Corporate Tax Inversions
The White House recently released new regulations designed to make tax inversions by US companies “significantly less profitable.” The rules will discourage—not stop—companies from moving their headquarters overseas, acting as a temporary means of capturing US corporate tax revenue while Congress works to develop more permanent and extensive measures.
RFF Fellow Marc Hafstead suggests that taxing emissions can be a viable long-term solution to corporate tax inversion. He writes: “Carbon taxes have the potential to raise billions of dollars each year that could finance the type of tax reform that would make US corporations more competitive and reduce their incentive for inversion. . . . A bill that establishes a carbon tax while reducing corporate tax rates could satisfy members on both sides of the aisle.”
Confronting Climate Change
In President Obama’s remarks at the United Nations Climate Summit, he emphasized the importance of a coordinated international effort to combat climate change and warned that “no nation can meet this global threat alone.” The president also reiterated the US pledge to meet its 2020 carbon emissions goals, highlighting the importance of securing similar commitments from other major polluters.
This year’s summit is considered by many to be a litmus test for the viability of a global climate agreement ahead of the 2015 UN conference in Paris. As RFF University Fellow Robert Stavins of Harvard notes, representatives should focus on gaining commitments from all members, eliminating the unsuccessful two-tier participation system of the past and “breaking the logjam that has prevented progress” since the Kyoto Protocol.
Each succeeding year in which the world fails to agree to forceful and binding commitments to slash releases of greenhouse gas emissions underscores the increased urgency of complementary measures to strengthen resilience to impacts of global warming that may no longer be avoided or sufficiently mitigated through just emissions reduction. Framing that dilemma in shorthand confronts us with the combined imperative of mitigation and adaptation.
To be sure, that duality has never eluded serious efforts to deal with climate change—whether in academic or policy circles. Anyone who has a copy of a 1989 RFF Press publication on a bookshelf will note on its spine the title, Greenhouse Warming: Abatement and Adaptation. And the 1992 RFF Press book, Global Development and the Environment: Perspectives on Sustainability, contains a chapter that, for its time, is an unusually strong argument for the concurrent pursuit of both emissions mitigation and adaptation—the latter, with particular emphasis on drought and water resource management. Read More
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.
American Gas to the Rescue? The Impact of US LNG Exports on European Security and Russian Foreign Policy
…The US shale gas boom has already helped European consumers and hurt Russian producers by expanding global gas supply and freeing up liquefied natural gas (LNG) shipments previously planned for the US market. This has strengthened Europe’s bargaining position, forcing contract renegotiations and lowering gas prices. US LNG exports will have a similar effect… – via Center on Global Energy Policy
The Effect of Natural Gas Supply on US Renewable Energy and CO2 Emissions
Increased use of natural gas has been promoted as a means of decarbonizing the US power sector, because of superior generator efficiency and lower CO2 emissions per unit of electricity than coal. We model the effect of different gas supplies on the US power sector and greenhouse gas (GHG) emissions. Across a range of climate policies, we find that abundant natural gas decreases use of both coal and renewable energy technologies in the future. Without a climate policy, overall electricity use also increases as the gas supply increases… – via Environmental Research Letters
Lawmakers employ a number of policy instruments to promote energy efficiency, including regulatory mandates, information campaigns, and technology subsidies. For energy-consuming durable goods, consumers often purchase products ultimately eligible for a subsidy because of their design under an energy efficiency standard and marketing subject to government-required information disclosure policies. Appliances such as refrigerators, dishwashers, and clothes washers, for example, fall into this category—they are subject to minimum energy efficiency standards set at the federal level and eligible for various rebates and tax credits, and manufacturers are required to disclose typical annual energy usage. Against the reality of limited resources and in a complicated landscape of overlapping, often redundant policy tools in play, what is the incremental impact of energy efficiency subsidies on energy outcomes, and why is it important?
