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The percentage of U.S. homes heated with electricity has increased steadily from 1% in 1950 to 40% in 2020. Energy prices, geography, climate, housing characteristics, and income are shown to explain 90% of the increase, with energy prices by far the most important factor. The paper then estimates the cost of an electrification mandate for new homes. Households in warm states tend to prefer electricity anyway, so would be made worse off by less than $350 annually on average. Households in cold states, however, tend to prefer natural gas so would be made worse off by more than $1000 annually.

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.

Air conditioning adoption is increasing dramatically worldwide as incomes rise and average temperatures go up. Using daily temperature data from 14,500 weather stations, we rank 219 countries and 1,692 cities based on a widely used measure of cooling demand called total cooling degree day exposure. India, China, Indonesia, Nigeria, Pakistan, Brazil, Bangladesh and the Philippines all have more total cooling degree day exposure than the United States—a country that uses 400 terawatt-hours of electricity annually for air conditioning. Adoption of air conditioning is increasing globally, leading to peaks in electricity consumption and related environmental concerns. Compiling recent data on population and temperature, this study ranks 219 countries and 1,692 cities based on a measure of cooling demand to improve our understanding of future trends.

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.

Previous studies of the effect of ridesharing on traffic fatalities have yielded inconsistent, often contradictory conclusions. In this paper we revisit this question using proprietary data from Uber measuring monthly rideshare activity at the Census tract level. Most previous studies are based on publicly-available information about Uber entry dates into US cities, but we show that an indicator variable for whether Uber is available is a poor measure of rideshare activity — for example, it explains less than 3% of the tract-level variation in ridesharing, reflecting the enormous amount of variation both within and across cities. Using entry we find inconsistent and statistically insignificant estimates. However, when we use the more detailed proprietary data, we find a robust negative impact of ridesharing on traffic fatalities. Impacts concentrate during nights and weekends and are robust across a range of alternative specifications. Overall, our results imply that ridesharing has decreased US alcohol-related traffic fatalities by 6.1% and reduced total US traffic fatalities by 4.0%. Based on conventional estimates of the value of statistical life the annual life-saving benefits range from $2.3 to $5.4 billion. Back-of-the-envelope calculations suggest that these benefits may be of similar magnitude to producer surplus captured by Uber shareholders or consumer surplus captured by Uber riders.

The growing "electrify everything" movement aims to reduce carbon dioxide emissions by transitioning households and firms away from natural gas toward electricity. This paper considers what this transition means for the customers who are left behind. Like most natural monopolies, natural gas utilities recover fixed costs by spreading fees out over time across their customer base. In periods of a shrinking customer base, this can lead to a lack of fixed cost recovery. To shed light on these dynamics, we use historical evidence from growing and shrinking utilities. We show that in the U.S. during the period 1997-2019 there are many growing utilities, but also hundreds of utilities that experienced sustained periods of customer loss. We then study how the loss of customers impacts utility operations and finances. Utilities that lose customers maintain their pipeline infrastructure even as the customer base financing their operations is shrinking. As a result, historical capital cost recovery and some operations and maintenance costs do not decrease. In keeping with this, we observe that utility revenues shrink, but less than one-for-one -- indicating higher bills for remaining customers. We highlight resulting equity implications -- both across income levels and across racial groups -- of the current push for building electrification and other energy transition policies. We conclude by discussing alternative utility financing options, such as recouping fixed costs through taxes rather than rates.

The percentage of U.S. homes heated with electricity has increased steadily from 1% in 1950, to 8% in 1970, to 26% in 1990, to 39% in 2018. This paper investigates the key determinants of this increase in electrification using data on heating choices from millions of U.S. households over a 70-year period. Energy prices, geography, climate, housing characteristics, and household income are shown to collectively explain 90% of the increase, with changing energy prices by far the most important single factor. This framework is then used to calculate the economic cost of an electrification mandate for new homes. Households in warm states are close to indifferent between electric and natural gas heating, so would be made worse off by less than $500 annually. Household in cold states, however, tend to strongly prefer natural gas so would be made worse off by $3000+ annually. These findings are directly relevant to a growing number of policies aimed at reducing carbon dioxide emissions through electrification, and underscore the importance of pricing energy efficiently. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

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...

Executive SummaryIn many countries, the revenue from gasoline taxes is used to fund highways and other transportation infrastructure. As the number of electric vehicles on the road increases, this ...

