2014-04-23 00:00
Jan 03, 2014

Jan 03, 2014 8:00 am, Loews Philadelphia Hotel, Commonwealth Hall A1 
Agricultural & Applied Economics Association
The Groundwater-Energy Nexus (Q2)
PresidingKRISHNA PAUDEL (Louisiana State University)
Transboundary Allocation of Groundwater for Fracking under Threat of Salt Water Intrusion
KRISHNA PAUDEL (Louisiana State University)
BISWO POUDEL (Louisiana State University)
[Hide Abstract]
Natural gas production through hydraulic fracturing (specifically horizontal slickwater fracking) since 1998 has brought or is likely to bring economic development in many parts of the U.S. Examples include: Marcellus Shale in New York, Barnett Shale in Texas, Eagle Ford Shale in Texas, Haynesville Shale in Louisiana, Arkansas and Texas, Bakken Shale in North Dakota and Montana, Niobrara shale in the Great plains of U.S., and Utica shale in the northeastern part of the U.S. Hydraulic fracturing has been the subject of much controversy and discussion because of its impact on groundwater quality, groundwater quantity, environmental quality, and health. The impact of hydraulic fracturing has also been linked to human rights (UN Human Right Council) as it can cause both direct and indirect impacts on human lives through its environmental impact.
The Effects of Energy Prices on Groundwater Extraction in Agriculture in the High Plains Aquifer
C.-Y. CYNTHIA LIN (University of California-Davis)
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Worldwide, about 70 percent of water extracted or diverted for consumptive use goes to agriculture, but in many groundwater basins, this proportion can be as high as 95 to 99 percent. Thus, any investigation into the economics of groundwater must consider the agricultural industry. This paper focuses exclusively on the groundwater used for agriculture. Many of the world's most productive agricultural basins depend on groundwater and have experienced declines in water table levels. Increasing competition for water from cities and environmental needs, as well as concerns about future climate variability and more frequent droughts, have caused policy makers to declare "water crises" and look for ways to decrease the consumptive use of water. Rising energy prices have also posed a concern, as they are an important component of water extraction costs. In this paper we examine the effects of energy prices on groundwater extraction using an econometric model of a farmer's irrigation water pumping decision that accounts for both the intensive and extensive margins.
The Role of Energy Costs in Groundwater Pricing and Investments in Desalination and Wastewater Recycling
JAMES ROUMASSET (University of Hawaii)
CHRISTOPHER WADA (University of Hawaii)
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To meet the growing demand for freshwater, many regions have increased pumping of groundwater in recent years, resulting in declining groundwater levels worldwide. Induced technical change regarding groundwater substitutes such as desalination and wastewater recycling is a source of hope for limiting water scarcity. However, because these technologies are energy intensive, optimal implementation also depends on future energy price trends. We provide an operational model for the application to reverse-osmosis seawater desalination. With this foundation, we outline a research agenda for extending the framework to other groundwater substitutes and for adaptation to climate change. Keywords:Groundwater management, water-energy nexus, dynamic optimization JEL code:Q25
NICHOLAS BROZOVIC (University of Illinois)
DAVID ZILBERMAN (University of California-Berkeley)

Jan 03, 2014 10:15 am, Philadelphia Marriott, Grand Ballroom - Salon K 
Association of Environmental & Resource Economists
Automobiles, Fuel Markets and Energy Efficiency (Q4)
PresidingANTONIO BENTO (Cornell University)
Testing a Model of Consumer Vehicle Purchases
GLORIA HELFAND (US Environmental Protection Agency)
ARI KAHAN (US Environmental Protection Agency)
DAVID GREENE (Oak Ridge National Laboratory)
CHANGZHENG LIU (Oak Ridge National Laboratory)
MICHAEL SHELBY (US Environmental Protection Agency)
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Consumer vehicle choice models have been estimated and used for a wide variety of policy simulations. Infrequently, though, have predicted responses from these models been tested against actual outcomes. This paper tests a model developed for the U.S. Environmental Protection Agency that is intended to estimate the impacts of changes in vehicle prices and fuel economy. It is a nested logit with a representative consumer and 5 layers: the buy/no buy decision, passenger versus cargo versus ultra-prestige vehicle, vehicle classes, subdivision of those classes into standard and prestige vehicles, and then individual vehicles. It is calibrated to vehicle purchases in model year (MY) 2008. Vehicle changes between MY and 2010 are then used to make predictions, and those predictions are compared to actual outcomes in MY 2010. The research suggests that the model may predict better when its inputs are aggregated than when they are as disaggregated as possible, though further work is needed to assess the model’s predictive abilities.
