processing firms is analyzed in a fishery that is managed under a total allowable catch constraint. Firms compete first in the ex-vessel market for round fish and then in the downstream consumer market. Nash equilibrium prices are characterized at each stage of the vertical market. When the number of processors is sufficiently large, equilibrium prices are approximately Walrasian. The ex-vessel price is close to the processor marginal valuation of the round fish and the consumer price clears the total quantity of processed fish. Implications for market structure, conduct and performance, and fisheries management policy are drawn.     

Directing technical change from fossil-fuel to renewable energy innovation: An application using firm-level patent data

In this paper we provide an analysis of directed technical change in the sector of electricity generation. We rely on patent data in fossil-fuel (FF) and renewable energy (REN) technologies for 5471 European firms over the 1978–2006 period. The novelty of our approach is in the focus on firm׳s heterogeneity in driving technological change. We make a distinction between small specialized firms, which innovate in only one type of technology, and large mixed firms, which innovate in both technologies, to analyse how REN patents can replace FF ones at the sector level both through a shift in innovation activities within existing firms and through firms׳ entry and exit. We use zero-inflated count data estimation techniques to identify the factors that affect specialized versus mixed firms׳ patenting behaviour both at the intensive (i.e., levels of innovation) and extensive (i.e., technological entry) margins. We further investigate the implications of our firm-level estimations for reducing the gap between REN and FF innovation at the aggregate level. We establish two key findings: (1) a decrease in the FF-REN technology gap mainly comes about through technological entry of specialized REN firms following an increase in REN market size; (2) increases in FF prices, FF market size, and FF knowledge stocks all increase the technology gap by increasing mixed firms FF innovation rates. An important implication of our results is that policies aimed at increasing REN innovation should focus on helping small firms to start and sustain innovation in the long-run.     

Property prices and the value of amenities

Implicit hedonic prices of amenities are estimated by means of a study of the variation in house prices in Sydney. The results include estimated hedonic prices for aircraft noise, road traffic, road widening, good views, spacious streets, good access to shops, and high quality neighborhoods. Since hedonic prices are the response of the market at the margin to supply as well as demand forces, they do not necessarily reflect average household willingness to pay prices. However, the paper concludes that they provide a basis from which the values of amenities to be used in benefit cost studies can be estimated.     

The higher price of cleaner fuels: Market power in the rail transport of fuel ethanol

This paper provides evidence of market power in the transportation of ethanol used in reformulated gasoline and alternative transportation fuels. I estimate a reduced form model for railroad route-level prices. My identification strategy instruments for railroad entry, controls for selection and explicitly models capacity constraints. A detailed understanding of this industry is important because U.S. environmental policies seek to substantially expand ethanol use. Evidence of market power may alter the types of policies pursued by lawmakers. I find that ethanol shipment prices are lower for more competitive routes. I also find evidence that railroads price discriminate based on environmental regulation at route destinations. Monopolist prices for shipments to carbon monoxide non-attainment areas are 3% higher than shipments to other destinations. This price premium falls sharply with increased competition. This suggests a perverse result where environmental regulation increases the price of a clean input.     

Valuing nature in a general equilibrium

We explore the consequences of modeling the demand for environmental quality improvements as a fully integrated part of a general equilibrium demand system in an applied general equilibrium (or CGE) analysis. Demand for non-market goods depends on a full range of relative prices as well as environmental outcomes. We simulate the effects of reducing two air pollutants to improve human health and three ecosystem services provided to households. The ecosystem services make non-separable contributions to household utility. We find that willingness to pay measures of use-based ecosystem services are impacted by changes in demand for complementary market goods. Demand for these goods shifts due to pollution reductions that enhance ecosystem services. Partial equilibrium estimates of these use values can be measured with substantial error if they fail to account for the general equilibrium adjustments caused by pollution. Over 300 calibrations of the model identify the model features important to these errors. We find that effects on ecosystem services associated with non-use values have important implications for the feedback effects on use related measures of economic tradeoffs. This is due to how our model integrates market and non-market effects, reflecting the non-market services importance to general equilibrium market outcomes.     

Coping with the liquidity crisis: a new dynamic quota readjustment scheme for carbon markets

Environmental Geochemistry and Health - Because of insufficient liquidity, prices in the carbon market are more vulnerable to unexpected events, for which the impact duration lasts longer than that...     

Double-dipping in environmental markets

There is an increasing tendency to use markets to induce the provision of environmental services. As such markets increase in scope, potential market participants might sell multiple environmental services. The question we consider here is whether participants in such markets should be allowed to sell credits in more than one market simultaneously. Some have argued in favor of such “double-dipping”, because it would make the provision of environmental services more profitable. In practice however, most programs do not allow double-dipping. We show that if the optimal level of pollution abatement is sought, then double-dipping maximizes societal net benefits. However, if pollution policies are set in a piecemeal fashion, then the caps for each market are unlikely to be optimal and, in this second-best setting, a policy prohibiting double-dipping can lead to greater social net benefits. We explore conditions under which a single-market policy is preferred, or equivalently, where piecemeal policies are likely to yield particularly inefficient outcomes.     