Information provision is a key element of government energy-efficiency policy, but the information that is provided is often too coarse to allow consumers to make efficient decisions. An important example is the ubiquitous yellow "Energy Guide" label, which is required by law to be displayed on all major appliances sold in the United States. These labels report energy cost information based on average national usage and energy prices. We conduct an online randomized controlled trial to measure the potential benefits from providing more accurate information. We find that state-specific labels lead to significantly better choices. Consumers invest about the same amount overall in energy-efficiency, but the allocation is much better with more investment in high-usage high-price states and less investment in low-usage low-price states. The implied aggregate cost savings are larger than any reasonable estimate of the cost of implementing state-specific labels.

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.

Executive SummarySince 2006, US households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other “clean energy” investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce greenhouse gases (GHGs).

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. We propose two empirical tests motivated by previous analytical models of hypercongestion. Our first test uses instrumental variables to empirically isolate the effect of travel demand on highway capacity. Our second test uses an event study analysis to measure changes in highway capacity at the onset of queue formation. We apply these tests to three highway bottlenecks in California for which detailed data on traffic flows and vehicles speeds are available. Neither test shows evidence of a reduction in highway capacity at any site during periods of high demand. Across sites and specifications we have sufficient statistical power to rule out small reductions in highway capacity. This lack of evidence of hypercongestion has important implications for travel supply and demand models and raises questions about highway metering lights and other traffic interventions aimed at regulating demand.

Natural gas producers are constantly making tradeoffs between money, time, and environmental risk. The private costs and benefits of drilling are realized immediately, but the external costs are not. This means that by the time external costs are well understood, producers may no longer exist or may not have sufficient resources to finance necessary cleanups or to compensate those who have been adversely affected. Because producers do not face the total cost of potential external damages, they may take too many risks. This article discusses alternative regulatory approaches for mitigating moral hazard in U.S. natural gas production. Particular emphasis is given to bonding requirements, which have tended to receive less attention from policy makers than other approaches but have a long history. Although the use of bonding has important limitations, this approach is quite well suited to addressing many of the environmental risks in this market. (JEL: K32, L71, Q48, Q58)

© 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.

This paper evaluates a large-scale appliance replacement program in Mexico that from 2009 to 2012 helped 1.9 million households replace their old refrigerators and air conditioners with energy-efficient models. Using household-level billing records from the universe of Mexican residential customers, we find that refrigerator replacement reduces electricity consumption by 8 percent, about one-quarter of what was predicted by ex ante analyses. Moreover, we find that air conditioning replacement actually increases electricity consumption. Overall, we find that the program is an expensive way to reduce externalities from energy use, reducing carbon dioxide emissions at a program cost of over $500 per ton. (JEL L68, L94, O12, O13, Q41, Q54)

Economists have long argued that many recipients of energy-efficiency subsidies may be “non-additional,” getting paid to do what they would have done anyway. Demonstrating this empirically has been difficult, however, because of endogeneity concerns and other challenges. In this paper we use a regression discontinuity analysis to examine participation in a large-scale residential energy-efficiency program. Comparing behavior just on either side of several eligibility thresholds, we find that program participation increases with larger subsidy amounts, but that most households would have participated even with much lower subsidy amounts. The large fraction of inframarginal participants means that the larger subsidy amounts are almost certainly not cost-effective. Moreover, the results imply that about half of all participants would have adopted the energy-efficient technology even with no subsidy whatsoever.

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.

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...

Regulatory oversight of toxic emissions from industrial plants and understanding about these emissions’ impacts are in their infancy. Applying a research design based on the openings and closings of 1,600 industrial plants to rich data on housing markets and infant health, we find that: toxic air emissions affect air quality only within 1 mile of the plant; plant openings lead to 11 percent declines in housing values within 0.5 mile or a loss of about $4.25 million for these households; and a plant’s operation is associated with a roughly 3 percent increase in the probability of low birthweight within 1 mile. (JEL I12, L60, Q52, Q53, Q58, R23, R31) Industrial plants that emit toxic pollutants are ubiquitous in the United States today, and many lie in close proximity to major population centers. These plants emit nearly 4 billion pounds of toxic pollutants in the United States annually, including 80,000 different chemical compounds. 1 Whereas criteria air pollutants like particulate matter have been regulated for decades, regulation of airborne toxic pollutants remains in its infancy. The nascent state of regulation of these emissions is controversial because, on the one hand, most of the chemicals emitted have never undergone any form of toxicity testing (US Department of Health and Human Services 2010) 2 , and, on the other hand, they are widely believed to cause cancer, birth defects, and damage to the brain and reproductive systems (Centers