The Unintended Consequences of Uncoordinated Regulation: Evidence from the Transportation Sector
KEVIN ROTH (University of California-Irvine)
[Hide Abstract]
This paper asks what the optimal choice of instrument is when other agencies are likely to employ complementary policies in an uncoordinated fashion. Equivalence of these policies requires full flexibility in setting standards for feebate rates, which is often not possible. Regulations, like CAFE standards and feebates, are often set for many years at a time by the National Highway Traffic Safety Administration (NHTSA).
The Impact of the Refiners' Discount Program on the South Korean Gasoline Market
DAE-WOOK KIM (Soongsil University)
JONG-HO KIM (Pukyong National University)
JUNJIE ZHANG (University of California-San Diego)
[Hide Abstract]
Our first empirical question asks how much refiners reduced their wholesale gasoline prices. Similar to some voluntary environmental programs (Khanna and Damon, 1999), the discount of- fered by the refiners was not out of self interests but rather under the pressure of the government. To avoid a harsher regulation on the gasoline market, the refiners participated in the program universally. Although the refiners claimed to offer the same amount of discount, the compliance could differ since there was no enforcement. In addition, refiners used different marketing strate- gies. The market leader SK offered direct cash back to consumers using credit card or membership card. The other refiners lowered their wholesale prices at the same amount. Therefore, we expect that the discount program had a heterogeneous effect on the wholesale gasoline prices because of differing compliance and discount strategies.
Evaluating the Cost-Effectiveness of Rebate Programs for Residential Energy Efficiency Retrofits
JOSEPH MAHER (University of Maryland)
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This paper is among the first cost-effectiveness evaluations of energy efficiency retrofits with household-level data. I use monthly residential electricity billing data, combined with data on observable characteristics of each residence, to assess nine separate retrofit rebate programs. The study takes place in Gainesville, Florida, and compares changes in energy use within a residence before and after an energy saving retrofit intervention (treatment group) with changes in energy use within a similar residence that did not receive improvements (control group). Results indicate that cost-effectiveness of retrofit rebate programs vary widely across retrofit types, and that engineering estimates of energy savings are resonably accurate.
SHANJUN LI (Cornell University)
ASHLEY LANGER (University of Arizona)
STEVE CICALA (University of Chicago)

Jan 03, 2014 2:30 pm, Pennsylvania Convention Center, 204-A 
American Economic Association
Energy, Environment, and Local Economic Spillovers (Q4)
PresidingDON FULLERTON (University of Illinois)
The Effects of Fracking on Welfare: Evidence from Property Values
JANET M. CURRIE (Princeton University)
JOHN DEUTCH (Massachusetts Institute of Technology)
MICHAEL GREENSTONE (Massachusetts Institute of Technology)
ALEXANDER BARTIK (Massachusetts Institute of Technology)
[Hide Abstract]
This paper uses detailed data from several states to determine the local impacts of recently developed hydraulic fracturing techniques (i.e., "fracking") to recover natural gas on infant health, property values, and local economic activity. We conduct the analysis with a new data file that contains the longitude and latitude of all fracked wells, the street address of all new mothers, the street address of houses and their values, and local measures of economic activity. These data will be merged with information on which households rely on well water that may potentially be contaminated through the fracking process and which ones rely on public water supplies that are cleaned in the normal process of water delivery.
Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America
HUNT ALLCOTT (New York University)
DANIEL KENISTON (Yale University)
[Hide Abstract]
The rise in oil and gas prices and drilling activity in the past decade has caused economists and policymakers to reconsider whether natural resource production benefits producer economies or instead creates a "Natural Resource Curse." We use confidential establishment-level data from the US Census of Manufactures and Longitudinal Business Database to estimate the effects of expansions and contractions of the oil and gas sector on growth since the early 1970s. Our approach combines cross-county variation in oil and gas supply with large time series variation in production activity. Oil and gas booms increase growth rates in producer counties by 60 to 80 percent relative to non-producer counties, and a necessary condition for the resource curse is satisfied: local wages increase by 0.3 to 0.5 percentage points per year during a boom. Nevertheless, manufacturing growth is positively associated with natural resource booms. Manufacturing employment and output both rise, while productivity does not, suggesting that at least in the rural counties we study, manufacturing firms benefit from increases in local demand.
