Beneath this gloomy surface, however, lies a golden sheen of real policy actions that are paving the way for future action to address the challenges of climate change. California and Sweden are two global trailblazers that are currently implementing robust and aggressive policies to reduce emissions and encourage innovative changes in how their national economies and governments operate. Last Tuesday, Resources for the Future, with Sweden’s Mistra Indigo and the ClimateWorks Foundation, put on a summit showcasing these two first movers in the climate policy world.

The event brought together preeminent thinkers on how cap-and-trade systems should be designed and the implications of different policy designs, and gave thoughts leaders from both countries a chance and share lessons learned, successes, challenges, and ways forward toward improving and strengthening their responses to climate change.

A few important themes emerged throughout the day’s discussions, and they provide useful insights for those looking to design better climate policies in the future.

• First, a mixture of policy mechanisms, including price signals and more traditional regulations, is essential for establishing climate policy programs. Some predict that regulation will be more important to California in the coming years than the price of emission allowances; in contrast Sweden has seen its economy thrive despite a relatively high carbon tax along with regulations. There is weak evidence that innovation responds to prices alone, but engineers, innovators, and even local governments react well to incentives, so a mix of flexible regulations and incentive-based mechanisms could increase the opportunity for greater efficiencies at lower costs.

• Second, climate regulations are closely linked to other environmental regulations. California and Sweden are pioneers in the climate space in part because they were previously pioneers in addressing problems like local air pollution. Moving forward, climate goals and other air quality goals may become more interlinked. In fact, there is some thought that future federal air quality standards may be harder to attain than future GHG reduction goals.

• Third, research and development is integral to success. Current technology can set us on the path to a low-carbon economy, but it cannot get us all the way there. Research and development of new technology in energy generation and transportation may bridge the gap between goals in 2013 and outcomes in 2020 or 2050. That will not happen, however, unless investments are made in the short-term.

The event underscored that the policy efforts commenced by both California and Sweden is extensive, and while they have made great progress, they will continue to face daunting challenges in the future, ones that may be overcome by sharing success stories and lessons learned from being laboratories of environmental protection and innovation.

OK, the title, “Environmental Regulation and Public Disclosure: The Case of PROPER in Indonesia” is admittedly a bit owlish. But I think many will be quite interested in the contents—an in-depth case study of an innovative pollution control program in a poor country has made a real difference.

My coauthors, Shakeb Afsah, Jorge García, and Thomas Sterner, and I have been involved in the design, implementation, and evaluation of PROPER for more than 15 years. We decided to pull together and flesh out what we have learned about the program because we believe that, having succeeded where many others have failed,  it can and should serve as a model for other developing countries.

Environmental management in poor countries is quite challenging: severe pollution problems abound, regulatory institutions tend to be weak, and politicians get more mileage from promoting poverty reduction than pollution control. As a result, conventional command-and-control regulation often performs poorly.

PROPER has managed to sidestep some of these constraints by relying on public disclosure instead of enforcing regulatory mandates. It ranks thousands of companies’ environmental performance using a five-color grading scale—Gold for excellent, Green for very good, Blue for good, Red for non-compliance, and Black for causing environmental damage—and then disseminates these rankings via the press and internet, thereby creating incentives for polluters to cut their emissions.

Our book is a multidisciplinary wideranging exploration of the program. We present rigorous statistical analyses showing that it has helped raise the average rate of compliance with environmental regulations from thirty to seventy per cent, and identifying the specific incentives that are responsible for this improvement. We also provide a comprehensive history of the origins and evolution of program and detailed explanations of the methods and procedures on which it relies.

Try it, we think you’ll like it.

Options in Recycling Revenues Generated through Carbon Pricing
…A new report out recently from the International Council on Mining and Metals (ICMM) provides a detailed look at the current revenue recycling practices around the world [from either the auction of emission allowances or the taxation of carbon emission]. — via International Council on Mining and Metals

MATCH: Metadata Access Tool for Climate and Health
The Obama Administration this week introduced an online tool to improve research into the link between climate change and human health and promote innovative responses to future threats. As climate change triggers more extreme weather events and temperature shifts, it is becoming increasingly important to determine how these changes will affect respiratory illnesses, infectious diseases, allergies, and other… — via United States Global Change Research Program

Superfund: EPA Should Take Steps to Improve Its Management of Alternatives to Placing Sites on the National Priorities List
The Environmental Protection Agency (EPA) most commonly addresses the cleanup of sites it has identified as eligible for the National Priorities List (NPL) by deferring oversight of the cleanup to approaches outside of the Superfund program. As of December 2012, of the 3,402 sites EPA identified as potentially eligible, EPA has deferred oversight of 1,984 sites to approaches outside the Superfund program… — via Government Accountability Office

