70 Years of RFF Research, US Electricity Grid Ages, and More

This week, the Intergovernmental Panel on Climate Change published a sweeping report that draws on thousands of academic studies from around the world. The report highlights “the interdependence of climate, ecosystems and biodiversity, and human societies,” an interplay of factors relating to the economy, energy, and environment that Resources for the Future (RFF) has focused on for the past 70 years. “Time and again, we’ve responded nimbly to meet society’s needs, delivering solutions that move decisions in a positive direction,” writes RFF President Richard G. Newell in his introductory letter to the new issue of Resources magazine, “improving the environment, human health, and our broader economic well-being.” The latest issue of Resources, launched digitally last week, looks back at seven decades of RFF fulfilling its mission to inform environmental and energy policy through impartial economics research, with an eye toward balancing the needs of the environment and economy. This issue features articles republished from the magazine archive that cover sustainable economic growth, the value of natural resources, regulation of water pollution, air quality and electricity, the evolving field of environmental economics, and more—with accompanying reflections from contemporary scholars.

Last month, the electric grid operator for New York State released a comprehensive reliability plan which found that extreme weather events, unforeseen fluctuations in demand, and potential power plant closures could threaten grid reliability. The plan warns that outages may become more frequent in the coming years. The Texas grid was put to the test last year, when Winter Storm Uri froze transmission lines and prevented the delivery of natural gas to the degree that consumer demand surged beyond capacity, widespread blackouts persisted for days, and hundreds died. Around the country, the energy transition is placing increased strain on an aging electric grid, as 70 percent of transmission and distribution lines are far into the second half of their extended lifespan. A recent Policy Leadership Series Podcast episode with Commissioner Allison Clements of the Federal Energy Regulatory Commission highlights the importance of modernizing the grid and increasing transparency and public participation with the agency. “If you think about planning for a future transmission grid, that is going to be expensive and is going to take buy-in from a lot of people and is going to take the development of new infrastructure—which is hard,” says Clements.

Last week, a California State Senate Oversight Committee held a hearing about the role of cap and trade in meeting the state’s goal to reduce greenhouse gases 40 percent below 1990 levels by 2030. The state’s Air Resources Board is revising its scoping plan, which lays out a five-year blueprint for how it can achieve its climate goals, and which faces skepticism from legislators and experts about the role of cap and trade as a key method for reaching California’s climate goals. Public comments on the plan from Carbon Market Watch and a recent Independent Emissions Market Advisory Committee (IEMAC) report, led by RFF Senior Fellow Dallas Burtraw, note that a large amount of banked carbon emissions allowances originating from the cap-and-trade program could reenter the system from private and public accounts. This potential flood of allowances into the program means that the emissions goals for this decade set by statute may not be met, and the IEMAC makes recommendations to the Air Resources Board to adjust pertinent policy design. On a recent Resources Radio episode, Burtraw, chair of the IEMAC, discusses findings from the independent committee’s recent report and potential next steps for the state’s cap-and-trade program. “We identify, fundamentally, two different approaches: One would directly address the cumulative supply of allowances that are available in the emissions market; for example, just by reducing the number of allowances that enter the auction,” Burtraw says. “A second approach would be to address the price of allowances by increasing the price floor—or better, perhaps, to add one or multiple additional price steps.”

Estimating the Cost of Controlling Water Pollution

In a new journal article, RFF Fellow Yusuke Kuwayama and University Fellow Sheila Olmstead, alongside a coauthor, find that a common approach of modeling the value of water quality may not fully account for the recreational benefits of water. Through a hybrid model, the authors find that homeowners exhibit a significant willingness to pay for clean water, meaning that previous studies may have underestimated the benefits of water pollution control.

Global energy markets are in turmoil. Even before Russia’s invasion of Ukraine, global oil prices had risen from an average of $42 per barrel (bbl) in 2020 to $71/bbl in 2021. By early March 2022, as Russian tanks rolled across the border, Brent crude prices spiked above $110/bbl. Because global oil markets are deeply interconnected, this spike in prices will quickly translate into higher gasoline prices for the United States and global consumers.

“Oil markets have always been volatile, but the last couple of years have been a real roller coaster,” says RFF Fellow Daniel Raimi. “In the short term, there’s little that policymakers can do to alleviate the pain for US drivers. But in the medium and long term, the best way to protect against the pain of high oil prices is simple: use less oil.”