Demand Shocks, Supply Chains, and Implications for Local Economies: Evidence from the Auto Industry
JAMES SALLEE (University of Chicago)
REED WALKER (University of California-Berkeley)
[Hide Abstract]
This paper explores the short-run implications of relative shifts in product demand for labor markets characterized by "million dollar plants". In doing so, we develop a new approach to quantifying and estimating demand spillovers in local labor markets by exploiting exogenous, plant-level changes in product demand and estimating the plant-specific impact on nearby and related economic activity. The empirical setting surrounds automotive industry which is one of the most heavily co-agglomerated industry groups in the United States. Parts suppliers tend to co-locate with production plants due to the "just-in-time", low-inventory production processes typical of the auto industry. The automotive industry also experiences large swings in demand that are driven by the interaction between the price of gasoline and the existing capital stock at a production plant (e.g. the type of car produced). When the price of gasoline goes up, relative demand shifts from low to high mile-per-gallon (MPG) vehicles and production responds. We use this plant-specific, relative shift in product demand as a source of identifying variation. We then use various measures of economic distance to examine localized production spillovers, either through the automotive supply chain and/or spillovers to non-tradable goods and services. We have three primary findings. First, we find that a 10% increase in gas price leads to a 4% relative difference in auto employment in high versus low MPG plants. Second, downstream production shocks propagate towards nearby upstream auto parts suppliers (in a relative sense). This allows us to estimate a short-run supply-chain multiplier for the auto industry: 1 job lost in auto production leads to 1.07 jobs lost in nearby auto suppliers. Third, short run shifts in production have large effects on local communities. We find evidence of demand spillovers into non-automotive sectors (e.g. non-tradable) and also increases in the local unemployment rate of a county.
Can State Level Renewable Portfolio Standards Reduce Emissions and Foster Local Economic Booms?
ANTONIO M. BENTO (Cornell University)
DANIEL KAFFINE (Colorado School of Mines)
TEEVRAT GARG (Cornell University)
[Hide Abstract]
Recently 29 states have adopted Renewable Portfolio Standards (RPS) that require a fraction of total electricity to be generated from renewable sources. Presumably RPS reduce GHG emissions, foster the extraction and use of renewables, and promote local economic "green" booms. Yet, knowledge of the effectiveness of RPS remains limited. We develop a simple analytical and numerical general equilibrium model with multiple jurisdictions and renewable technologies to evaluate the effectiveness of RPS. Our focus is on the impacts of the RPS on (1) the amount of renewables and fossil fuels used in electricity production, (2) GHG emissions, and (3) local booms from renewable rents. Each jurisdiction is endowed with different quantities of various renewables, and capital is mobile across jurisdictions. Earlier work that examined the effects of environmental mandates relied on a single jurisdiction/technology framework and emphasized two key channels of adjustment, an output effect and a substitution effect. In our context, the output effect corresponds to the decrease in capital used in fossil production, while the substitution effect corresponds to the increase in capital used in renewable production. With multiple jurisdictions and technologies two other important effects come in to play: a capital-mobility effect as capital moves across jurisdictions, and a technology-substitution effect as technology- specific standards induce capital movement between alternative renewable technologies. We highlight three key results. First, the output effect grows relative to the substitution effect as the pre-existing standard increases, implying larger emission reductions in states with high pre-existing standards. Second, we find that the capital-mobility effect can be positive or negative depending on the relative magnitudes of the output and substitution effects, enhancing or diminishing local economic booms from changes in rents to the renewable endowment. Third, the technology-substitution effect reduces the production from other renewable sources and limits overall emissions reductions and local resources booms.