The Conservation Economy in America: Direct Investments and Economic Contributions
An April 2013 study by Southwick Associates, “The Conservation Economy in America: Direct investments and economic contributions” reports that conservation has measurable economic impacts. The study was produced for the National Fish and Wildlife Foundation to identify the level of impact that these activities have on the U.S. Economy and to serve as the basis for development of an assessment tool in determining the economic and job activity created by the NFWF’s… — via Southwick Associates for the National Fish and Wildlife Foundation

Green Economy and Trade: Trends, Challenges and Opportunities
…At the United Nations Conference on Sustainable Development (Rio+20) held in June 2012, governments agreed to the outcome document The Future We Want, which makes a commitment to help countries implement clear and practical measures for transitioning to green economies. This document affirms international trade as an engine for development and sustained economic growth… — via United Nations Environment Programme

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American chestnut trees may be on the rise again due to a genetic engineering breakthrough that protects them from a debilitating fungus. If the transgenic chestnuts can be successfully integrated into woodland ecosystems, similar genetic engineering methods may be able to reestablish other trees.

In Resources magazine, RFF Associate Research Director and Fellow Juha Siikamäki discusses the potential for bioengineering to create a “blight-resistant American chestnut.” This was the topic of an RFF First Wednesday Seminar that featured a panel of experts involved in the Forest Health Initiative. Watch the video from the event to learn more.

Biomass Emissions

The debates continue about the carbon emissions—or carbon neutrality—of burning biomass for fuel. “The [United Kingdom’s] government’s own research has shown that using wood from whole UK conifers results in an increase in emissions of 49 percent compared with coal.”

However, RFF Senior Fellow Roger Sedjo says that the emissions should be measured using a life cycle assessment—a method that measures the environmental impacts of a product over its lifetime, from raw material extraction through disposal. In new research, he examines three different approaches  to life cycle assessment and finds that, “given sufficient time and assuming that complete regeneration replaces harvest, all three approaches will generate no net emissions for their respective forest since each becomes a fully regulated forest in which growth equals harvest.”

Responding to Ecological Loss

In a recent article for Resources magazine, RFF Senior Fellow and Co-Director of the Center for the Management of Ecological Wealth Jim Boyd notes the difficulty of applying traditional market-driven methods to ecological issues, which can lead to underinvestment in information about the best ways to mitigate ecological loss. Last week, RFF hosted a seminar on such limits to ingenuity, focusing on the role of new technologies (such as genetically modified organisms), the capability to substitute for nature, and the ethics of certain innovations to limit ecological loss. Watch the full video from the seminar here.

Assessment of Undiscovered Oil Resources in the Bakken and Three Forks Formations
The United States Geological Survey (USGS) today released an updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks… — via US Geological Survey

Adaptation in Europe – Addressing Risks and Opportunities from Climate Change in the Context of Socio-economic Developments
This report provides policymakers across Europe, at different levels of governance and stages of policy formulation, with information that can be used to support adaptation planning and implementation. Specific parts of the report are therefore targeted at different audiences. — via European Environment Agency

South Africa Carbon Tax Policy Paper: Reducing Greenhouse Gas Emissions and Facilitating the Transition to a Green Economy
…This Carbon Tax Policy Paper updates the 2010 discussion paper “Reducing Greenhouse Gas Emissions: The Carbon Tax Option and takes into account the public comments received. It takes account of the principles in both the 2010 paper as well as the 2006 Environmental Fiscal Reform Policy Paper, which provides a policy context and foundation for the use of taxes and incentives to support the attainment of environmental objectives…. — via National Treasury, Republic of South Africa

Stress Relief: Prescriptions for a Healthier Delta Ecosystem
California is at a critical juncture on policy for the Sacramento–San Joaquin Delta. This report summarizes the results of a wide-ranging study of cost-effective ways to improve the health of the Delta ecosystem. It highlights the need for science-based, integrated management of the many sources of ecosystem stress. The report also recommends improvements to the highly fragmented system of oversight that now involves dozens… — via Public Policy Institute of California

Hydraulic Fracturing and Water Stress: Growing Competitive Pressures for Water
A new Ceres research paper on water use in hydraulic fracturing operations shows that a significant portion of this activity is happening in water stressed regions of the United States, most prominently Texas and Colorado, which are both in the midst of prolonged drought conditions. It concludes that industry efforts underway, such as expanded use of recycled water and non-freshwater resources… — via Ceres

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Carbon Tax Effects

Last week the Senate Finance Committee introduced the idea of a carbon tax in a list of “prominent tax reform options.” Many have noted that such a tax could negatively impact the poor, and the Committee has said that it would be a challenge to maintain the progressivity of the tax.