In a new RFF discussion paper, we investigate the impact of the largest subsidy program for energy efficient appliances implemented in the United States. Determining the incremental impact of subsidies in this context is important for three reasons. First, subsidy instruments, such as tax credits and rebates, have frequently been “turned on” for short periods of time and then “turned off” (for example, through the one-time 2009 economic stimulus bill, occasional tax extender bills, and occasional utility rebate programs). For this reason, subsidies, in practice, appear to be a marginal policy measure where energy efficiency is concerned. Second, subsidies are the marginal policy lever on the extensive margin, which facilitates our analysis since we clearly observe when the programs turn on and off, in contrast to the gradual changes in the revision of minimum efficiency standards and mandatory information disclosure. Third, such subsidies may be employed to an even greater extent in the future, making current analysis important for future decisionmaking. Read More
This is the fourth in a series of questions that highlights RFF’s Expert Forum on EPA’s Clean Power Plan. Readers are invited to submit their own comments to the questions and/or the responses using the “Leave a Comment” box below. See all of the questions to date here.
Expanding utility and state efforts to promote greater efficiency in electricity use (the fourth building block in EPA’s proposed Clean Power Plan) will reduce demand on power plants, thereby reducing emissions and saving money for electricity consumers. To set the state-specific emissions rate reduction goals laid out in EPA’s proposal, the agency determined that each state can eventually achieve a 1.5 percent savings in energy consumption per year based on energy efficiency resource standard goals that have been adopted or recently achieved in selected states. Did EPA appropriately construct building block #4?
“Building block [#4] was constructed in a reasonable way, although [ACEEE] will be suggesting some refinements and improvements in our formal comments to EPA. . . . With these refinements, [we estimate] that the energy efficiency savings and emissions reductions could more than double.”
—Steven Nadel, Executive Director, American Council for an Energy-Efficient Economy (ACEE) (See full response.)
“EPA has not appropriately constructed building block #4 and has substantially overstated the amount of [energy efficiency] that could be achieved by states in the future in setting the 111(d) CO2 standards.”
—Bruce Braine, Vice President, American Electric Power (See full response.)
“The approach that EPA takes raises a couple of questions about the cost-effectiveness of this particular building block. . . . First, states with ambitious existing energy efficiency programs tend to have a larger obligation. . . . Second, state targets under building block #4 are not differentiated based on the potential for associated carbon reductions.”
—Karen Palmer, Research Director and Senior Fellow, Resources for the Future (See full response.)
Economics and the Environment
Today marks the beginning of Climate Week NYC 2014, which will feature more than 100 events around New York City in support of the UN Climate Summit. Summit representatives are expected to discuss the economic benefits of carbon pricing and national climate commitments, as well as the ability of cities to offer policymakers “some of the lowest-hanging fruit” for preventing damages from climate change.
During Climate Week, join RFF for an RFF Policy Leadership Forum on Economics and the Environment, with EPA Administrator Gina McCarthy. Tune in on September 25 to view the live webcast at www.rff.org/live. Questions can be submitted via Twitter using #AskRFF and will be answered as time permits.
EPA Clean Power Plan Comment Period Extended
The deadline to submit comments on the EPA’s Clean Power Plan has been extended to December 1, though the agency is “still working towards a June deadline” for its finalized regulation. The 45-day extension was granted by the Obama administration to give the public a greater opportunity to offer additional input that will ultimately result in a “practical, flexible, and achievable” plan.
In a new installment of RFF’s Expert Forum on the Clean Power Plan, experts from RFF, Alstom Power, and NRG Energy comment on the practicality of the plan’s assumption that existing natural gas power plants can meet an average utilization of 70 percent. Readers are encouraged to share their thoughts on this question and more by commenting on Common Resources.
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.
A Global High Shift Scenario: Impacts And Potential For More Public Transport, Walking, And Cycling With Lower Car Use
[Yale Environment 360] Expanding public transportation and infrastructure that promotes walking and biking throughout the world’s cities could save $100 trillion and cut transportation-related carbon emissions by 40 percent by 2050, according to an analysis by researchers at the University of California, Davis, and the Institute for Transportation and Development Policy. Urban transportation accounted for roughly one-quarter of all transportation-related emissions in 2010, the report said, and these emissions could double by 2050 as growth continues in major cities in China, India, and other developing countries. – via Univ. of California Davis | Institute for Transportation and Development Policy
Household Electricity Expenditures as a Percentage of Income 2008-2012
[WFPL] A new data mapping project from the Kentucky Energy and Environment Cabinet highlights the disparities in income and electricity prices both around the country and in the commonwealth. The Kentucky Department of Energy Development and Independence took median household income data from the American Community Survey, and combined that with federal Energy Information Administration data on electricity prices. The result is a national heat map that shows the areas where residents devote more of their household income to paying their electric bills. – via Kentucky Energy and Environment Cabinet, Department for Energy Development and Independence
India’s car market has expanded rapidly since the country’s economic reforms in the early 1990s, a trend that is expected to continue well into the future; its passenger fleet alone is projected to swell from 22 million to 112 million vehicles between 2010 and 2030. In the wake of this growth, India is considering the adoption of fuel economy standards in its quest to curb fuel usage and foreign oil dependence. At the same time, India’s lenient taxation of diesel fuel (selling 30 to 50 percent below petrol) has worked against it by encouraging market “dieselization” and overall diesel consumption by new car owners.
