Search

Electricity cannot be cost-effectively stored even for short periods of time. Consequently, wholesale electricity prices vary widely across hours of the day with peak prices frequently exceeding off-peak prices by a factor of ten or more. Most analyses of energy-efficiency policies ignore this variation, focusing on total energy savings without regard to when those savings occur. In this paper we demonstrate the importance of this distinction using novel evidence from a rebate program for air conditioners in Southern California. We estimate electricity savings using hourly smart-meter data and show that savings tend to occur during hours when the value of electricity is high. This significantly increases the overall value of the program, especially once we account for the large capacity payments received by generators to guarantee their availability in high-demand hours. We then compare this estimated savings profile with engineering-based estimates for this program as well as a variety of alternative energy-efficiency investments. The results illustrate a surprisingly large amount of variation in economic value across investments.

As global temperatures go up and incomes rise, air conditioner sales are poised to increase dramatically. Recent studies explore the potential economic and environmental impacts of this growth, but relatively little attention has been paid to the implications for inequality. In this paper we use household-level microdata from 16 countries to characterize empirically the relationship between climate, income, and residential air conditioning. We show that both current and future air conditioner usage is concentrated among high-income households. Not only do richer countries have much more air conditioning than poorer countries, but within countries adoption is highly concentrated among high-income households. The pattern of adoption is particularly stark in relatively low-income countries such as Pakistan, where we show that the vast majority of adoption between now and 2050 will be concentrated among the upper income tercile. We use our model to forecast future adoption, show how patterns vary across countries and income levels, and discuss what these patterns mean for health, productivity, and educational inequality.

The prospect for electric vehicles as a climate change solution hinges on their ability to reduce gasoline consumption. But this depends on how many miles electric vehicles are driven and on how ma...

This paper provides the first empirical analysis of the homeowner-renter gap for electric vehicles. Using newly-available U.S. nationally representative data, the analysis shows that homeowners are...

Falling revenues and rising costs have put US nuclear plants in financial trouble, and some threaten to close. To understand the potential private and social consequences, we examine the abrupt closure of the San Onofre Nuclear Generating Station (SONGS) in 2012. Using a novel econometric approach, we show that the lost generation from SONGS was met largely by increased in-state natural gas generation. In the twelve months following the closure, natural gas generation costs increased by $350 million. The closure also created binding transmission constraints, causing short-run inefficiencies and potentially making it more profitable for certain plants to act noncompetitively. (JEL D24, L25, L94, L98, Q42, Q48)

This paper uses fare changes in Mexico City, Guadalajara, and Monterrey to estimate the price elasticity of demand for urban rail transit. In two of the cases there is a significant fare increase (30%+), and in the third there is a 60-day fare holiday. Ridership responds sharply in the expected direction in all three cities, implying price elasticities which range across cities from −.23 to −0.32. In addition, there is suggestive evidence that the temporary fare holiday led to a higher baseline level of ridership. These estimates are directly relevant for policymakers considering alternative pricing structures for urban rail. The paper discusses the relevant economic considerations and then shows how the estimated elasticities can be used to perform policy counterfactuals.

There is a widely-held view that as demand for travel goes up, this decreases not only speed but also the capacity of the road system, a phenomenon known as hypercongestion. We revisit this idea in the context of highway bottlenecks. We propose an empirical test using an event study design to measure changes in highway capacity at the onset of queue formation. We apply this test to three highway bottlenecks in California for which detailed data on traffic flows and vehicles speeds are available. We find no evidence of a reduction in highway capacity at any of the three sites during periods of high demand. Across sites and specifications we have sufficient statistical power to rule out even small reductions in highway capacity. This lack of evidence of hypercongestion stands in sharp contrast to most previous studies and informs core models in urban and transportation economics.

© 2018 by The Association of Environmental and Resource Economists. Despite widespread agreement that a carbon tax would be more efficient, many countries use fuel economy standards to reduce transportation-related carbon dioxide emissions. We pair a simple model of the automakers’ profit maximization problem with unusually rich nationally representative data on vehicle registrations to estimate the distributional impact of US fuel economy standards. The key insight from the model is that fuel economy standards impose a constraint on automakers that creates an implicit subsidy for fuel-efficient vehicles and an implicit tax for fuel-inefficient vehicles. Moreover, when these obligations are tradable, permit prices make it possible to quantify the exact magnitude of these implicit subsidies and taxes. We use the model to determine which vehicles are most subsidized and taxed, and we compare the pattern of ownership of these vehicles between high-and low-income census tracts. Finally, we compare these distributional impacts with existing estimates in the literature for a carbon tax.

