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Economics of Energy & Environmental Policy
Volume 13, Number 1


The End of Neutrality? Fuel Standards, Technology Neutrality, and Stimulating the EV Market

James B. Bushnell, Erich J. Muehlegger, David S. Rapson, and Julie Witcover

DOI: 10.5547/2160-5890.13.1.jbus
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Widespread electrification of the transportation sector is a key component of most strategies for deep decarbonization of the U.S. economy. While the acceptance of EVs has grown dramatically over the last decade, much of this growth has been spurred by substantial support from public funds and other related policies. Major electrification on the time scales supported in many climate policy plans will require substantial investment spurred by policy. In this paper we discuss the policy options for expanding the EV market. Our particular focus is on the potential role that a Clean Fuel Standard (CFS) can play in supporting electrification. These standards, like California’s LCFS, are typically positioned as “technology neutral,” and the LCFS itself relies upon a dense set of calculations and assumptions to rate a wide variety of fuels based upon their life-cycle carbon intensity (CI). However, it is likely that for a CFS to support the kinds of investments on a magnitude likely necessary to reach electrification goals, it may have to be altered in such fundamental ways as to no longer really function as either technology-neutral or a purely fuels-based standard.

Key Fuel Poverty Indicators and Variables: A Systematic Literature Review

Luiza Brabo-Catala, Eva Collins, and Barry Barton

DOI: 10.5547/2160-5890.13.1.lbra
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Fuel poverty is a condition associated with the inability to afford sufficient energy services in a home, especially heating. There is no single standardised process for defining or measuring fuel poverty. Each different method used in research or policy presents biases, resulting in different numbers of affected households with implications for interventions. This systematic literature review aims to summarise the patterns and trends in the indicators and variables of fuel poverty found in relevant publications, as well as the prevalence of associated issues. This study analysed the strengths and weaknesses of the key indicators and variables, showing their biases and opportunities for improvement. The eighty-four publications analysed were selected according to the most relevant results found on Google Scholar searching for definitions and indicators of fuel poverty/energy poverty/energy hardship. The prevalence of relevant themes was identified using NVivo. Understanding the background and the strengths and weaknesses of common indicators and variables of fuel poverty can help develop efficient and effective policies and interventions.

Symposium on "Green Opportunities for the Energy Sector"

Green Opportunities for the Energy Sector

Tooraj Jamasb, Juan Rosellón, and Elisa Trujillo-Baute

Electricity Markets in Transition and Crisis: Balancing Efficiency, Equity, and Security

Tooraj Jamasb, Rabindra Nepal, and Daniel Davi-Arderius

DOI: 10.5547/2160-5890.13.1.tjam
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Two electricity market crises following the lifting of post-Covid restrictions in 2021 and the natural gas supply interruptions in 2022, challenged the functioning of the EU electricity market and its design. This paper argues that the market design was already ripe for an overhaul as the efficient market paradigm has gradually become an instrument of cost-effective attainment of green targets and balancing the elements of the energy trilemma. We discuss the linkages between the long-term and short-term markets. While policy interventions to alleviate short-term affordability are important, they cannot constraint the long-term sustainability and security of supply. Short-term electricity markets have, technically, worked according to design. However, their distributional implications call for revisiting how resources are allocated to and outcome of the market. We revisit several dimensions of market design with a view to the recent calls and to overhaul them.

Policy Reversals in Transitional Markets: The Effect of Changing Marginal Cost to Physical Order Dispatch in the Mexican Power Sector

Raúl Gutiérrez-Meave, Juan Rosellón, and Luis Sarmiento

DOI: 10.5547/2160-5890.13.1.rgut
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This study explores the 2021 Mexican electric reform that proposes changing the power dispatch from a marginal-cost-based to a command-and-control physical system. The new law forces the state power company to dispatch before private generators. We use the GENeSYS-MOD techno-economic energy model to determine the reform's effect on the power sector's generation mix, energy emissions, and market structure. Our findings reveal that although the merit-order change increases the share of generation with fossil fuels and CO2 emissions for the first decade after policy adoption, scenarios start to converge after 2030 because of the substitution of old and inefficient state-owned power plants with renewable facilities. On aggregate, changing the dispatch order results in 189 TWh of lost renewable generation and an increase of 188.93 (Mil. tCO2) in power sector emissions.

Does adaptive capacity reduce funding costs of municipalities that are exposed to climate change risk?

Ronald Huisman and Bram T.C. van Nijen

DOI: 10.5547/2160-5890.13.1.rhui
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Research shows that municipalities that face more risk from climate change have higher financing costs than municipalities that face less risk. However, to our best knowledge, it is unknown whether the adaptive capacity of a municaplity is rewarded in terms of lower financing costs.  We study municipal bonds issued by U.S. municipalities that are known to face risk from climate change and examine whether the climate risk mitigating role of adaptive capacity is recognized by lower issuance costs. We do find a negative relationship between adaptive capacity and bond issuance costs. We conclude that cities having policies to improve adaptive capacity are likely to be paid off by lower funding costs.