NATHANIEL BAUM-SNOW (Brown University)
DAVID H. AUTOR (Massachusetts Institute of Technology)
DON FULLERTON (University of Illinois)

Jan 04, 2014

Jan 04, 2014 8:00 am, Philadelphia Marriott, Grand Ballroom - Salon C 
International Association for Energy Economics/National Association for Business Economics
The Energy Boom and the United States Economy (Q4) (Panel Discussion)
Panel ModeratorMINE YUCEL (Federal Reserve Bank of Dallas)
ADAM SIEMINSKI (Energy Information Administration) Outlook for U.S. Shale Oil and Gas
JOHN LARSON (IHS) The Effects of the Unconventional Energy Revolution on the U.S. Economy
ARTHUR BERMAN (Labyrinth Consulting Services, Inc.) Let's Be Honest About Shale Gas

Jan 04, 2014 12:30 pm, Philadelphia Marriott, Grand Ballroom - Salon C 
International Association for Energy Economics
Advances in Energy Economics Research (Q4)
PresidingKEVIN FORBES (Catholic University of America)
A Computable General Equilibrium Model of Energy Taxation with Endogenous Resource Supply and Flexible Substitution
ANDRE BARBE (Rice University)
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This paper constructs a new general equilibrium model of the United States economy designed to analyze energy tax policies. Existing models in the literature fall into two groups: general equilibrium models with exogenous energy resource supply and partial equilibrium models of the energy sector with endogenous resource supply. I combine the main advantages of these two strains of the literature by incorporating endogenous resource supply in a computable general equilibrium model with highly disaggregated and flexible industry cost and consumer expenditure functions. The new model is able to analyze the inefficiencies caused by energy taxation: production and consumption inefficiencies, inefficiencies related to resource rents, and those related to externalities. The model is then used to analyze the effects of numerous proposed changes to the taxation of fossil fuels in President Obama's 2014 budget, which would raise revenue by imposing additional taxes on the energy sector. This analysis reaches three main conclusions. First, the impact of the provisions in the budget proposal on the neutrality of the tax code is unclear. Some provisions move toward neutrality in taxation as advocated in the literature while others do not. The paper also analyzes relative levels of taxation and shows that, taking into account all forms of taxation rather than only income taxes, fossil fuel production is on average taxed more highly than other industries. Second, in comparison to a uniform tax increase that would raise the same amount of revenue, the proposal would have positive - and to some extent unexpected - effects on the US economy. The energy tax increases of the proposal lead to higher household welfare than would occur under a uniform capital tax increase but also would increase the production of fossil fuels, as general equilibrium effects increasing demand more than offset the negative effects of tax-reform-induced increases in the cost of capital in the energy industry. Third, considering general equilibrium effects and allowing for flexible substitution in both inputs and consumption goods significantly alter the predicted impact of the proposal and are thus necessary to accurately predict the effects of energy taxes on the energy industry and the economy. A model that neglects either of these two factors would underestimate the welfare gains from the proposal and not capture the net increase in fossil fuel production. In total, these results show that the budget proposal increases economic efficiency and that general equilibrium models with flexible substitution provide an improved model of energy taxation.
The Effectiveness of Renewable Portfolio Standards in Reducing Carbon Emissions in the United States Electricity Sector
R.J. BRIGGS (Pennsylvania State University)
SUMAN GAUTAM (Pennsylvania State University)
[Hide Abstract]
Do renewable portfolio standards (RPS) – a state level policy that requires utility companies to include a minimum percentage of total electricity sales from eligible renewable or "alternative" technologies – lower CO2 emissions? A major goal of RPS is to reduce carbon emissions, but to our knowledge no prior study quantifies this impact. We analyze how RPS policy affects carbon emissions and how this impact varies with RPS characteristics. We develop panel data for 48 states from 1997 to 2010 that integrates state-level annual data on RPS levels, CO2 emissions, electricity generation, electricity market restructuring, electricity price, fuel prices, and demographic characteristics. Since selection of RPS policies may be non-random, we use a two-step Heckit model to control for states' choice to adopt an RPS and the level of the RPS in each year. We use a contagion model to identify the first stage selection, where a state's decision to adopt RPS depends on the decision of "neighboring" states, its renewable potential and economic condition. From the second-stage, we calculate the RPS yearly targets. In the final stage of the three-part model, we use the selection-corrected estimates of RPS levels to estimate the impact of RPS on carbon emissions. The OLS results show RPS yearly targets are statistically significant in reducing CO2 per MWh, but the selection-corrected regression results fail to find the significance of RPS targets in affecting carbon emission efficiency. Analysis suggests that a state's decision to adopt its RPS policy is influenced by factors such as neighboring states' RPS, share of fossil generation, and electricity price. This study's findings do not claim that RPS is not effective in reducing CO2 per MWh, rather we conclude that that the underlying characteristics of states enacting RPS policies have more to do with success.
