This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.

Remote Sensing of Fugitive Methane Emissions from Oil and Gas Production in North American Tight Geologic Formations
[Energy Guardian] Some ten percent of natural gas produced in drilling fields like those in the Bakken and Eagle Ford shale – most of which is methane — leaks into the atmosphere, according to a study published in the journal Earth’s Future, E&E reports.

[Abstract] In the past decade, there has been a massive growth in the horizontal drilling and hydraulic fracturing of shale gas and tight oil reservoirs to exploit formerly inaccessible or unprofitable energy resources in rock formations with low permeability. In North America, these unconventional domestic sources of natural gas and oil provide an opportunity to achieve energy self-sufficiency and to reduce greenhouse gas emissions when displacing coal as a source of energy in power plants. However, fugitive methane emissions in the production process may counter the benefit over coal with respect to climate change and therefore need to be well quantified. Here we demonstrate that positive methane anomalies associated with the oil and gas industries can be detected from space and that corresponding regional emissions can be constrained using satellite observations. – via Earth’s Future

Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom
[]  …The report examines EIA’s forecasts for 12 shale plays that together cover 82% of tight oil (tight oil refers to oil recovered from shale formations, not to be confused with oil shale) and 88% of shale gas production. Basically, Post Carbon finds the same “extremely optimistic” outlook at work. Although the report predicts fairly robust activity in the near term, it predicts that tight oil will be far lower than the EIA predicts over its 2040 timeline, absent the discovery of significant new plays. – via Post Carbon Insitute

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Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies

Pages from RFF-DP-14-38In the Canada–Renewable Energy/Feed-In Tariff case of 2013, the European Union (EU) and Japan brought a case to the World Trade Organization (WTO) against Canada, questioning the validity of Ontario’s decision to combine a generous feed-in tariff (FIT) with a local content requirement (LCR) promoting the growth of renewable energy-related manufacturing. Under this LCR, the minimum required domestic content for large wind installations was set at 50 percent and the minimum for solar voltaic installations was 60 percent—requirements that the European Union and Japan saw as institutionalized domestic content discrimination in violation of WTO policies. In a new RFF discussion paper with Steve Charnovitzof the George Washington University Law School, we summarize the legal arguments of the case, compare and contrast them with the economics of renewable energy policies, and examine the Appellate Body’s findings, highlighting a number of important implications of the Appellate Body’s reasoning.

The European Union and Japan soundly won their case against Canada when it was first brought before the WTO panel. The complainants argued that by enforcing a minimum required domestic content level, Ontario was violating WTO provisions on three separate counts: Read More

A Look at How the NFIP Differs from a Private Insurance Company

CoverFlood insurance in the United States is offered through the federal National Flood Insurance Program (NFIP). The 2005 hurricane season sent the program massively into debt to the US Treasury. As the deficit grew, Congress focused its attention on the program’s pricing policies. One focus was on the roughly 20 percent of policyholders who pay discounted premiums because their properties were built before the land was mapped as a high flood hazard area. Attention was also focused on whether the premium revenue collected from NFIP policyholders would be sufficient to pay future claims. Rate changes became the subject of congressional reform in 2012 and again in 2014.

Throughout these discussions, private sector pricing, often used interchangeably with the notion of actuarial pricing, has been used as a benchmark for NFIP rates. In addition, congressional legislation calls on the Federal Emergency Management Agency to report on how its premiums compare with what a private insurer might charge. In a new discussion paper, “Pricing Flood Insurance: How and Why the NFIP Differs from a Private Insurance Company,” we explain why, within constraints set by law, the NFIP may currently employ actuarially sound pricing principles. At the same time, because of restrictions on its pricing and operations, the NFIP is not collecting enough premium revenue to cover payouts over the long run, which would not occur with a private insurance company and creates a fiscally unsound program. Indeed, the NFIP is unlikely to be able to recover from its current debt, which now stands at roughly $24 billion. Read More

RFF on the Issues: State energy efficiency; Ending the oil export ban

State Energy Efficiency

The American Council for an Energy-Efficient Economy has released its 2014 scorecard evaluating and ranking state energy efficiency, concluding that states saved a total of 24 million megawatt hours of power in the past year. The scorecard noted that states are “truly at the forefront of energy efficiency policy in the US,” with state investments in such programs increasing from $2.5 billion to $7.5 billion per year over the past 8 years.

Register now for an upcoming webinar co-hosted by RFF and the Electric Power Research Institute on the role of state-based energy efficiency in EPA’s proposed Clean Power Plan. This topic is also discussed in the fourth installment of RFF’s Expert Forum on the Clean Power Plan, where participants gauge options for states to improve energy efficiency.

