Browsing by Subject "energy economics"

The changes to the environment caused by anthropogenic climate change pose major challenges for energy production in the next century. Carbon Capture and Storage (CCS) is a group of technologies that would permit the continued use of carbon-intense fuels such as coal for energy production while avoiding further impact on the global climate system. The mechanism most often proposed for storage is injection of CO2 below the surface of the Earth in geological media, with the most promising option for CO2 reservoirs being deep saline aquifers (DSA's). Unlike oil and gas reservoirs, deep saline aquifers are poorly characterized and the variability in their properties is large enough to have a high impact on the overall physical and economic viability of CCS. Storage in saline aquifers is likely to be a very high-capacity resource, but its economic viability is almost unknown. We consider the impact of geological variability on the total viability of the CO2 storage system from several perspectives. First, we examine the theoretical range of costs of storage by coupling a physical and economic model of CO2 storage with a range of possible geological settings. With the relevant properties of rock extending over several orders of magnitude, it is not surprising that we find costs and storage potential ranging over several orders of magnitude. Second, we use georeferenced data to evaluate the spatial distribution of cost and capacity. When paired together to build a marginal abatement cost curve (MACC), this cost and capacity data indicates that low cost and high capacity are collocated; storage in these promising areas is likely to be quite viable but may not be available to all CO2 sources. However, when we continue to explore the impact of geological variability on realistic, commercial-scale site sizes by invoking capacity and pressure management constraints, we find that the distribution costs and footprints of these sites may be prohibitively high. The combination of issues with onshore storage in geological media leads us to begin to evaluate offshore storage potential. By considering the temperature and pressure regimes at the seafloor, we locate and quantify marine strata that has "self-sealing" properties, a storage option that we find is plentiful off the coasts of the United States. We conclude that further research into transport optimization that takes into account the true variation in geological media is necessary to determine the distribution of costs for carbon capture and storage to permit the full evaluation of CCS as a mitigation option.

This dissertation presents three essays in environmental economics and policy. In the first chapter, I examine the optimal timing for electric vehicle (EV) subsidies with the perspective of maximizing environmental return of the policy. I show that EV subsidies are best introduced before the time when EVs become cleaner than gasoline internal combustion engines (ICEs) for two reasons related to the dynamics of decarbonization and technology diffusion. First, the net lifetime damages of EVs can be less than those of gasoline ICEs. More importantly, policies boosting technology diffusion have positive spillover effects. As marginal emissions of the power grid decline in the long run, more EV adoption produces environmental gains in the process. I simulate an empirically calibrated EV diffusion model, calculate the discounted lifetime damages of EVs versus gasoline ICEs, and examine EV subsidies enacted in different years. Even when EVs are initially more polluting than ICEs, I find that the environmental return from the policy-induced EV diffusion process decreases when governments delay intervention.

The second chapter (in collaboration with Yang Zhou, William A. Pizer, Libo Wu, and Yingjie Tian) analyzes the time pattern in averting behavior against air pollution. The results indicate that one standard deviation increase in Air Quality Index level leads to a significant 1-3 percent reduction in outdoor population counts in the evening hours and a 4-6 percent increase in electricity consumption during mid-day and early evening periods. Meanwhile, by comparing the intensity of averting behavior and the level of air pollution, we find a mismatch in that people have the least elastic behavior during peak pollution hours. We find that abatement efforts that better target the peak pollution hours when averting responses are inelastic can reduce pollution exposure by 13 percent and residential energy consumption by 82 percent compared to simulated outcomes based on the observed hourly improvements.

The third chapter is a paper in collaboration with William A. Pizer, which was accepted in the Journal of Environmental Economics and Management in January 2021. This paper discusses the choice of discount rate for public project evaluation with costs today and benefits over long time horizons. We generalize the assumptions in the previous discounting literature to consider arbitrary patterns of future benefits, accruing either directly to consumers or indirectly through future investment. We derive an expression for the appropriate discount rate and show that it converges to the consumption rate for benefits increasingly far into the future. More generally, the bounding rates depend on the temporal pattern of the undiscounted dollars. As an application, we estimate the appropriate discount rate for climate change damages from carbon dioxide, finding it lies in a narrow range (+/- 0.5 percent) around the consumer rate of interest.