The Long-Run Macroeconomic Impacts of Fuel Subsidies
MICHAEL PLANTE (Federal Reserve Bank of Dallas)
[Hide Abstract]
International Energy Agency (IEA) and the International Monetary Fund (IMF) show these subsidies are often quite costly for the governments that put them in place. Analysis on the macroeconomic implications of fuel subsidies has been scant, however. In this paper I use a small open economy model to analyze how fuel subsidies impact the long-run levels of macroeconomic aggregates such as consumption, labor supply, and aggregate welfare. The case of a net oil importer and a net oil exporter are considered. For both cases the analysis takes into account that these subsidies must be financed by the government. Net oil importers finance the subsidy through some method of taxation while net exporters do so by selling domestically produced oil below its world price. The results show that long-run aggregate welfare is reduced by these subsidies. The welfare losses are large once the cost of the subsidy exceeds 1 or 2 percent of GDP. This result holds regardless of whether a country is a net oil importer or exporter. The distortions in relative prices introduced by the subsidy create most of the welfare losses. How the subsidy is financed is of secondary importance to the size of the losses. Replacing the subsidies with lump-sum transfers of equal value is a significantly better policy option as this avoids the distortions in relative prices introduced by the subsidy. Behind the welfare results are the actual distortions introduced by the subsidy. The results show that fuel subsidies can lead to crowding out of non-oil consumption, inefficient inter-sectoral allocations of labor, and other distortions in macroeconomic variables. The exact nature of these distortions is sensitive to the type of tax used to finance the subsidy. This is because distortionary taxes introduce additional changes in people's decisions on how much to work and consume.
The Effects of Oil and Gas Fiscal Regimes on Exploration and Production Decisions
TIMOTHY FITZGERALD (Montana State University)
ANDREW STOCKING (Congressional Budget Office)
[Hide Abstract]
Long run energy supply depends on drilling new wells and continuing to produce old ones. Tax policy and production contracts are critical to both the quantity produced from existing oil and gas wells and the drilling of new wells. The details surrounding the system of auctions, rentals, taxes, and royalties (the fiscal regime) has important implications for government revenue as well as domestic oil and gas production. This study exploits variation in state and federal fiscal regimes to compare leasing and production outcomes on public land. This comparison allows for new estimates of the sensitivity of exploration and production to fiscal changes. Changes in the fiscal terms of new leases over time offer within regime variation. Such changes have been the basis of past empirical tests. We have the ability to test competing hypotheses by the similar nature of oil and gas resources on state and federal lands within counties at the same time. This provides variation between fiscal regimes. Comparing leasing and production outcomes between federal and state mineral leasing programs provides rich variation between contractual terms. Using a unique dataset that allows us to link production data to the lease acquisition, exploration, and termination data, we conduct an empirical study. We examine data from federal onshore leases and state leases in Kansas, Montana, and North Dakota. Preliminary results are that federal and state lease terms do not influence decisions about how much oil or gas to produce from a lease, conditional on positive production from existing wells and not increasing the number of wells on that lease. Initial evidence suggests that leases with lower royalty rates or less onerous environmental regulations attract higher bonus bids. So the fiscal regime affects the extensive margin and the long-term supply as opposed to immediate supply from the intensive margin.