Ending the Oil Export Ban

A new report by the US Government Accountability Office (GAO) suggests that ending the country’s ban on crude oil exports would lower consumer gas prices and support economic growth “with implications for employment, investment, public revenue, and trade.” The report, which was based on a review of studies pertaining to the ban, also noted that eliminating the ban would likely increase greenhouse gas emissions as well as the risk of spills during the transportation of crude.

RFF’s Alan Krupnick and Stephen Brown from the University of Nevada, Las Vegas, comment on the GAO’s review of export ban studies—one of which was published by RFF—in a new blog post. They write: “The GAO study provides a service by carefully comparing the four studies … [then] goes beyond all of these studies by considering the implications of lifting the ban on exporting crude oil from the US strategic petroleum reserve (SPR). We agree that the SPR should be rethought.”


This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.

Ozone Air Quality Standards: EPA’s 2015 Revision
[Energy Guardian]  The nonpartisan Congressional Research Service has quietly given some advice to lawmakers: Don’t believe the most dire warnings about the costs of the Obama administration’s upcoming rule on allowable levels of smog-producing ozone. In an Oct. 3 report on the status of the planned ozone proposal by the Environmental Protection Agency, CRS said annual costs likely would run into the billions of dollars. – via Congressional Research Service

EPA Study: Negligible Benefits to Soybean Production from Pesticide Linked to Bee Deaths
[Salon] The EPA has yet to do much about neonicotinoids, the class of pesticides implicated in the United States’ mass bee die-offs, but it has started looking into them. And the results of an extensive review into one such pesticide, commonly applied to soybean seeds, presents another compelling reason to ban them: using them, the agency found, isn’t any better than using no pesticides at all. – via US Environmental Protection Agency

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Crediting Early Action under EPA’s Clean Power Plan

This is the seventh 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.

RFF asks the experts: Should EPA credit early action taken by the states? If so, how?

A key question when developing any new climate policy is how to treat existing policies that already reduce emissions. In EPA’s Clean Power Plan, the agency proposes that actions taken by states since June 2, 2014 could count toward compliance efforts—which are slated to be measured from 2020. However, some feel that EPA is penalizing early adopters by not recognizing actions taken before this date. If EPA counted all actions taken by states before 2020 toward compliance, early adopters would likely be more fully rewarded; but such an approach might also award credit to actions that would have happened regardless of the Clean Power Plan and consequently decrease the emissions reductions achieved under the plan.

frank-prager“Unquestionably, the proposed Clean Power Plan would establish more aggressive targets in states that committed early to clean energy leadership. This is bad policy on every level.”
—Frank Prager, Vice President, Policy and Strategy, Xcel Energy (See full response.)




megan-ceronsky“There are, of course, highly compelling reasons to begin to take action now to reduce carbon pollution. . . . These are simply common sense actions, with tremendous co-benefits—and the existence of an initial compliance date for the long-awaited carbon pollution standards does not alter that common sense.”
—Megan Ceronsky, Director of Regulatory Policy and Senior Attorney, Climate and Air Program, Environmental Defense Fund (See full response.)


vince-hellwig“Michigan does not agree with this proposed cutoff date and instead recommends adopting EPA’s proposed option of recognizing emissions reductions that existing state requirements, programs, and measures have achieved starting from the end of 2005.”
—G. Vinson Hellwig, Senior Policy Advisor, Michigan Department of Environmental Quality (See full response.)


The GAO Report: Competition of Oil Export Ban Studies

Today, the U.S. Government Accountability Office (GAO) released a report that reviews four studies about lifting the ban on U.S. crude oil exports—those by RFF, ICF International and EnSys Energy, IHS Global Insights, and NERA.  According to the GAO’s summary, these studies estimate that U.S. crude oil prices would increase by about $2 to $8 per barrel—bringing them closer to international prices. At the same time, the gains in U.S. crude oil prices would boost world supplies of crude oil and reduce U.S. prices for gasoline, diesel, and other consumer fuels (which follow international prices).

According to the RFF study, lifting the ban on U.S. crude oil exports will allow crude oil prices in the Midwest to rise to international levels, which will stimulate Midwestern and Canadian crude oil production.  In addition, lifting the ban will improve the efficiency of international refinery operations by allowing the lighter crude oil produced in the United States to go to foreign refineries and the heavier crude oil produced abroad to come to U.S. refineries (which are better equipped to handle the heavier crude).  The increased production of crude oil and the improved efficiency in refineries will cause prices for refined products to fall.