India has significant potential to meet its goals through a tax on diesel fuel that could correct some of the imbalances created by its current policy, though a tax on diesel vehicles themselves would be a more politically feasible option. In our new RFF discussion paper, we consider the welfare implications of a price-equalizing diesel fuel tax, a diesel car tax that would prompt a similar market share reduction in diesel cars, and a smaller diesel fuel tax that would result in the same fuel savings as a car tax. To quantify the efficiency of a fuel tax relative to a car tax, we use a JD Power APEAL survey to model joint consumer decisions about which car to buy and how much to drive it based on the strategy in place. Read More
Next week, world leaders will meet at the United Nations in New York City at the invitation of UN Secretary-General Ban Ki-moon. The purpose of the meeting is to discuss actions the leaders will take to limit their country’s emissions of greenhouse gases in an effort to forestall global climate change. For many, success of the meeting will be measured by the ambition of the stated actions—that is, how aggressive will the emissions reductions offered by each country be?
Although ambition may be a good measure of success, climate policy watchers will be just as interested in the specific actions that give rise to the stated emissions reductions. It is the efficacy of the action that makes stated ambition credible but, unfortunately, there are many ineffective actions that can be taken.
One heavy-hitting climate policy watcher is World Bank Special Envoy for Climate Change Rachel Kyte. Earlier this year, Kyte reiterated her support for climate policy actions that take the form of prices on emissions of carbon dioxide (often termed “carbon pricing”). She encouraged “countries, sub-national jurisdictions, and companies to join a growing coalition of first movers to support putting a price on carbon.” The governments and organizations comprising this coalition are not supporting a specific level of ambition in terms of emissions reductions; rather, they are supporting a specific effective action—carbon pricing. Read More
This is the third in a series of questions that highlights RFF’s Expert Forum on EPA’s Clean Power Plan. Readers are invited to submit their own comments to the questions and/or the responses using the “Leave a Comment” box below. See all of the questions to date here.
With a boom in natural gas production in the United States, many view this fuel source as a possible “bridge” to a low-carbon future. In fact, building block #2 of EPA’s Clean Power Plan assumes that states can increase the average utilization of existing natural gas power plants to 70 percent, substantially higher than current rates. RFF asked the experts about the practicality and cost-effectiveness of this building block. Do such opportunities exist, and at what cost? Would an increase in the utilization of existing gas facilities render them unavailable to balance the intermittent supply from renewable energy generation?
Is it possible for existing natural gas power plants to increase average utilization by 70 percent (building block #2) and, if so, at what cost?
“Recent history suggests a dramatic change in capacity factor is very possible, but prior experience does not provide evidence that it would be sufficient to achieve the building block target of 70 percent on average for all gas plants.”
—Dallas Burtraw, Darius Gaskins Senior Fellow, Resources for the Future (See full response.)
“If you address this from the technical perspective, there is no question that the natural gas combined cycles that EPA focuses on are fully capable achieving and maintaining a 70 percent capacity factor. To achieve this, however, four issues will need to be addressed with careful modeling and planning.”
—Robert Hilton, Vice President, Power Technologies for Government Affairs, Alstom Power Inc. (See full response.)
“A more gradual phase-in of building block #2 over time would avoid this reliability-driven rush to new gas-fired generation, . . . allow a more thoughtful transition to increasingly competitive renewables and other clean energy resources, . . . and lower CO2 emissions from the power sector as a whole at a lower cost.”
—Steve Corneli, Senior Vice President, Policy and Strategy, NRG Energy (See full response.)