RFF’s Daniel Morris and Clayton Munnings analyzed over 20 years of economic research to explain the distributional consequences of a carbon tax. They note that lower-income households could be compensated for increases in electricity and gas prices resulting from a carbon tax through direct rebates or targeted tax swaps, and maintain that “when accounting for how households anticipate spending over time . . . a carbon tax begins to appear more progressive than previously suggested.”

The History of Shale Gas

Driven by the US natural gas boom, many countries are beginning to develop their own shale gas reserves and are facing challenges in balancing environmental protection with cheaper energy and economic growth.

“The key question for policymakers in countries attempting to develop shale gas resources is how to generate a policy and market environment in which firms have the incentive to make investments and would eventually find it profitable to produce shale gas,” writes RFF Fellow Zhongmin Wang and Senior Fellow Alan Krupnick in new research about  the history of shale gas development in the United States.

• Progressing to a Fair Carbon Tax: Policy Design Options and Impacts to Households | Daniel F. Morris and Clayton Munnings | RFF Issue Brief 13-03
  
• A Retrospective Review of Shale Gas Development in the United States: What Led to the Boom? | Zhongmin Wang and Alan J. Krupnick | RFF Discussion Paper 13-12
• Comparative Life Cycle Assessments: Carbon Neutrality and Wood Biomass Energy | Roger A. Sedjo | RFF Discussion Paper 13-11
• Mercury and Air Toxics Standards Analysis Deconstructed: Changing Assumptions, Changing Results | Blair Beasley, Matthew Woerman, Anthony Paul, Dallas Burtraw, and Karen L. Palmer | RFF Discussion Paper 13-10
• Mixing It Up: Power Sector Energy and Regional and Regulatory Climate Policies in the Presence of a Carbon Tax | Dallas Burtraw and Karen Palmer | RFF Discussion Paper 13-09
• Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets | Dallas Burtraw, Karen L. Palmer, Clayton Munnings, Paige Weber, and Matthew Woerman | RFF Discussion Paper 13-04

Infrastructure, Energy, and Natural Resources
A Senate Finance Committee white paper on possible federal tax code changes for energy suggested establishing a carbon tax in place of most or all energy tax incentives.

The paper offered the carbon tax with a range of other policy options to help chip away at a Congressional Budget Office-estimated $16 billion of foregone energy-related tax expenditures in fiscal 2013… — via U.S. Senate Committe on Finance.

Gone for Good: Fracking and Water Loss in the West
The regional network of organizations’ 37-page report, titled “Gone for Good,” warns of continued diminished water supplies in areas that have been hit hard by drought in recent years. The report also states that the data currently available and processes used to track energy industry water used for fracking are not sufficient, and that the “current level of water use for oil and gas production simply cannot be sustained.” —  via Western Organization of Research Councils

National Parks and Hydraulic Fracturing: Balancing Energy Needs, Nature and America’s National Heritage
The report, “National Parks and Hydraulic Fracturing: Balancing Energy Needs, Nature and America’s National Heritage,” examines the impact of existing, proposed and potential oil and natural gas development on lands surrounding national parks and offers recommendations to safeguard public health and the environment… — via National Parks Conservation Association

Legal Fractures in Chemical Disclosure Laws: Why the Voluntary Chemical Disclosure Registry FracFocus Fails as a Regulatory Compliance Tool
FracFocus, the website used by Exxon Mobil Corp. and other energy companies to disclose chemicals used in hydraulic fracturing, fails as a compliance tool for the 11 states that rely on it, a Harvard Law School study found.

Using the voluntary registry for compliance with state disclosure requirements is “misplaced or premature” because of spotty reporting, lack of a searchable database… — via Businessweek

BISON, a Species Discovery Tool (Biodiversity Information Serving Our Nation)
Biodiversity Information Serving Our Nation or BISON is the only system of its kind; a unique, web-based Federal resource for finding species in the U. S. and territories.  Its size is unprecedented, offering more than 100 million mapped records of nearly every living species nationwide and growing. And the vast majority of the records are specific locations, not just county or state records. — via US Geological Survey

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Today is Earth Day and groups around the globe are contemplating what it means to live sustainably and make “green” choices.

Economists have long argued that in most cases unrestricted trade, including unrestricted exports, will generate the maximum benefits to the exporting country. Economic analysis shows that the benefits to the resource-exporting sector will typically exceed the costs to the domestic resource-using sector, thereby generating positive net benefits to the country as a whole.

