Twice a month, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Keep reading, and send us your feedback.
Here are some questions we’re asking and addressing with our research chops this week:
How have environmental and economic policy met at the nexus of dynamic global changes over time?
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.
Will the aging electricity grid carry the United States through its energy transition?
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.
How might California’s cap-and-trade program help the state meet its emissions reduction goals?
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.”
Next week on Thursday, March 10, at 10:00 a.m. EDT, RFF will host a panel of experts who will discuss current trends and future trajectories in carbon pricing around the world. Speakers include Valentina Bosetti, a senior scientist at the RFF-CMCC European Institute on Economics and the Environment; Pam Kiely of Environmental Defense Fund; and Joseph Majkut from the Center for Strategic and International Studies. Marc Hafstead, an RFF fellow and director of RFF’s Carbon Pricing Initiative, will moderate the event.
On Tuesday, March 22, legal experts will share their thoughts and insights on recent Supreme Court cases that have significant bearing on the future of US climate policy and environmental regulation. RFF Board of Directors Chair Susan Tierney will moderate a conversation with legal experts Lisa Heinzerling, a professor at the Georgetown University Law Center, and Jonathan Wiener, an RFF university fellow and a professor at the Duke University School of Law. RSVP here.
Russia produces about 10 million barrels of oil per day, accounting for 10 percent of the world’s oil production. Since Russia invaded Ukraine, oil prices are at their highest in seven years—and all this while transportation begins to rebound globally as pandemic restrictions phase out. “The potential disruption of that source of supply on the international market is the bigger-picture issue, especially in the context of the big rebound in global oil demand amidst the broader economic recovery,” says RFF Fellow Brian Prest.
Current sanctions aim to isolate Russia via financial institutions and technology. But Russia’s invasion of Ukraine threatens to impact oil markets across the globe, leading President Joe Biden to explore options that can protect American consumers from price volatility at gas pumps. “The unfortunate truth is that there are not that many options to address oil and natural gas prices in the short term,” says RFF President and CEO Richard G. Newell. “The only short-term policy instrument of any significant relevance is the strategic petroleum reserve, and even that is limited in its effectiveness.”
In a new blog post, Massimo Tavoni—director of the RFF-CMCC European Institute on Economics and the Environment and a lead author of the fifth and sixth Assessment Reports of the IPCC—expounds on how scientists extrapolate data to envision future scenarios and implications of those scenarios. Tavoni explains how math can serve an empirical approach to modeling emissions trajectories, and the importance of communicating science so that people understand the consequences of the climate crisis.
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.
Russian Invasion Highlights Oil Dependence
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.”
This figure from NBC News shows data from the CIA World Factbook for Russia’s global shares of natural gas and crude oil exports, which make the country one of the biggest suppliers of energy in the world. Following the Russian invasion of Ukraine, dependence on Russian resources already has shifted in the European Union, Asia, and the United States.