RFF ON THE ISSUES: State implementation of the Clean Air Act; The natural gas revolution

State Implementation of the Clean Air Act

The draft of a rule by the US Environmental Protection Agency (EPA) that would create strict new limits on power plant emissions has reached the White House. While critics have expressed concern about the rule’s effect on the coal industry, EPA Administrator Gina McCarthy says that it offers flexibility and recently noted that the agency is working “hand in hand” with the states on implementation of the regulation.

RFF’s Dallas Burtraw notes that flexibility and cooperation with the states are two key aspects for successful implementation of this regulation. Building on his research on reducing carbon emissions, he recently answered frequently asked questions about the costs, challenges, and advantages of regulating power plant emissions at the state level under the Clean Air Act. Video highlights and full text of the FAQs about state implementation of the Clean Air Act are available online, as part of RFF’s resource page on regulating carbon emissions under the Clean Air Act.

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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.

Planning For Fracking on the Barnett Shale: Urban Air Pollution, Improving Health Based Regulation, and the Role of Local Governments
A review by a University of Texas at Austin researcher highlights the rapid proliferation of gas industry operations in urban areas and questions whether state and federal air pollution regulatory programs are well designed to ensure health and safety. The review recommends increased government monitoring, health impact studies and regulation of air pollution. — via Virginia Environmental Law Journal

Trees, Trash, and Toxics: How Biomass Energy Has Become the New Coal
…this first-ever detailed analysis of the bioenergy industry reveals that the rebooted industry is still a major polluter. Comparison of permits from modern coal, biomass, and gas plants shows that a even the “cleanest” biomass plants can emit > 150% the nitrogen oxides, > 600% the volatile organic compounds, > 190% the particulate matter, and > 125% the carbon monoxide of a coal plant per megawatt-hour, although coal produces more sulfur dioxide (SO2 ). Emissions from a biomass plant exceed those from a natural gas plant… — via Partnership for Policy Integrity.

U.N. Intergovernmental Panel on Climate Change Working Group II Final Draft Report
…The U.N. Intergovernmental Panel on Climate Change said that climate change is already hurting the poor, wreaking havoc on the infrastructure of coastal cities, lowering crop yields, and endangering various plant and animal species.
But the Nobel Peace Prize-winning group said that climate change’s effects will grow more severe and that spending and planning are needed to guard against future costs, much as people buy insurance against a range of possible accidents or health problems. — via U.N. Intergovernmental Panel on Climate Change

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Identifying “Known Unknowns” in the Natural Gas Revolution

Last week, my colleagues and I released a new RFF report, The Natural NGI-coverGas Revolution: Critical Questions for a Sustainable Energy Future. At one point, I began referring to this document as the “Known Unknowns” report, in reference to a widely quoted Donald Rumsfeld speech. As the former secretary of defense noted, there are certain pieces of information that “we know we don’t know”—and those are what my coauthors and I have tried to identify for the broad world of natural gas development and use.

Our goal was extensive. We reviewed the literature and consulted experts in a range of different areas—from resource estimates, to demand drivers, to environmental risks and economic opportunities—to better understand what socioeconomic and policy questions researchers have already tried to answer. (Note the emphasis on socioeconomic and policy questions, areas that are the strengths of researchers at RFF; we largely chose not to explore technology questions, although there are many of importance.)

This search turned up a small number of relatively definitive answers (the known knowns, if you will), and many more uncertainties or remaining controversies. We sorted these into seven categories, which turned into chapters in the report: supply, demand, economic impacts, environmental impacts, climate impacts, regulatory and voluntary best practices, and international issues.

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Resources Magazine: Negotiating a Post-2020 Climate Agreement in a Mosaic World

As we approach the end game serious negotiations for a post-2020 international climate regime, Brian Flannery describes the difficult road ahead.

Architects of the 1997 Kyoto Protocol believed it would usher in a long-term, top-down process for mitigating climate change, with a growing set of nations taking on increasingly ambitious greenhouse gas emissions targets and carbon markets playing a central role. That has not happened.

