Each week, 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. Here are some questions we’re asking and addressing with our research chops this week:
What are the consequences of FERC’s complex and controversial MOPR order?
Last December, the Federal Energy Regulatory Commission (FERC) released an order mandating that PJM, the grid operator running the nation’s largest capacity market, expand its minimum offer price rule (MOPR) to nearly all state-subsidized resources. The sweeping change came after a 2016 complaint from natural gas generator Calpine and a 2018 FERC order that declared PJM’s practices “unduly discriminatory” for not doing enough to address state subsidies keeping the cost of renewable energy artificially low. The expanded MOPR remains controversial: just this week, a variety of organizations—state utility boards, clean energy associations, and even PJM itself—filed requests for FERC to reconsider based on concerns that the order privileges incumbent fossil fuel generation and will raise costs for consumers. Supporters counter that the order is preferable over FERC continuing to accommodate varying state policies, contending that wind and solar will not be significantly affected.
With the implications of this order for energy in PJM’s jurisdiction still a subject of contention, RFF this week hosted “Making Sense of FERC's MOPR Order” another event in RFF Live’s Future of Power event series. RFF Research Associate Kathryne Cleary opened the event by overviewing the context behind FERC’s order, before RFF Senior Fellow Karen Palmer moderated a panel discussion, which included representatives from both PJM and Calpine. Reflecting on the challenges ahead, panelist Susan Tierney, chair of the RFF board and a senior advisor at Analysis Group, argued that “there are so many states and public power entities who [will] decide that this is not the way that they want to go … there will need to be pathways to figure out how [they] can exit the capacity market.” For more context about the MOPR order, watch a recording of the RFF Live event or read Cleary’s recent blog.
Related research and commentary:
Can new evidence about the success of carbon pricing in the European Union help sway US skeptics?
A long-held critique of carbon pricing might no longer hold up, according to new research from Gilbert Metcalf, an RFF university fellow and a professor of economics at Tufts University. Politicians who oppose carbon pricing have often argued that such a mechanism would hinder economic growth and threaten jobs. But with 25 countries around the world adopting various forms of carbon pricing, empirical data can be leveraged to demonstrate that the economic effects may not be what the critics expected. While carbon pricing remains politically contentious in the United States, several carbon pricing proposals are under consideration in Congress. One bill, which would put a price on carbon and then return all revenue to Americans as a “carbon dividend,” has 75 cosponsors in the House, including Republican representative Francis Rooney.
In their paper, Gilbert Metcalf and James H. Stock, a professor of economics at Harvard University, use new data on European carbon prices to estimate the impact of carbon pricing on GDP and employment. They found no solid evidence that carbon pricing has a negative effect on employment or GDP growth in EU countries. This new research comes after a previous study from Metcalf that advocated for a carbon tax as a cost-effective policy tool, and a necessary one for the United States to adopt to successfully reduce emissions. A blog post from the Energy Institute at HAAS points out that these findings are likely to be unsurprising to most economists, but the results are notable because they contrast directly with political claims that have fueled opposition to carbon pricing. And while support for carbon pricing among Republican legislators is still minimal, just last week, the Washington Post published an op-ed that touts carbon pricing as “the winning conservative climate solution,” aligning with party values of finding market-based solutions and promoting private-sector innovation.
Related research and commentary:
- Journal article: Measuring the Macroeconomic Impact of Carbon Taxes
- Podcast: Balancing the Ledgers: Pollution and GDP, with Nicholas Z. Muller
- Explainer: Carbon Pricing 101
With House Republicans signaling a willingness to address climate change, is there potential for compromise?
This week, House Republican leaders unveiled a series of bills to address climate change, shortly after Democrats released their own 2020 climate change agenda. While still avoiding clear emissions reduction targets, Republicans are proposing bills that would grow more trees with the goal of sequestering more carbon; greatly expand federal investment in clean energy technology; and direct foreign aid to countries burdened by plastic pollution. Explaining how his party is approaching climate change, House Minority Leader Kevin McCarthy says that Republicans are prioritizing “realistic policies” that can lower emissions “without decimating our own communities and dismantling our economic system.” These newfound goals reflect a broader shift in Republican rhetoric on environmental issues and come at a time when Americans increasingly believe that global temperatures are rising. The new bills also open up the possibility of bipartisan compromise, which has been elusive, given the often partisan nature of climate change discussions.
On a new episode of Resources Radio, Daniel Esty, a professor of environmental law at Yale University and a board member at RFF, speaks about the value of consensus building in climate change discussions. Esty’s argument that “transformative change doesn’t ever happen except on a bipartisan basis” has implications for today’s Congress, with both parties communicating a desire to pass climate change legislation but prescribing vastly different solutions. He elaborates on how to cultivate broad support for climate legislation, arguing that “the path forward is almost certainly going to be a portfolio of policies and approaches,” rather than solely “red light” policies, which regulate pollution, or “green light” policies, which incentivize innovations in clean energy technology. Listen to more of his reflections on crafting ambitious environmental policies and including a diversity of voices in climate discussions here.
Related research and commentary: