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Optimizing the Scale of Markets for Water Quality Trading

Allowing polluters to buy, sell or trade water-quality credits could significantly reduce pollution in river basins and estuaries faster and at a lower cost than requiring facilities to meet compliance costs on their own, a new Duke University led study finds. The scale and type of the trading programs, though critical, may matter less than just getting them started. The analysis in the journal Water Resources Research shows that water-quality trading of any kind can significantly lower the costs of achieving Clean Water Act goals.

Author(s): Martin Doyle, Lauren Patterson, Yanyou Chen, Kurt Schnier, and Andrew Yates

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Science

Water

Ecosystem Services

Environmental Economics

National

Journal Articles

Terminating Links between Emission Trading Programs

Links between emission trading programs are not immutable, as highlighted by New Jersey's exit from the Regional Greenhouse Gas Initiative. This raises the question of what to do with existing permits that are banked for future use—choices that have consequences for market behavior in advance of, or upon speculation about, delinking. We consider two delinking policies. One differentiates banked permits by origin, the other treats banked permits the same. We describe the price behavior and relative cost-effectiveness of each policy. Treating permits differently generally leads to higher costs, and may lead to price divergence, even with only speculation about delinking.

Author(s): William Pizer and Andrew Yates

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Climate & Energy

Environmental Economics

Climate Change Policy

Energy Sector

National

Working Papers

Regulating Existing Power Plants under the Clean Air Act: Present and Future Consequences of Key Design Choices

In June 2014, the EPA released its proposal for rules to regulate carbon dioxide emissions from existing fossil fuel power plants, triggering considerable debate on the proposal’s environmental and economic consequences and on alternatives highlighted by the proposal and by other stakeholders. One question not addressed by this debate is this: What if the EPA regulations turn out to be inadequate to address future mitigation goals? That is, what will the landscape for future policies look like if these regulations turn out to be just an interim measure? This analysis explores the long-term consequences of several key regulatory design choices, including mass-based versus rate-based standards, tradable versus non-tradable standards, and differentiated versus single standards. It finds that these consequences may be significant: differentiated standards lead to relatively greater investment in coal retrofits; non-tradable standards lead to relatively greater retirement of coal capacity. It may be the case that key policy choices entail one set of tradeoffs if proposed EPA rules are viewed as relatively permanent and final and another set of tradeoffs if the rules are viewed as an interim solution.

Authors: Brian C. Murray, William A. Pizer, and Martin Ross

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Environmental Economics

Climate Change Policy

Energy Sector

Modeling

Working Papers

Mangrove Ecosystem Services Valuation: State of the Literature

A growing body of literature provides estimates of ecosystem services values derived from mangroves. If this literature is to be useful in decision making, it must have a solid foundation of value estimates. This paper identifies gaps in data and knowledge regarding mangrove ecosystem services valuations and recommends ways that future research could advance understanding of mangrove ecology, ecosystem services valuation, and conservation. 

Authors: Tibor Vegh, Megan Jungwiwattanaporn, Linwood Pendleton, and Brian Murray

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Oceans & Coasts

Marine Ecosystem Services

Ecosystem Services

Marine

Environmental Economics

Working Papers

Synthesis and Review: Advancing Agricultural Greenhouse Gas Quantification

Reducing emissions of agricultural greenhouse gases (GHGs), such as methane and nitrous oxide, and sequestering carbon in the soil or in living biomass can help reduce the impact of agriculture on climate change while imporving productivity. A new article in a special focus issue of Environmental Research Letters synthesizes the current findings on the state of the capacity for agricultural GHG quantification. It concludes that strategic investment in quantification can lead to significant global improvement in agricultural GHG estimation in the near term.