Instead, the world has moved to a bottom-up approach, where nations take on self-determined obligations based on national priorities and circumstances—an approach that I characterize as a “mosaic world.” In the mosaic world, for many developed and developing nations, carbon markets play no role. Though it promises less, proceeding under a mosaic approach may ultimately accomplish more than insisting on a top-down approach, which runs the very real risk of reducing participation by many countries that account for significant emissions globally. Without their participation, ambitious goals will never be met.

Tension over these approaches are on display as nations commence serious negotiations to develop a post-2020 agreement to be concluded in Paris in late 2015, at the 21st meeting of the Conference of Parties (COP-21). Since the very visible failure to reach an agreement in Copenhagen in 2009 (COP-15), nations have grown increasingly frustrated and concerned over the viability of negotiations under the United Nations Framework Convention on Climate Change (UNFCCC). In part, this arises from a growing legacy of unmet expectations.

As the negotiations become increasingly complex, fundamental differences continue to grow and separate various coalitions of nations. Groups have yet to resolve central issues, including the following:

  • the magnitude of national emissions commitments, and whether they should put the world on track to limit warming to less than 2°C;
  • the means of implementation—particularly finance, but also technology and capacity building;
  • how the agreement will reflect differences between developed and developing nations based on common but differentiated responsibilities, equity, and historical responsibility; and
  • whether the ultimate agreement will be legally binding.

Given these differences and the realities of today’s mosaic world, progress in Paris may depend on whether nations can embrace bottom-up commitments in lieu of a more ambitious top-down, legally binding approach.

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RFF ON THE ISSUES: Exporting LNG; Local Impacts of Shale Gas; Returning Carbon Tax Revenue

Exporting LNG

Recently, several congressional committees have held hearings to review the benefits and implications of expediting exports of liquid natural gas (LNG). While industry has supported such proposals, environmental groups remain concerned about how increased gas use will contribute to more greenhouse gas emissions (especially methane).“Greenhouse gas emissions need to come down. But fighting exports of gas and oil is way down the list of actions that will be effective and economically sensible,” says RFF’s Alan Krupnick. In a recent blog post, he writes: “To the extent our exports make gas prices in Europe and Asia lower, that may enable more fuel substitution away from coal, lowering greenhouse gas emissions.” Read more commentary on LNG exports from RFF experts here, here, and here.

Local Impacts of Shale Gas

While discussions about natural gas exports have taken the national (and international) stage, local communities around the country continue to feel the direct effects (both positive and negative) of shale gas development. Some regions are experiencing economic booms, while others are eyeing potential risks. On April 10, RFF is hosting a seminar to illuminate the pros and cons of such impacts, including research on the boom-and-bust cycles, how impact fees are being used in local economies, effects on residential property values, and observed changes in truck traffic and accidents in local communities (infographic). Register for the seminar or watch on the web at www.rff.org/live.

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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. Check out this week’s highlights below:

Oil and Gas Wells and their Integrity: Implications for Shale and Unconventional Resource Exploitation
A small percentage of the shale gas sites drilled in the event of a UK fracking boom would probably contaminate the surrounding environment because of problems with wells, a new report has warned, adding that in some cases the damage could be exacerbated because the companies that drilled them will have gone out of business. — via Marine and Petroleum Geology

US Shale Gas and Tight Oil Industry Performance : Challenges and Opportunities
In just seven years, the US shale gas and tight oil revolution has created significant new challenges and opportunities and a new known-unknown that energy market players and analysts must learn to deal with in the years to come. Among all the data and evidence at hand, this comment focuses around the following pieces of industry data that capture a vast amount… — via Oxford Institute for Energy Studies

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RFF on the Issues: Climate Change Information; Effects of Fuel Efficiency Standards

Climate Change Information

The White House announced that it is collaborating with Google to gather and publish data on climate change, with the goal of helping communities prepare for changes in temperatures and water levels “as easily as they use Google maps to get driving directions.” The joint effort will also feature a high-resolution mapping initiative to track climate-related changes to sea levels.

RFF’s Molly Macauley notes that “the quantity and quality of our information will play a critical role in determining the effectiveness of public and private responses [to climate change].” However, in this Resources article, she writes that such information comes at a price, and outlines four principles for deciding if the information “delivers sufficient bang for the buck.”

