Essays in Energy and Environmental Economics

Abstract

Policymakers are increasingly turning to second- or third-best policy interventions targeted to specific sectors of the economy for mitigating pollution and climate damages despite long-standing agreement among economists that pricing pollution externalities is the efficient (and hence first-best) solution. The essays composing this dissertation explore the rationale for such policy preferences by measuring the environmental benefits of one such policy intervention and evaluating the expected welfare outcomes of calibrated pollution pricing policies. In particular, the first two chapters examine the efficiency and equity implications of rooftop solar policy, an example of a targeted intervention in the electricity sector. The final chapter discusses what appears to be a policy preference for including emission targets in climate policy and then presents an alternative welfare metric that both rationalizes the desire for an emissions target and allows us to evaluate different "hybrid tax" policies.In the first chapter, "Distributional Benefits of Rooftop Solar Capacity," my co-author Travis Dauwalter and I study the equity and environmental justice implications of rooftop solar policy in the U.S. It is an accepted fact today that households of color and low-income households face disproportionate exposure to pollution and poor environmental conditions. The effects of environmental policies on improving or perhaps even worsening the pollution gap are less understood, however. We provide the first robust evidence on the distribution of benefits of rooftop solar capacity, contributing to the growing economics literature on environmental justice and the distributional consequences of policy. We find the current distribution of environmental benefits from rooftop solar is regressive, but that households of color receive slightly larger benefits per capita than White households. Most interestingly, we demonstrate the lack of an efficiency-equity tradeoff in this context: rooftop solar capacity allocations that maximize total environmental benefits also maximize benefits received by households of color and low-income households. Our results suggest that current rooftop solar policy, reflected at least in part by existing capacity, fails to achieve policymakers’ desired distributional outcomes and could be better targeted to achieve more efficient and more equitable allocations.The second chapter, "Heterogeneous Solar Capacity Benefits, Appropriability, and the Costs of Suboptimal Siting," co-authored with Steven Sexton, Justin Kirkpatrick, and Nicholas Muller provides the foundation for the first chapter. In this paper, we provide the first zip-code level estimates of the environmental benefits of rooftop solar capacity by estimating marginal power plant emissions responses to changes in electricity load. We use these estimates to compute the total environmental benefits of rooftop solar and show that about $1 billion in benefits would be gained annually were capacity optimally sited. Together, these chapters demonstrate that current solar policy cannot be rationalized on either efficiency or equity grounds.In the third chapter, "Using Carbon Taxes to Meet an Emission Target," my co-author Billy Pizer and I explore emissions and cost outcomes of simple, rule-based hybrid carbon tax policies, contributing to a growing literature on carbon tax adjustment mechanisms. This work is particularly important as current policy debate in the U.S. has frequently discussed the ability (or inability) of carbon taxes to achieve certainty over emissions outcomes. We show that simple adjustment mechanisms can achieve substantial increases in emissions certainty relative to an ordinary, exogenous tax.