In an influential paper, Bertrand and Mullainathan (2001) show that energy executives are rewarded for high oil prices, which they term pay-for-luck. Almost twenty years later, performance-based pay as a portion of executive compensation has nearly doubled; total executive compensation has also nearly doubled; and new disclosure laws and tax rules have changed the regulatory landscape. In this paper, we examine whether their results and their interpretation continue to hold in this changing environment. We find that executive compensation at U.S. oil and gas companies is still closely tied to oil prices, indicating that executives continue to be rewarded for luck despite the increased availability of more sophisticated compensation mechanisms. This finding is robust to including time-varying controls for the firms' scale of operations, and it holds not only for total executive compensation but also for several of the separate individuals components of compensation, including bonuses. Moreover, we show there is less pay-for-luck in better-governed companies, and that pay-for-luck is asymmetric – rising with increasing oil prices more than it falls with decreasing oil prices. These patterns are more consistent with rent extraction by executives than with maximizing shareholder value.

Retail petroleum markets in Mexico are on the cusp of a historic deregulation. For decades, all 11,000 gasoline stations nationwide have carried the brand of the state-owned petroleum company Pemex and sold Pemex gasoline at federally regulated retail prices. This industry structure is changing, however, as part of Mexico's broader energy reforms aimed at increasing private investment. Since April 2016, independent companies can import, transport, store, distribute, and sell gasoline and diesel. In this paper, we provide an economic perspective on Mexico's nascent deregulation. Although in many ways the reforms are unprecedented, we argue that past experiences in other markets give important clues about what to expect, as well as about potential pitfalls. Turning Mexico's retail petroleum sector into a competitive market will not be easy, but the deregulation has the potential to increase efficiency and, eventually, to reduce prices.Keywords: Market Deregulation, Gasoline Stations, Price Competition, Product Differentiation, Vertical Integration

Summary Least-squares estimates of the response of gasoline consumption to a change in the gasoline price are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We demonstrate that anticipatory behavior provides an important explanation for this result. Gasoline buyers increase purchases before tax increases and delay purchases before tax decreases, rendering the tax instrument endogenous. Including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower elasticity estimates. Copyright © 2016 John Wiley & Sons, Ltd.

© 2017 by the IAEE. All rights reserved. Despite increasing calls for reform many countries continue to provide subsidies for gasoline and diesel. This paper quantifies the external costs from global fuel subsidies using the latest available data and estimates from the World Bank and International Monetary Fund. Under preferred assumptions about supply and demand elasticities, current subsidies cause $44 billion in external costs annually. This includes $8 billion from carbon dioxide emissions, $7 billion from local pollutants, $12 billion from traffic congestion, and $17 billion from accidents. These external costs are in addition to conventional deadweight loss, estimated to be $26 billion annually. Government incentives for alternative fuel vehicles are unlikely to cost-effectively reduce these externalities as they do little to address traffic congestion or accidents and only indirectly address carbon dioxide and local pollutants.

Despite growing enthusiasm, there is still much to be learned about how well energy-efficiency investments work in practice. Evidence is particularly lacking from low- and middle-income countries, despite a widespread view that these countries have many of the best opportunities. This paper evaluates a field trial in Mexico in which a quasi-experimental sample of new homes was provided with insulation and other energy-efficient upgrades. A novel feature of our study is that we deploy large numbers of data loggers which allow us to measure temperature and humidity at high frequency inside homes. We find that the upgrades had no detectable impact on electricity use or thermal comfort, with essentially identical temperature and humidity levels in upgraded and non-upgraded homes. These results stand in sharp contrast to the engineering estimates that predicted considerable improvements in thermal comfort and up to a 26% decrease in electricity use. As we document, part of the explanation is that most households have their windows open on hot days, nullifying the thermal benefits of roof and wall insulation. Overall, we conclude that the benefits from these investments are unlikely to exceed the costs, which added $650-$850 USD to the cost of each home. Our results underscore the urgent need to fully incorporate human behavior into engineering models of energy use.

Policymakers around the world are turning to license-plate based driving restrictions in an effort to address urban air pollution. The format differs across cities, but most programs restrict driving once or twice a week during weekdays. This paper focuses on Mexico City, home to one of the oldest and best-known driving restriction policies. For almost two decades Mexico City’s driving restrictions applied during weekdays only. This changed recently, however, when the program was expanded to include Saturdays. This paper uses hourly data from pollution monitoring stations to measure the effect of the Saturday expansion on air quality. Overall, there is little evidence that the program expansion improved air quality. Across eight major pollutants, the program expansion had virtually no discernible effect on pollution levels. These disappointing results stand in sharp contrast to estimates made before the expansion which predicted a 15%+ decrease in vehicle emissions on Saturdays. To understand why the program has been less effective than expected, the paper then turns to evidence from subway, bus, and light rail ridership, finding no evidence that the expansion was successful in getting drivers to switch to lower-emitting forms of transportation.