IMAN NASSERI (University of Hawaii-Manoa)
CARLO ANDREA BOLLINO (Università di Perugia)
TED TEMZELIDES (Rice University)
CHARLES MASON (University of Wyoming)

Jan 04, 2014 2:30 pm, Pennsylvania Convention Center, 103-A 
American Economic Association
Firm Behavior, Standards, and the Provision of Energy Efficiency (Q4)
PresidingROBERT STAVINS (Harvard University)
Imperfect Information, Nudges, and Inventory Decisions: Evidence from a Field Experiment on the Adoption of Energy Efficient Durables
HUNT ALLCOTT (New York University)
RICHARD SWEENEY (Harvard University)
[Hide Abstract]
Imperfect information about energy costs is one potential explanation for why some consumers do not purchase energy efficient durables, and this has motivated information provision mandates such as fuel economy labels and "Yellow Tags" on home appliances. We partner with the water heater division of a large nationwide retailer of household energy using durables, where the market share of Energy Star appliances is only about five percent. We implement a field experiment that randomizes hard information on energy costs, large customer rebates, and incentives for sales associates who sell Energy Star appliances. We calibrate a demand system by combining the field experiment with observed purchase and inventory data and additional microdata from follow-up surveys with a subsample of customers. We show that the largest barrier to adoption of energy efficient durables in this context is not hard information on energy costs. Instead, the firm's inventory and stocking decisions, combined with subtle nudges provided by the sales associates, have large impacts compared to customer rebates and hard information.
The Perverse Consequence of Energy Efficiency Standards
KOICHIRO ITO (Stanford University)
JAMES SALLEE (University of Chicago)
[Hide Abstract]
This paper provides empirical evidence that energy efficiency standards can have an adverse effect on energy efficiency. Regulators in many counties recently implemented energy efficiency standards that vary by the size of products. For example, the fuel economy standards in the US, Japan, Korea, and China have different standards for different size of vehicles. First, we provide a simple model of automakers' decisions under such regulation. Automakers can meet the standard either by actually improving the efficiency of vehicles or by increasing the size of vehicles to have less stringent regulation. Second, we exploit the nonlinear schedules of Japanese fuel economy standards to test empirical predictions. We find significant bunching of cars at the kink points of the nonlinear schedules, which suggests that significant numbers of cars become heavier due to the regulation. Because automakers meet the efficiency targets by increasing the weights of many vehicles, the overall energy efficiency becomes worse, although automakers appear to meet the targets set by regulators. Finally, we provide the efficiency cost of this regulation compared to the first best scenario with carbon pricing.
Do Fuel Economy Standards Reduce Automobile Safety? Examining Automaker Choices in the Distribution of Vehicle Attributes
ANTONIO M. BENTO (Cornell University)
KEVIN ROTH (Cornell University)
[Hide Abstract]
With the latest round of 2017-2025 Corporate Average Fuel Economy (CAFE) standards, the United States is committed to using standards as the primary policy instrument to reduce oil consumption and emissions. Yet standards are controversial, in part due to the possibility that automakers may down-weight vehicles in order to meet the standards, potentially leading to increased automobile fatalities and injuries. The relationship between fuel economy standards, automaker attribute choices, and fatalities depends on both the automaker response to fuel economy standards across an entire vehicle fleet and how changes to the distribution of attributes in the fleet translate to fatalities and injuries. This study examines how historical changes in CAFE standards have influenced product attribute choices across the entire vehicle line-up, from the promulgation of CAFE standards in 1978 to the present. We bring together comprehensive data on vehicle attributes and sales for all major automakers selling in the U.S. We examine the impact of changes in fuel economy on the quantiles of the unconditional distribution of weight using a regression of the recentered influence function of the unconditional quantile on the explanatory variables. The results are used to simulate how the distribution of weight in the vehicle fleet would change with tightened fuel economy standards. We then perform a Monte Carlo analysis to examine how fatalities and injuries would change based on the change in the distribution of the fleet. We find clear evidence that automakers did not down-weight the entire product line-up in response to more tightly binding fuel economy standards, but rather focus on smaller to mid-sized vehicles. Surprisingly, the increase in the weight dispersion of the fleet is offset by an overall downweighting, so the number of fatalities and injuries only modestly increases. This result highlights the complex consequences of fuel economy standard regulation.