Author(s): Lydia P. Olander, Eva Wollenberg, Francesco N. Tubiello, and Martin Herold

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Climate & Energy

Agriculture

Ecosystem Services

Environmental Economics

National

Journal Articles

Completing the Energy Innovation Cycle: The View from the Public Utility Commission

Achieving a widespread adoption of innovative electricity generation technologies involves a complex system of research, development, demonstration, and deployment, with each phase then informing future developments. Despite a number of non-regulatory programs at the federal level to support this process, the innovation premium—the increased cost and technology risk often associated with innovative generation technologies—creates hurdles in the state public utility commission (PUC) process. This article in the Hastings Law Journal examines how and why innovative energy technologies face challenges in the PUC process, focusing on case studies where PUCs have approved or denied utility proposals to deploy high cost, first-generation energy technologies. It concludes with an outline of possible strategies to address PUC concerns by allocating the innovation premium beyond a single utility's ratepayers.

Author(s): Jonas Monast and Sarah Adair 

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Climate & Energy

Policy and Design

State Utility Regulation

Environmental Economics

Climate Change Policy

Energy Sector

States & Regions

State Policy

Journal Articles

Land Use in a Future Climate Agreement

The second options assessment report, Land Use in a Future Climate Agreement, is in support of the ADP negotiations on a post-2020 agreement and focuses specifically on the role of emissions and removals from land use. It is part of a series of option reports funded by the U.S. Department of State but is not in support of, or reflecting, U.S. Government positions and is the sole work of an independent author team. 

Author(s): Manuel Estrada, Donna Lee, Brian Murray, Robert O'Sullivan, Jim Penman, and Charlotte Streck

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Climate & Energy

Policy and Design

Land

Environmental Economics

International

REDD

Reports

Alternative Approaches for Addressing Non-Permanence in Carbon Projects: An Application to Afforestation and Reforestation under the Clean Development Mechanism

Afforestation and reforestation (A/R) projects generate greenhouse gas reduction credits by removing carbon dioxide from the atmosphere through biophysical processes and storing it in terrestrial carbon stocks. One feature of A/R activities is the possibility of non-permanence, in which stored carbon is lost though natural or anthropogenic disturbances. The risk of non-permanence is currently addressed in Clean Development Mechanism (CDM) A/R projects through temporary carbon credits. To evaluate other approaches to address reversals and their implications for policy and investment decisions, the authors assess the performance of multiple policy and accounting mechanisms using a forest ecosystem simulation model parameterized with observational data on natural disturbances . The analysis, featured in the journal Mitigation and Adaptation Strategies for Global Change, finds that location, project scale, and system dynamics all affect the performance of different risk mechanisms. It also find that there is power in risk diversification. Risk management mechanisms likewise exhibit a range of features and tradeoffs among risk conservatism, economic returns, and other factors. Rather than relying on a single approach, a menu-based system could be developed to provide entities the flexibility to choose among approaches, but care must be taken to avoid issues of adverse selection.

Author(s): Christopher Galik, Brian Murray, Stephen Mitchell, Phil Cottle

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Climate & Energy

Policy and Design

Environmental Economics

Climate Change Policy

Natural Resources

Journal Articles

How Effective are U.S. Renewable Energy Subsidies in Cutting Greenhouse Gases?

The federal tax code provides preferential treatment for the production and use of renewable energy. This analysis in The American Economic Review: Papers and Proceedings provides estimates of the subsidies' effects on greenhouse gas emissions developed in a recent National Research Council (NRC) report. Due to lack of estimates of the impact of tax provisions on greenhouse gas emissions, new modeling studies were commissioned. The studies found, at best, a small impact of subsidies in reducing greenhouse gas emissions; in some cases, emissions increased. The NRC report also identified the need to capture the complex interactions among subsidies, pre-existing regulations, and commodity markets.
 
Author(s): Brian Murray, Maureen L. Cropper, Francisco C. de la Chesnaye, and John M. Reilly

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Climate & Energy

Environmental Economics

Energy Sector

Journal Articles

Carbon Market Lessons and Global Policy Outlook

Although markets for trading carbon emission credits to reduce greenhouse gas emissions have stalled in United States federal policy-making, carbon markets are emerging at the state level within the U.S. and around the world, teaching us more about what does and doesn't work. Authors discuss in a Policy Forum piece in Science key lessons from a decade of experience with carbon markets.

Author(s): Richard Newell, William Pizer, Daniel Raimi

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Climate & Energy

Policy and Design

Science

Environmental Economics

Natural Resources

International

National

State Policy

Journal Articles

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