Beginning in the late 1990s, electricity markets in many US states were deregulated, and almost half of the nation’s 103 nuclear power reactors were sold to independent power producers. Deregulation has been accompanied by substantial market consolidation, and today the three largest companies control one-third of US nuclear capacity. We find that deregulation and consolidation are associated with a 10 percent increase in operating performance, achieved primarily by reducing the duration of reactor outages. At average wholesale prices, this increased operating performance is worth $2.5 billion annually and implies an annual decrease of 35 million tons of car bon dioxide emissions. (JEL L11, L51, L94, L98, Q42, Q48) T his paper examines an unprecedented period of deregulation and consolidation in the US nuclear power industry. For four decades, all nuclear power reactors in the United States were owned by regulated utilities. Few utilities owned more than one or two reactors, and utilities received a rate of return on their capital investments that was largely disconnected from operating performance. Beginning in the late 1990s, electricity markets in many states were deregulated, and 48 of the nation’s 103 nuclear power reactors were sold to independent power producers selling power in competitive wholesale markets. These divestitures have led to substantial market consolidation, and today the three largest companies control one-third of US nuclear capacity. Using a unique 40-year monthly panel of all nuclear reactors in the United States, we find that deregulation and consolidation are associated with a 10 percent increase in operating performance, achieved primarily by reducing the frequency and, more impor tantly, duration of reactor outages. Gains in operating performance were experienced broadly across reactors of different types, manufacturers, and vintages, with the largest increases in the spring and fall during the peak months for refueling. We also examine explicitly the role of consolidation, comparing gains across companies that operate different numbers of reactors. While we find suggestive evidence that consolidation led to improved operating performance, it explains relatively little of the overall increase.

This paper uses restricted census microdata to examine housing values and rents for neighborhoods in the United States where power plants were opened during the 1990s. Compared to neighborhoods with similar housing and demographic characteristics, neighborhoods within 2 miles of plants experienced 3%–7% decreases in housing values and rents, with some evidence of larger decreases within 1 mile and for large-capacity plants. In addition, there is evidence of taste-based sorting, with neighborhoods near plants associated with modest but statistically significant decreases in mean household income, educational attainment, and the proportion owner-occupied. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Most goods and services in Mexico are subject to a 16 percent value added tax (VAT). However, within 20 kilometers of the border with the United States, the VAT rate is 11 percent. This preferential rate was implemented by the Mexican Department of Revenue to reduce cross-border shopping in the United States. However, the tax differential also creates an unusual distortion within Mexico, encouraging Mexicans to travel to the preferential tax zone for shopping. This paper performs an empirical test of tax avoidance using the Mexican Economic Census, comparing towns on either side of the 20 kilometer threshold using a regression discontinuity design. The analysis provides evidence of a modest but statistically signifi cant distortion in economic activity toward the preferential tax zone.

Recently the proposal has been made to raise gasoline taxes in the United States to curb carbon emissions. The existing literature on the sensitivity of gasoline consumption to changes in price may not be appropriate for evaluating the effectiveness of such a tax. First, most of these studies fail to address the endogeneity of gasoline prices. Second, the responsiveness of gasoline consumption to a change in tax may differ from the responsiveness of consumption to an average change in price. We address these challenges using a variety of methods including traditional single-equation regression models, estimated by least squares or instrumental variables methods, and structural vector autoregressions. Our preferred approach exploits the historical variation in US federal and state gasoline taxes. Our most credible estimates imply that a 10-cent per gallon increase in the gasoline tax would reduce carbon emissions from vehicles in the United States by about 1.5%. Copyright © 2010 John Wiley & Sons, Ltd.

Over the last two decades an unprecedented increase in private vehicle ownership has taken place in the developing world. This growth is due, in part, to increased international trade in used vehicles. In this paper we use theory and empirical evidence to evaluate the environmental implications of free trade in vehicles and other used durable goods. With non‐homothetic preferences, used vehicles are relatively inexpensive in high‐income countries and free trade causes these goods to be exported to low‐income countries. We apply this framework to the North American Free Trade Agreement. Since trade restrictions were eliminated in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicle‐level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped. Key Words: Durable Goods, Non‐Homothetic Preferences, NAFTA, Climate Change JEL: F18, H23, Q54, Q56.