Of course, this does not imply that each sector within the country will benefit. Rather, there will be domestic winners and losers. In this case the benefits to gas exporters will exceed the relative losses to the domestic gas users. This net benefit is the case for free trade. Note here that the domestic interests may not be net long-term losers when utilizing a newly developed resource such as shale gas. For example, if the domestic price, after the market has reached its equilibrium, is lower than it was before the onset of new supplies, e.g., due to fracking, domestic users are still ahead. But, they are relative losers to the extent that exports result in gas prices higher than they would otherwise be without exports.

There are, however, well recognized cases where an export restriction might be advantageous to the country as a whole. Suppose a country, or group of countries, is a dominant worldwide producer of a product. The classic case is OPEC with its dominance in the export of oil. In this case the countries have monopoly power and can manipulate export prices with an export tax or, more often, by restricting their exports. If the higher prices increase their export earnings (and profits) more than the lost earnings associated with the decrease in exports, the country as a whole will benefit. Hence, monopoly power in the export market has generated net benefits.

However, individual countries rarely possess significant market power, particularly in the longer term. In most cases single counties provide only a small fraction of world market supply and thus have merely a negligible impact of world prices. This is likely the case for the US with respect to natural gas. Note that even with substantial production expansion, the US is unlikely to export anywhere near the volumes necessary to dominant the world market. This is because world supplies are likely to be influenced by a variety of suppliers, both existing suppliers and also newly emerging supply sources. In this case the US, even as it is moving from a net importer to an exporter, will only be a relatively marginal supplier to the total world market and thereby have only negligible power to affect prices.

Overall, however, the US now finds itself in a very favorable position. In the shorter term, due to the fragmentation of natural gas transport infrastructure, the US may be a major temporary supplier in some markets and benefit on a temporary basis from the very high prices. In the longer term, as an exporter the US can benefit from the normal gains from trade. Additionally, high transport costs give US gas users a significant cost advantage over gas-importing for producing energy intensive goods, even when international gas markets clear.

What are the implications for US gas trade policy? The US may be able to have the best of both worlds. Exporters will have the advantage of higher prices in foreign markets while domestic users will have a competitive advantage via lower gas costs than many of their foreign competitors. Wise policy, then, ought to take advantage of this situation by not interfering with gas usage – domestic or foreign. Let the market do its job and sort out flows and usage. Policy’s primary role should be to focus on minimizing negative environmental impacts associated with the resource’s development.

PAG Manual: Protective Action Guides And Planning Guidance For Radiological Incidents
…On Monday, the Environmental Protection Agency expects to publish in the Federal Register a draft document that would change its long-standing advice to state and local governments about how to limit long-term exposure to radiation after a reactor accident or a “dirty bomb” attack. By reducing the projections for how much radiation exposure is likely in the years after such an episode, the proposal could also reduce… — via U.S. Environmental Protection Agency

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011
GHG emissions in 2011 showed a 6.9% drop below 2005 levels. Total emissions of the six main greenhouse gases in 2011 were equivalent to 6,702 million metric tons of carbon dioxide. These gases include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride. — via U.S. Environmental Protection Agency

Black Carbon and Kerosene Lighting: An Opportunity for Rapid Action on Climate Change and Clean Energy for Development
Replacing inefficient kerosene lighting with electric lighting or other clean alternatives can rapidly achieve development and energy access goals, save money and reduce climate warming. Many of the 250 million households that lack reliable access to electricity rely on inefficient and dangerous simple wick lamps… — via Brookings Institution

International Climate Change Financing: the Green Climate Fund
Over the past several decades, the United States has delivered financial and technical assistance for climate change activities in the developing world through a variety of bilateral and multilateral programs. The United States and other industrialized countries committed to such assistance through the… — via Congressional Research Service

Annual Energy Outlook 2013
The U.S. Energy Information Administration (EIA) today begins the full release of Annual Energy Outlook 2013 (AEO2013), expanding on the AEO2013 Reference case highlights that were issued in December 2012. Today’s release includes a Legislation and Regulations section that discusses evolving legislative and regulatory issues, a Market Trends section that highlights and summarizes… — via U.S. Department of Energy, Energy Information Administration

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Click here to read the full article.

The International Monetary Fund (IMF) has just released a report that presents an exhaustive account of worldwide energy subsidies. Although concern with energy may not immediately be associated with the Fund’s ongoing involvement in international monetary and fiscal-policy issues, it would be a mistake to view energy subsidies as extraneous to those traditional areas of responsibility. Thus, the extent to which energy subsidies can non-trivially warp the pursuit sound fiscal policy is just one useful insight to be drawn from this report.