Even without an improved refinery efficiency, the increased production of crude oil in the Midwest and Canada will mean that prices for refined products will fall, but just by not as much.

The GAO study provides a service by carefully comparing the four studies and showing that they basically reach the same conclusions using very different models.  Since those four were completed, several other studies of lifting the ban on U.S. oil exports have been done, such as those by Brookings and Aspen Institute (the latter focusing only on the economic effects).  Those studies come to similar conclusions, as well.

The GAO report goes beyond all of these studies by considering the implications of lifting the ban on exporting crude oil from the U.S. strategic petroleum reserve (SPR).

We agree that the SPR should be rethought.  We would like to see discussion not only of the size of the reserve and other design issues, but also of the meaning of the reserve given the greater integration of North American energy markets that we expect in the future, especially in light of recent Mexican energy reforms.

RFF on the Issues: Natural gas emissions; Renewable energy in EPA’s Clean Power Plan

Natural Gas Emissions

A new study published online this week in Nature finds that more abundant supplies of lower-cost natural gas in the future would not only displace higher-emitting coal but would also displace lower-emitting renewable and nuclear technologies. It concluded that without additional policies “emissions of heat-trapping gases … would not decline worldwide and could possibly go up” with increased use of natural gas.

RFF’s Brian Flannery, who co-authored the study with an international team of researchers, explains that while many hoped “that the recent US natural gas boom could help slow climate change,” it appears not to be the case. However, he notes that the recent shale gas boom has resulted in various “benefits related to the economy, jobs, energy security, and local air pollution,” which should not be ignored.

Renewable Energy in EPA’s Clean Power Plan

The Union of Concerned Scientists (UCS) recently published a report suggesting that EPA’s proposed Clean Power Plan “could deliver much deeper reductions in emissions” by including more opportunities to take advantage of renewable energy. It recommends a number of alterations to the plan that UCS says would “nearly double the amount of cost-effective renewable energy in [its] state targets.”

As part of RFF’s Expert Forum on the EPA’s Clean Power Plan, UCS Senior Energy Analyst Jeremy Richardson weighs in on EPA’s assumptions about the deployment of renewable energy in its proposal. Richardson describes six ways EPA could strengthen its renewables-based building block, including “factoring in renewable energy growth between 2012 and 2017” and “removing (or relaxing) artificial limits on growth rates.” Experts from the Environmental Defense Fund and Pacific Gas & Electric also provide their views on this issue in RFF’s forum.


Cap and Trade in China: How Might It Work?

CoverChina plans to start a nationwide cap-and-trade market in 2016. But can China, whose economy still contains many nonmarket features, properly design and implement a fundamentally market-based policy? In our new RFF discussion paper, my coauthors (RFF’s Richard Morgenstern, Zhongmin Wang, and Xu Liu) and I attempt to answer this question by examining cap-and-trade pilot programs in Shanghai, Shenzhen, and Guangdong that have each operated in China for over a year.

We find that some designs in the pilots represent a deft tailoring of cap and trade to China’s unique political economy. For example, most cap-and-trade designs outside of China require electricity producers to retire allowances and pass allowance costs through to electricity consumers in the form of higher prices; this pass-through ensures that the whole electricity sector (producers and consumers) faces prices that reflect the cost of carbon. In China, however, the government heavily regulates electricity prices and rarely allows those prices to increase—which virtually precludes the pass through of allowance costs. This constraint threatens to keep a carbon price signal from reaching electricity consumers, potentially leaving low-cost abatement opportunities on the table. Read More

This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.

Power Plants Are Not Built on Spec: 2014 Update
[Fierce EnergyJust 2.4 percent, at the most, of generation capacity constructed in 2013 was developed solely for sale into organized electricity markets, according to a report released by the American Public Power Association (APPA).  In 2013, almost all new generation capacity was supported by long-term power purchase agreements or ownership, and only 6 percent of all capacity constructed that year was built within the footprints of one of the regional transmission organizations (RTO) with mandatory capacity markets, the report, “Power Plants Are Not Built on Spec: 2014 Update,” says. – via American Public Power Association

Potential Impacts of the EPA Clean Power Plan
[The Hill] A study commissioned by the coal industry and other business groups found that the Environmental Protection Agency’s (EPA) carbon rule for power plants could cost at least $366 billion. The analysis, written by Nera Economic Consulting, said that people in 43 states would see double-digit percentage increases in their electricity bills, with at least 20 percent increases in 14 states. Meanwhile, the carbon dioxide reductions would only limit global warming by 0.02 degrees and sea level rises by 0.01 inch, researchers said… – via NERA Economic Consulting

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