This article describes a household production model in which energy-efficient durable goods cost less to operate so households may use them more. The model is estimated using household-level data from a field trial in which participants received high-efficiency clothes washers free of charge. The estimation strategy exploits this quasi-random replacement of washers to derive precise estimates of the household production technology and a demand function for clothes washing. During the field trial, households increased clothes washing on average by 5.6% after receiving a high-efficiency washer, implying a price elasticity of −.06. The complete model is used to evaluate the cost-effectiveness of recent changes in minimum efficiency standards for clothes washers.

In 1989, the government of Mexico City introduced a program, Hoy No Circula, that bans most drivers from using their vehicles one weekday per week on the basis of the last digit of the vehicle’s license plate. This article measures the effect of the driving restrictions on air quality using high‐frequency measures from monitoring stations. Across pollutants and specifications there is no evidence that the restrictions have improved air quality. Evidence from additional sources indicates that the restrictions led to an increase in the total number of vehicles in circulation as well as a change in composition toward high‐emissions vehicles.

Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices 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. We provide evidence that gasoline buyers increase gasoline purchases before tax increases and delay gasoline purchases before tax decreases. This intertemporal substitution renders the tax instrument endogenous, invalidating conventional IV analysis. We show that including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower and more plausible elasticity estimates. Our analysis has implications more broadly for the IV analysis of markets in which buyers may store purchases for future consumption.

Since 2006, U.S. households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other "clean energy" investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce GHGs.

Since 2006, U.S. households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other "clean energy" investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce GHGs.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices 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. We provide evidence that gasoline buyers increase gasoline purchases before tax increases and delay gasoline purchases before tax decreases. This intertemporal substitution renders the tax instrument endogenous, invalidating conventional IV analysis. We show that including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower and more plausible elasticity estimates. Our analysis has implications more broadly for the IV analysis of markets in which buyers may store purchases for future consumption.

In this paper, we exploit the abrupt closure of the San Onofre Nuclear Generating Station to estimate the value of electricity transmission. Following the plant’s closure in February 2012, we nd that as much as 75% of lost generation during high demand hours was met locally. Although lower-cost production was available elsewhere, transmission constraints and other physical limitations of the grid severely limited the ability of other producers to sell into the southern California market. These constraints also made it potentially more protable for certain plants to exercise market power, and we nd evidence consistent with one company acting non-competitively.

By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline assumptions about supply and demand elasticities, the total annual deadweight loss worldwide is $44 billion. Incorporating external costs increases the economic costs substantially.

A ubiquitous and largely unquestioned assumption in studies of housing markets is that there is perfect information about local amenities. This paper measures the housing market and health impacts of 1,600 openings and closings of industrial plants that emit toxic pollutants. We find that housing values within one mile decrease by 1.5 percent when plants open, and increase by 1.5 percent when plants close. This implies an aggregate loss in housing values per plant of about $1.5 million. While the housing value impacts are concentrated within 1/2 mile, we find statistically significant infant health impacts up to one mile away.

Nuclear power has long been controversial because of concerns about nuclear accidents, storage of spent fuel, and how the spread of nuclear power might raise risks of the proliferation of nuclear weapons. These concerns are real and important. However, emphasizing these concerns implicitly suggests that unless these issues are taken into account, nuclear power would otherwise be cost effective compared to other forms of electricity generation. This implication is unwarranted. Throughout the history of nuclear power, a key challenge has been the high cost of construction for nuclear plants. Construction costs are high enough that it becomes difficult to make an economic argument for nuclear even before incorporating these external factors. This is particularly true in countries like the United States where recent technological advances have dramatically increased the availability of natural gas. The chairman of one of the largest U.S. nuclear companies recently said that his company would not break ground on a new nuclear plant until the price of natural gas was more than double today's level and carbon emissions cost $25 per ton. This comment summarizes the current economics of nuclear power pretty well. Yes, there is a certain confluence of factors that could make nuclear power a viable economic option. Otherwise, a nuclear power renaissance seems unlikely.