Bunching With the Stars: How Firms Respond to Product Certification
SEBASTIEN HOUDE (University of Maryland)
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This paper first shows that firms respond strategically to ENERGY STAR, a voluntary certification program for energy efficient products. In the US refrigerator market, firms offer products that bunch exclusively at the minimum and ENERGY STAR standards. Firms also charge higher markups on certified models on the order of 1 to 5 percentage points. The second part of this paper performs a structural estimation of an oligopoly model, and simulates firms' product lines and pricing decisions under certification, and various other policies. Compared to a Pigouvian tax, a certification performs surprisingly well from the standpoint of economic efficiency. The presence of imperfect competition, consumer heterogeneity, and firms' ability to alter the product mix explain this result. Without certification, firms have more incentives to distort energy efficiency to screen consumers--a separating equilibrium with low and high energy efficient products is more likely to prevail. The ENERGY STAR certification favors a pooling equilibrium with products that just meet the certification requirement. For the demand parameters estimated, this pooling equilibrium delivers greater benefits to consumers, on average. Consumers are better off with a choice set that is less differentiated, but offers energy efficiency above the minimum standard. Profits are also higher when the certification is in effect. Firms can extract more consumer surplus due to consumers' high willingness to pay for the ENERGY STAR label.
CAROLYN FISCHER (Resources for the Future)
ASHLEY LANGER (University of Michigan)
MAR REGUANT (Stanford University)
ERICH MUEHLEGGER (Harvard University)

Jan 05, 2014

Jan 05, 2014 1:00 pm, Philadelphia Marriott, Meeting Room 307 
American Economic Association
Energy in the Developing World (Q4)
PresidingMEREDITH FOWLIE (University of California-Berkeley)
Powering Up China: The Drivers of Residential Energy Consumption
MAXIMILIAN AUFFHAMMER (University of California-Berkeley)
CATHERINE WOLFRAM (University of California-Berkeley)
[Hide Abstract]
Since 2000, energy demand in China has grown by more than 10% per year on average. China surpassed the U.S. in terms of greenhouse gas emissions in 2006 and in terms of total quads of energy consumed in 2009. It today emits more CO2 from coal alone than the US does overall. Forecasts of China's energy growth vary significantly. At a very conservative 3% growth rate, China would account for 25% of global energy demand by 2035. China's emissions have had a relatively steady share of 72% from coal over the past 50 years, so, without dramatic changes to its energy production, greenhouse gas emissions are likely to grow as well. Given the importance of China's energy consuming sectors for climate change and world energy markets, there is surprising little research on energy consumption patterns in China at a subnational and sector level. It is crucial to understand the drivers of energy consumption in order to improve forecasts. Also, given the level of central planning in the country, a first-order question is how well neoclassical models of household consumption apply to China. In this paper, we focus on provincial residential energy and electricity consumption and investigate how income growth, particularly among households close to the bottom of the income distribution, affects appliance adoption rates as well as total residential electricity consumption. We combine detailed provincelevel data, reported separately for rural and urban households, on appliance saturation levels and total residential electricity consumption with similar data on income distributions. In spite of the tremendous decline in poverty, China's poverty alleviation has been uneven, so we have rich variation in changes in income distributions across provinces. We will use cross-province variation to investigate the relationship between poverty alleviation and growth in residential energy consumption.
The Economic Cost of Global Fuel Subsidies
LUCAS DAVIS (University of California-Berkeley)
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By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline assumptions about supply and demand elasticities, the total annual deadweight loss worldwide is $44 billion. Incorporating external costs increases the economic costs substantially.
Are Power Plants in India Less Efficient than Power Plants in the United States?
RON H.S. CHAN (University of Maryland)
MAUREEN CROPPER (University of Maryland)
KABIR MALIK (University of Maryland)
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India's coal-fired generating capacity more than doubled between 1990 and 2010 and currently accounts for 70% of electricity produced. Despite this, thermal efficiency at state-owned coal-fired power plants in India is significantly lower than at plants in the US. When matched on age, vintage, capacity and load factor, we find that heat input per kWh was 6-7% higher at Indian plants between 1997 and 2009. This can only partly be explained by the lower heat content of Indian coal. Restructuring of the electric utility sector in the US improved thermal efficiency slightly at investor-owned plants; however, electricity sector restructuring in India has not yet improved thermal efficiency at state-owned coal-fired power plants.
SHANJUN LI (Cornell University)
GILBERT METCALF (Tufts University)
JIM BUSHNELL (University of California-Davis)