The IMF’s estimate of global energy subsidies comes to an annual total of $1.9 trillion – hardly a negligible sum in the context of worldwide GDP of around $60 trillion. That figure is composed of two elements. The first is well grounded empirically and, for the most part, can be sharply defined. The IMF defines the subsidy for a commodity as the benchmark international price (adjusted for transport and distribution costs) minus the cost charged the energy consumer. The second category is well honed conceptually but less robust in its quantitative dimensions. It treats as a subsidy the estimated spillover costs (also called “negative externalities”) in both energy production and use that inflict damages on society.

The IMF reckons that, in aggregate, subsidies that underprice energy to users relative to market levels come to an annual global level of around $480 billion. As an iconic example, there’s the case of Venezuela where, most recently, the price per gallon of gasoline equaled about 10 cents (US). With a world gasoline price averaging around $2.75 per gallon (and three times as much in countries with high fuel taxes), it gives you a sense of how the Venezuelan government deprives its nation of about $2.50 a gallon in income that could be deployed to meet any number of social and infrastructural needs (including the long-neglected modernization of the oil industry itself); and it produces gridlock and pollution that tangibly compound the economic distress of a misguided pricing system. While such a manifest degree of subsidization is especially prevalent in oil-producing developing economies, the problem is more widespread. Consider India’s recurrent power blackouts where underpriced electricity robs investors and producers of the wherewithal and incentives to improve power generation and the grid.

The $480 billion ascribed to under-pricing is more solid than the estimate of implicit subsidies attributed to the exclusion, in energy prices, of various negative externalities associated with energy production and utilization. That second component of subsidies, estimated at $1.4 trillion, is based on a number of speculative and even heroic assumptions laid out in the body of the report and appendix materials.

In terms of energy categories, the comparison between subsidies from below-market pricing with those attributed to externalities is quite striking. For one thing, underpricing, as noted, is much more a feature of the developing world than of advanced countries. Externalities, on the other hand, are concentrated in advanced industrial countries. In terms of particular energy resources, coal is a relatively insignificant offender in the first category but, not surprisingly, a conspicuous contributor to the second category, as is clear from the accompanying table. (I should note that, in the case of electricity, externalities associated with fuel inputs, such as coal, are tabulated on lines for those fuels rather than electricity.)

Subsidies ascribed to:

Arguably, a precipitous removal of subsidies could invite political turmoil in a number of countries. Moreover, there are situations where equity demands attention to the regressive burden that some energy costs can impose on low-income households. But that ought not to feed a populist frenzy for cheap energy; more often than not, distributive justice is more effectively achieved through targeted income support than widespread subsidization of society at large. Indeed, the very proceeds (say, through oil royalty payments) to governments embracing sound energy and fiscal policies can finance such earmarked assistance to its needy citizens.

The IMF study is a an important wake-up call that the prevailing pattern and magnitude of energy subsidies is a major impediment to rational energy, environmental, and – not least – sound economic policy-making.

California’s Air Resources Board and Governor Jerry Brown approved a proposal to link California’s carbon market with Quebec’s, to allow for greater investment in low-carbon technologies, more flexibility for companies to trade carbon permits, and larger reductions in greenhouse gas emissions.

RFF’s Dallas Burtraw, Karen Palmer, Clayton Munnings, and Matt Woerman, along with Paige Weber from Yale University, recently introduced a framework to help policymakers who are working to link cap-and-trade markets. They note: “The incremental alignment of program elements—which we call ‘linking by degrees’—can capture benefits in program administration, build institutions and political support, and may influence the design of expected rules governing greenhouse gas emissions under the US Clean Air Act.“ They also apply the framework to California’s cap-and-trade program and the Regional Greenhouse Gas Initiative, finding that “the two markets are nearly ready to formally link.”

Eradicating Extreme Poverty

Last week, World Bank President Jim Yong Kim announced that, “The world can end extreme poverty by 2030.” He calls for continued sustainable growth in the developing world, and cites climate change as “a fundamental threat to economic development and the fight against poverty.”

In his Resources 2020 lecture at RFF, Nobel Laureate Joseph Stiglitz noted that “inequality ought to be a fundamental consideration when fashioning environmental policies.” He continued: “In democracies, the desperately poor tend to have less of an interest in pursuing policies designed to protect the environment, because their most important concern is doing whatever’s necessary to get out of the current situation. So societies with more inequality will get less support for good environmental policies.” Read an excerpt from the lecture here or watch the full video here.