Robust technology policy against emission leakage: The case of upstream subsidies

Asymmetric regulation of a global pollutant between countries can alter the competitiveness of industries and lead to emissions leakage, which hampers countries’ welfare. In order to limit leakage, governments consider supporting domestic trade-exposed firms by subsidizing their investments in abatement technology. The suppliers of such technologies tend to be less than perfectly competitive, particularly when both emissions regulations and advanced technologies are new. In this context of twin market failures, we consider the relative effects and desirability of subsidies for abatement technology. We find a more robust recommendation for upstream subsidies than for downstream subsidies. Downstream subsidies tend to increase global abatement technology prices, reduce pollution abatement abroad and increase emission leakage. On the contrary, upstream subsidies reduce abatement technology prices, and hence also emissions leakage.     

Cost,environmental impact,and resilience of renewable energy under a changing climate: a review

Energy derived from fossil fuels contributes significantly to global climate change, accounting for more than 75% of global greenhouse gas emissions and approximately 90% of all carbon dioxide emissions. Alternative energy from renewable sources must be utilized to decarbonize the energy sector. However, the adverse effects of climate change, such as increasing temperatures, extreme winds, rising sea levels, and decreased precipitation, may impact renewable energies. Here we review renewable energies with a focus on costs, the impact of climate on renewable energies, the impact of renewable energies on the environment, economy, and on decarbonization in different countries. We focus on solar, wind, biomass, hydropower, and geothermal energy. We observe that the price of solar photovoltaic energy has declined from $0.417 in 2010 to $0.048/kilowatt-hour in 2021. Similarly, prices have declined by 68% for onshore wind, 60% for offshore wind, 68% for concentrated solar power, and 14% for biomass energy. Wind energy and hydropower production could decrease by as much as 40% in some regions due to climate change, whereas solar energy appears the least impacted energy source. Climate change can also modify biomass productivity, growth, chemical composition, and soil microbial communities. Hydroelectric power plants are the most damaging to the environment; and solar photovoltaics must be carefully installed to reduce their impact. Wind turbines and biomass power plants have a minimal environmental impact; therefore, they should be implemented extensively. Renewable energy sources could decarbonize 90% of the electricity industry by 2050, drastically reducing carbon emissions, and contributing to climate change mitigation. By establishing the zero carbon emission decarbonization concept, the future of renewable energy is promising, with the potential to replace fossil fuel-derived energy and limit global temperature rise to 1.5 °C by 2050.

     

Modeling the impact of uncertainty in emissions trading markets with bankable permits

The various forms of uncertainty that firms may face in bankable emission permit trading markets will affect firms’ decision making as well as their market performance. This research explores the effect of increased uncertainty over future input costs and output prices on the temporal distribution of emission. In a dynamic programming setting, the permit price is a convex function of stochastic prices of coal and electricity. Increased uncertainty about future market conditions increases the expected permit price and causes a risk neutral firm to reduce ex ante emissions in order to smooth out marginal abatement costs over time. Finally, safety valves, both low-side and high-side, are suggested to reduce the impact of uncertainty in bankable emission trading markets.     

What floats your boat? Preference revelation from lotteries over complex goods

We examine a type of lottery used to distribute some publicly held resource access rights. The lottery provides participants with the opportunity to choose among a set of simple gambles over multi-attribute goods. Participant choices result in an endogenous distribution of success rates over gambles that reflects tradeoffs between the relative desirability of the available goods and the probability of winning. When lottery winnings are multi-attribute goods, lottery outcomes provide sufficient information to estimate hedonic prices, marginal utility, and marginal rates of substitution among attributes. We develop a model for characterizing preferences from this information set. We apply our model to Idaho?s Four Rivers Whitewater Recreation Lottery, which allows applicants to apply for one permit among a large set of alternative river/day combinations that provide varying river and weather characteristics. This lottery structure shows promise as a foundation for economic experiments for preference revelation.     

Do lower electricity storage costs reduce greenhouse gas emissions?

In the electricity sector, innovation in large-scale storage is anticipated to reduce costs and improve performance. The effect on greenhouse gas emissions of lower storage costs depends on the interactions between storage and the entire grid. The literature has disagreed on the role of storage in reducing emissions. In this paper we present a stylized model, which suggests that the effect of storage costs on emissions depends on the supply responsiveness of both fossil and renewable generators. Under common conditions in the United States, lower storage costs are more likely to reduce emissions when wind investment responds to equilibrium electricity prices and when solar investment does not. Simulations of a computational model of grid investment and operation confirm these intuitions. Moreover, because of its effect on coal and natural gas–fired supply responsiveness, introducing a carbon dioxide emissions price may increase the likelihood that lower storage costs reduce emissions.