Essays in energy economics and climate policy [electronic resource]

As U.S. climate policy begins to emerge at the state and federal levels, new technological, economic, and legal challenges follow close behind. With the aim of contributing to effective, science-based climate policy, this dissertation portfolio draws on insights from energy economics and environmental law to address current policy debates. My research comprises two sets of projects. One category, which deals with national-level climate policy, focuses on front-end policy design choices and fundamental arguments over the merits of competing mitigation strategies. The other category addresses California's evolving climate policy regime, providing scientific and legal input into ongoing policy development processes. Both approaches demonstrate an expansion on conventional approaches to academic research, bridging the gap between applied and theoretical research in a way that graduate students from a range of backgrounds can adopt in their own work. PART I -- NATIONAL ENERGY DATA AND MODELING Projects in the first category integrate economic analysis and energy modeling to inform federal policy, which is just beginning to grapple with the climate challenge. Within this category, I explore two related problems: (1) the inadequacy of national energy data and (2) the challenges of using energy models to assess prospective climate policies. Data (Chapters 1-2): I identify significant conceptual mistakes that result from improperly extrapolating policy conclusions from semi-empirical energy consumption data. This issue is particularly important for research addressing the potential of energy efficiency to reduce greenhouse gas emissions. Because empirical energy data are so limited, many researchers rely on secondary data series to calibrate models or develop policy insights. My work shows how prominent criticisms of the potential for energy efficiency are based on major conceptual misunderstandings of the available data. Modeling (Chapters 3-4): My colleague Jordan Wilkerson and I set up a fully functioning copy of the U.S. Department of Energy's National Energy Modeling System (NEMS) at Stanford. In one study, we show how the model's treatment of end-use energy efficiency economics in the residential and commercial buildings sectors is driven in large part by non-price parameters. This finding has important implications for the model's ability to project energy efficiency responses to price-based policies, such as a carbon tax. Working with faculty in law and engineering, we also use NEMS-Stanford to model the economic and environmental implications of a carbon fee-and-dividend bill introduced in the U.S. Senate in the spring of 2013. Our work breaks down the expected economic impacts across household income levels and census regions, offering the first distributional analysis of recent carbon tax proposals using the government's official energy model. PART II -- CLIMATE POLICY IN CALIFORNIA Projects in the second category focus on the climate policy regime in California, where regulators are in the process of implementing a comprehensive cap-and-trade system. I completed research on three related policy issues, working in close collaboration with Stanford's Environmental Law Clinic: (1) participation in a lawsuit, in which I defended the constitutionality of State regulators' use of lifecycle assessment methods, (2) the development of carbon offset protocols, and (3) the regulation of resource shuffling in the electricity sector, an issue that has important implications for the State's carbon market. Litigating science (Chapters 5-7): In December 2011, a federal court struck down part of California's climate policy as unconstitutional. The primary reason was that the judge found that the policy's use of lifecycle assessment methods impermissibly discriminated against interstate commerce, violating the Commerce Clause of the U.S. Constitution. In response, my colleague David Weiskopf and I represented two groups of scientists on appeal to the Ninth Circuit, providing science-based arguments to address the legal questions in the case. Offset protocols (Chapters 8-9): California's climate law allows regulated entities to use carbon offsets to meet their emissions reduction targets, earning credit for actions taken to reduce emissions outside of the regulated system. Crucially, offset projects must be "additional" when compared against the counterfactual scenario that would have taken place in the absence of the offset project. This means that absent the financial incentive provided by the offset credit, the project activities would not otherwise have taken place. I wrote comment letters critiquing offset protocols for forestry projects in Mexico and coalmine methane destruction in the U.S., providing technical and legal analysis to improve the protocols' treatment of additionality. Resource shuffling (Chapter 10): State law requires its climate regulations to minimize leakage, which is defined as a reduction of emissions within the state system that is linked to a corresponding increase in emissions outside of the system. Yet the electricity sector is owned and operated across state boundaries, and thus readily subject to a form of leakage called resource shuffling. Resource shuffling occurs when companies in the electricity sector swap their contracts for high-emitting resources with low-emitting replacements, without any change in the physical operation of the electricity system. Because this kind of exchange creates leakage, the California Air Resources Board banned resource shuffling. Recently, however, the Board introduced draft rules that exempt many activities from the prohibition. My colleague David Weiskopf and I critique the State's proposed regulatory structure, showing how a creative lawyer could exploit loopholes to permit leakage in almost any situation. We present the fullest accounting to date for leakage risks associated with early divestment from out-of-state coal, which provides a significant amount of California's electricity supply. We find that if California companies are permitted to offload the emissions liability associated with these plants to companies that do not face reporting requirements under California's climate law, this could result in significant amounts of leakage—potentially even more leakage than the cumulative mitigation requirements expected under the cap-and-trade market through 2020. We also offer a fully developed proposal for revised regulations that expand compliance options while reducing the leakage risks we identify.

Advisor: Koomey Jon
Weyant John P. (John Peter) primary advisor. Thesis advisor
Wara Michael