Energy Tax Reform

The Obama administration is having bipartisan discussions on energy tax policy issues. Administration officials have said that maintaining the production tax credit for renewable energy is a priority, which they hope will be maintained in the tax code.

However, in new research, RFF Fellow Joshua Linn and Clayton Munnings examined five renewable electricity policies and found that the production tax credit “is the least cost-effective policy.” They suggest “[financing] the subsidy from a charge to consumers rather than out of general tax revenue,” to stabilize electricity prices, which can cause increased electricity consumption.

Map of Assessed Shale Gas in the United States, 2012
The U.S. Geological Survey has compiled a map of shale-gas assessments in the United States that were completed by 2012 as part of the National Assessment of Oil and Gas Project. Using a geology-based assessment methodology, the U.S. Geological Survey quantitatively estimated potential volumes of undiscovered gas within shale-gas assessment units. These shale-gas assessment units are mapped, and square-mile cells are shown to represent… — via US Geological Survey

Induced Seismicity and Hydraulic Fracturing for the Recovery of Hydrocarbons
A new study of hundreds of thousands of hydraulic fracturing (or “fracking”) operations has found that the process has only caused earth tremors that could be felt on the surface in three cases. Hydraulic fracturing is the method by which sedimentary rock is deliberately cracked to recover oil and gas, including shale gas. — via Marine and Petroleum Geology

U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes
As estimates for the amount of U.S. natural gas resources have grown, so have the prospects of rising U.S. natural gas exports. The United States is expected to go from a net importer of natural gas to a net exporter by 2020. Projects to export liquefied natural gas (LNG) by tanker ship have been proposed—cumulatively accounting for about 12.5% of current U.S. natural gas production—and are at varying stages of regulatory approval… — via Congressional Research Service

Earthquake Triggering and Large-scale Geologic Storage of Carbon Dioxide
Despite its enormous cost, large-scale carbon capture and storage (CCS) is considered a viable strategy for significantly reducing CO2 emissions associated with coal-based electrical power generation and other industrial sources of CO2 [Intergovernmental Panel on Climate Change (2005) IPCC Special Report on Carbon Dioxide Capture and Storage. Prepared by Working Group III of the Intergovernmental Panel on Climate Change… — via Proceedings of the National Academy of Sciences

Globalization, Climate Change, and Human Health
The global scale, interconnectedness, and economic intensity of contemporary human activity are historically unprecedented, as are many of the consequent environmental and social changes. These global changes fundamentally influence patterns of human health, international health care, and public health activities. They constitute… — via New England Journal of Medicine

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There are plenty of data on pipeline spills which can be used to examine this claim.  Looking at 35 years of data in Alberta collected by Alberta’s Energy and Resources Conservation Board from 1975 to 2010, there were 25,942 company-reported releases from pipelines. Of these, 9,011 released crude oil, diesel oil, oily sludge, synthetic crude, or oil crude bitumen.

Deciphering risk from these data is tricky. Spills are self-reported by the companies, and reporting requirements change, as might compliance with reporting. Also, the frequency of oil spills is a function of how much oil is being transported, something that I do not have data on. The average quantity of oil released per year was much lower in the period 1995-2009, which  has been driven by the advances in leak detection, emergency response, and inspection tools, but could also be partly driven by changes in reporting (see graph). For example, spills of less than a barrel were not reported before 1992, and so the drop in the average size of spills after 1992 could be driven by small spills now being included in the sample.

 Pipeline Spills in Alberta, 1975-2009 (ERCB)

Nonetheless, examining all the data on spills, including spills of less than a barrel is still useful to shed light on the reasons why pipeline releases occur.

The EPA calls any spill larger than 250 barrels a major spill. Taking the above graph but only including major spills also shows that the number of major spills greater than 250 barrels has been decreasing over time.

Pipeline Spills in Alberta Greater than 250 Barrels, 1975-2009 (ERCB)

However, considering that a spill of 1 barrel would not cause the damage seen in Arkansas, it is important to also focus on larger spills to get an idea of risk. The Arkansas spill is estimated to have been 10,000 barrels.  In the Albertan data there were 12 oil spills larger than 10,000 barrels. (The data I have end in mid-2010, but in Alberta there was a 28,000 barrel spill on First Nation land in 2011 and a 22,000 barrel spill in 2012.) So, do 14 spills of this size, over 37 years constitute “very isolated incidents”?

Formally examining these trends, beyond what can be done in a blog post, as well as including years post-2010, would be a worthy exercise.  Keystone XL would likely be better-engineered and built than most of the pipelines in this dataset, and leak detection has improved, However, it is important to consider pipeline integrity for decades to come—the Arkansas pipeline was 65 years old.   Therefore, for optimal planning, we should not dismiss incidents as “very isolated,” especially since there is still so much to be learned from the data.