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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. Check out this week’s highlights below:

Co-producing Wells as a Major Source of Methane Emissions: a Review of Recent Analysis
U.S. EPA’s estimate of this number is at least 100 times lower than what it should be, according to a white paper released yesterday by the Environmental Defense Fund (EDF). The white paper reviewed a series of recent studies that have tried to quantify methane emissions from wells that produce both natural gas and oil… — via Environmental Defense Fund

What We Know: the Reality, Risks and Response to Climate Change (AAAS Report)
…Despite “overwhelming evidence”, the AAAS said Americans had failed to appreciate the seriousness of the risks posed by climate change, and had yet to mobilise at a pace and scale needed to avoid a climate catastrophe. — via American Association for the Advancement of Science

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Research Questions for the Midterm CAFE Review: The Fuel Efficiency Gap

This is the second in a series of blog posts by RFF’s transportation team that will address some of the key research questions for the midterm CAFE review.

traffic jam

Source: iStockphoto

As the first post in this series described, US standards for passenger vehicle fuel economy and greenhouse gas emissions are slated to tighten steeply. By 2025, the greenhouse gas standards require a fleet-wide average that’s equivalent to about 54 miles per gallon. The goals of the standards are to reduce greenhouse gas emissions, improve energy security, and reduce consumers’ fuel costs. When the two regulatory agencies that administer the standards—the Environmental Protection Agency and the National Highway Traffic Safety Administration—estimated the costs and benefits of meeting the standards, the estimated value of fuel savings dominates the other benefits, accounting for about 80 percent of the expected benefits. Indeed, these savings outweigh the expected costs of the regulation by three to one.

With such large fuel savings, we would expect consumers to demand fuel-saving technologies and manufacturers to adopt them. But we don’t see this happening in the market place—a situation known as the fuel efficiency gap.

The literature trying to explain this gap is voluminous and varied, but a recent journal article and working paper stand out. Both argue that of all the explanations for the gap, consumer undervaluation of fuel economy benefits is not one of them. Each paper suggests that consumers are willing to pay close to, if perhaps slightly less than, $1 for $1 worth of expected fuel savings. These results are based on the effects of gasoline prices on actual consumer vehicle choices and on vehicle prices.

There are other possible explanations:

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Resources Magazine: Putting a Price on Carbon. Who Gets the Revenue?

Dallas BurtrawOne of the many questions governments must answer when setting a price on carbon is how to allocate the potentially very large revenues that a cap-and-trade or carbon tax program would generate. RFF Darius Gaskins Senior Fellow Dallas Burtraw argues that two perspectives are emerging based on property rights: one views the atmosphere as property of the government, the other as a common-pool resource shared by its citizens. Resources sat down with Burtraw to discuss how this choice affects the efficiency and fairness of a given carbon-pricing program, and what these consequences mean for the political economy and likelihood of climate policy.

Resources: One of the first and most notable cases of using incentives to manage pollution in the United States was the regulation of sulfur dioxide emissions through a cap-and-trade program under the Clean Air Act Amendments of 1990. In that case, the emissions allowances were given to firms based on their historical levels of pollution. You’ve pointed out that using the same strategy for greenhouse gas regulation could have some very important distributional implications.

Dallas Burtraw: The situation for carbon dioxide is very different than it was for sulfur dioxide in 1990, because carbon dioxide is ubiquitous through our economy. If we have a system that gives emissions allowances for free to firms in a competitive economy, we can expect them to forward those costs to consumers through a change in product prices, just in the same way they would a change in their cost for fuel or labor. So it puts industry in a situation of being able to charge consumers for something they themselves have received for free. The consequence can be the prospect for “windfall” profits—that is, changes in revenues that are greater than the changes in costs that the firms actually have to incur in order to reduce their emissions. This has occurred already in Europe.

Resources: So when we create property rights in the environment and acknowledge this common property resource, are we actually creating a source of wealth?

Burtraw: I would make the observation that the introduction of a price on carbon in the US economy would constitute the greatest creation of a federally enforced property right since the opening of the Great American West in the nineteenth century. The land obviously existed previously and was inhabited by Native Americans, just as our atmosphere exists already, and we all breathe it.

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