Numerous organizations have run economic models to predict how the electricity sector will respond to MATS. The models try to answer questions such as how much coal capacity will retire and how much natural gas generation will ramp up. However, these studies have come to different conclusions about the impact of MATS.

A new RFF Discussion Paper seeks to break down the differences in the various models and isolate what leads some models to predict large impacts on the electricity sector and others to predict minimal changes. This is accomplished by running policy scenarios using a common modeling platform, RFF’s Haiku electricity sector model. The exercise highlights the power of modeling assumptions.

Overall, the RFF paper finds that models that include requirements and flexibilities similar to those in the final MATS rule predict fewer coal retirements than models that strayed farther from the rule’s requirements. For example, under MATS plants can meet an emission standard for hydrochloric acid (HCl) or, as an alternative, sulfur dioxide (SO2). Models that required plants to meet the SO2 standard, with no option to select the HCl standard, tended to find more coal retirements and more SO2 emissions reductions than models that included both compliance options.

Another factor driving the differences was the number of rules modeled at the same time. When MATS was modeled alongside other proposed EPA regulations, such as a future CO2 policy, the impacts on the electricity sector tended to be more severe. This distinction is important since some studies modeled numerous EPA policies at once.

MATS will certainly impact the electricity sector. New pollution controls are likely to come online, for example, and emissions, particularly those of mercury, are anticipated to come down. However, this new modeling exercise shows that MATS is unlikely to lead to the large-scale retirements in the coal fleet that some observers have feared.

Scholars in RFF’s Center for Energy Economics and Policy conducted the first survey-based, statistical analysis of experts from government agencies, industry, academia, and nongovernmental organizations to identify the priority environmental risks related to shale gas development. This infographic illustrates the 12 “consensus risk” pathways — those that survey respondents from all four expert groups most frequently identified as priorities for further regulatory or voluntary action.

Of the 12 consensus risk pathways:

• 7 involve potential risks to surface water quality,
• 2 involve potential risks to air quality,
• 2 involve potential risks to groundwater quality, and
• 1 is related to habitat disruption.

Click here to read the full Resources article.

In a recent report, we refer to authorization of allowance flows between two carbon markets as “formal linking.” We distinguish formal linking from “linking by degrees,” a process during which regulators incrementally align program elements between markets. For example, regulators from two markets participate in linking by degrees when they share protocols for a certain offset type or when one regulator replicates another regulator’s standards for measuring, reporting and verifying carbon emissions. We argue that linking by degrees can provide at least three categories of non-economic benefits, even if incremental alignment does not result in a formal link.

The first benefit is building greater political confidence. Market alignment signals cooperation and a common and joint effort to reduce carbon emissions. This signal might enable more aggressive mitigation targets and could convince other jurisdictions to introduce a price on carbon.

The process of linking by degrees also provides administrative benefits. Linking by degrees enhances opportunities for regulators to share best practices and learn from one another. Alignment, in addition, might simplify compliance for businesses covered by both carbon markets.

Lastly, the process of linking by degrees benefits states by boosting their influence in shaping national policy. In the contemporary climate, expected Clean Air Act rules for power plants require states to submit implementation plans to the Environmental Protection Agency (EPA) for approval. We anticipate states that have already incrementally aligned markets will earn greater deference from the EPA.

In our report, we apply the framework of linking by degrees to California’s cap-and-program and the Regional Greenhouse Gas Initiative (RGGI). We find that these two programs are already aligned in significant ways and that the two markets are nearly ready to formally link. Further research will apply this framework to international carbon markets.

Restoring a Degraded Gulf of Mexico: Wildlife and Wetlands Three Years After the Gulf Oil Disaster
This report gives a snapshot view of six wildlife species that depend on a healthy Gulf and the coastal wetlands that are critical to the Gulf’s food web. It describes different sources of restoration funding and provides initial suggestions as to how this funding can be used to improve the outlook for the species discussed in the report. — via National Wildlife Federation

A Fair Compromise to Break the Climate Impasse: A Major Economies Forum Approach to Emissions Reductions Budgeting
…We suggest that taking three manageable steps to a fair compromise will unlock progress…First, negotiate a core agreement between the 13 members in the MEF (including the EU-27), which accounts for 81.3 percent of all global emissions.This makes the negotiations feasible, where deals can be struck that would be impossible in the vast U.N. forum. — via Brookings Institution

The Critical Decade: Extreme Weather
A report released today by the Climate Commission says climate change has driven an increase in the occurrence and intensity of extreme weather events like floods, bushfires, droughts and hot days…Australia’s populous southeast is particularly vulnerable, it says, sparking calls from the report’s authors for governments, emergency services, businesses and individuals to begin planning for the predicted increase in extreme weather. — via Australian Climate Commission

Landscape Consequences of Natural Gas Extraction in Allegheny and Susquehanna Counties, Pennsylvania, 2004–2010
The combined effects of these two natural gas extraction methods [hydraulic fracturing and coalbed methane] create potentially serious patterns of disturbance on the landscape. This document quantifies the landscape changes and consequences of natural gas extraction for Allegheny County and Susquehanna County in Pennsylvania between 2004 and 2010. Patterns of landscape disturbance related to natural gas extraction activities…— via US Geological Survey

Energy Subsidy Reform: Lessons and Implications
Oil-and-gas interests, and their Republican allies, say the provisions are cost-recovery mechanisms and business deductions that other industries also claim.

In 2011, nations doled out roughly $480 billion of “pre-tax” incentives, which are “when consumers pay less than supply cost of energy,” Lipton explained. They are generally found in emerging economies, according to an IMF report released Wednesday. — via International Monetary Fund

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Image: Resources for the Future

In keeping with the theme for RFF’s 60th anniversary year, the latest issue of Resources magazine looks ahead to the next decade of economic policymaking. Check out features by RFF president Phil Sharp and others including:

Options for US Climate Policy
Pete Nelson and Kristin Hayes
With national cap-and-trade legislation off the table, RFF experts are focusing on three alternatives for reducing greenhouse gas emissions: the Clean Air Act, a carbon tax, and a clean energy standard.

Ensuring Competitiveness under a US Carbon Tax
Carolyn Fischer, Richard Morgenstern, and Nathan Richardson
Tax exemptions, industry rebates, and border tax adjustments can help protect the competitiveness of industries affected by a carbon tax, but they are not equally efficient at achieving economic and environmental goals.

Taxing Carbon: Potential Deficit and Emissions Reductions
Roberton C. Williams III
An innovative modeling approach shows that a US carbon tax could provide a large new source of federal revenue and achieve emissions reductions—but the costs rise dramatically over time with a stringent target.

The Institutional Blind Spot in Environmental Economics
Dallas Burtraw
Although economic tools aim to be efficient and cost-effective, environmental policymaking largely has favored regulation over market-based approaches. One reason may be that economists don’t fully consider how their prescriptions interact with existing federal, state, and local institutions.

To view all articles from this issue of Resources, visit our website or download the Resources app for iPad, iPhone, or Android.

A new initiative by the US Department of Energy is funding research and projects to improve clean energy products. Assistant Secretary of Energy David Danielson noted that one of the goals of the initiative is to improve the cost-competitiveness of these technologies, a move that would ultimately remove their dependence on subsidies.

RFF Research Director and Senior Fellow Margaret Walls was invited to discuss government financing for new energy technologies in a Wall Street Journal online forum, where she calls for the implementation of a price on carbon: “The most important first step to bring these technologies to market is not direct government financing but a carbon price. . . . As carbon-intensive fossil fuels become more expensive, private industry will . . . search for new low-cost alternatives. And as consumers demand more efficient products to lower their energy costs, industry will have incentives to provide them.” She also explains how a carbon tax could be implemented.

Royal Dutch Shell will spend $1 billion annually to explore China’s shale gas resources as part of a contract to begin developing shale gas in the country. Developing China’s large reserves could significantly help the country overcome its energy and environmental challenges.

In an interview with the Cheung Kong Graduate School of Business in China, RFF Fellow Anthony Liu, a visiting assistant professor of economics at the school, discussed these issues: “Shale gas will have two major macroeconomic impacts on China if it is developed to scale. First, it will lower the cost of energy. . . . Second, it will create new jobs.” He also noted that “a reduced reliance on coal and a greater reliance on natural gas would definitely improve air quality and would certainly reduce the carbon intensity of the economy.”

Water Management

A study of the Colorado River Basin shows water shortages in effect across the US Southwest as a result of climate change. Water conservation across sectors, reuse in cities, and watershed management have been suggested as possible mitigation actions.

Lynn Scarlett, RFF visiting scholar and co-director of RFF’s Center for the Management of Ecological Wealth, analyzes water governance in the United States, especially challenges that arise from multi-jurisdictional water systems. She suggests that meeting these water management challenges requires a mix of “new management tools that emphasize integrated and adaptable water management; filling in governance gaps with additional networking glue; and identifying misalignments of specific policy tools that deter coordination.” An interview with Lynn Scarlett on this issue is also available.