Regulatory impact on Quality of Electricity Distribution Services: The case of Latin America and the Caribbean

Mariana Weiss, Pauline Ravillard, Maria Eugenia Sanin, Franco Carvajal, Yuri Daltro, Enrique Chueca, and Michelle Hallack

DOI: 10.5547/2160-5890.13.1.mwei
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In this study, we empirically estimate the impact of quality regulation based on economic incentives on the frequency and duration of power outages. First, based on a sample of 143 electricity distributors across Latin America and the Caribbean, we show that between 2003 and 2019, the System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI) decreased after the implementation of quality regulation by an average of 40% and 45%, respectively. Second, our estimations show that the implementation of the quality regulation had a positive and significant impact on reducing both the duration and frequency of outages. Finally, our results show that on average, private firms had a better quality performance, but the worst performing firms in the region were also private. Our results advocate for more quality regulation.

Quality Matters: Power Reliability and Grid Connection in Rural Guatemala

Federico M. Accursi

DOI: 10.5547/2160-5890.13.1.facc
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Electrification rates have been increasing within low and middle income countries. However, the prevalence of outages is still a relevant issue for rural households when considering whether to connect to the grid. We test this by exploiting a shock in quality that unequally affected different municipalities in Guatemala during 2012–2014. Our main estimates, which are robust to using an instrumental variable strategy, suggest that households affected by severe outages are about 13–17 p.p. less likely to get a connection to the grid. We further check this result by combining household-level data from the 2018 Census with a complete register of electricity quality service. Although 2018 was a good year in terms of quality, a 1% increase in the number of outage hours affected the probability of connection by 3 p.p. Efforts to expand the electricity grid to rural areas should thus be analyzed in parallel with actual power grid quality levels.

Determinants of energy poverty: Trends in Spain in times of economic change (2006–2021)

Maria T. Costa-Campi, Elisenda Jové-Llopis, Jordi Planelles-Cortes, and Elisa Trujillo-Baute

DOI: 10.5547/2160-5890.13.1.mcos
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The debate concerning energy affordability in Europe is more pressing than ever, not solely as an energy issue but also as a broader social concern related to climate change, poverty, and health deprivation. This paper empirically investigates the factors leading to household energy vulnerability and identifies new dimensions and profiles affected by this structural problem. To carry out this econometric analysis, we draw on an exhaustive sample of more than 300,000 households extracted from the Spanish Household Budget Survey (HBS) for the period 2006–2021. Our empirical results confirm that energy poverty in Spain remains a chronic problem with a tendency to worsen during times of economic crisis and, most particularly, during the global economic recession caused by the COVID-19 pandemic. The study identifies two main groups—the retired and women living alone—as being at greatest risk of energy poverty. Our results also point to the importance of the economic activity performed by household members in determining the probability of their being energy poor.

Electricity Access, Gender Disparity, and Renewable Energy Adoption Dynamics: The Case of Mountain Areas of Bangladesh

Sakib Bin Amin, Tooraj Jamasb, Farhan Khan, and Rabindra Nepal

DOI: 10.5547/2160-5890.13.1.sami
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This paper examines the relationship between grid-based electricity access, gender disparity, and renewable energy adoption in the mountain areas of Bangladesh by collecting a novel set of micro-level survey data. We develop unique weighted indices and apply the robust instrumental generalised method of moment estimation for investigating electricity access and women empowerment nexus. The findings indicate that increased electricity access (hours) benefits women's empowerment in the Chittagong Hill Tracts (CHT) districts. Using a quasi-experimental framework, we find no evidence that women from grid-connected households enjoy greater gender parity than women from off-grid areas. This is likely due to the increased adoption of renewable energy such as Solar Home System (SHS) and addressing the challenges associated with grid expansion in mountain districts. Using a probabilistic random utility model, we show that a surge in non-food expenditures tends to suppress the adoption of renewable energy in poorer households more than their counterparts, given the high prices and the lack of financial schemes to support the purchase of the renewable device. We argue that the expansion of green financial strategies can advance the outreach of renewable energy in the CHT districts and gender parity aligning with the attainment of sustainable development goals such as cleaner energy access and gender equality.

Economic efficiency and CO2 impact of a clean cooking program in Ecuador

Daniel Davi-Arderius and Moisés Obaco

DOI: 10.5547/2160-5890.13.1.ddav
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Clean cooking programs are implemented to replace polluting fuel technologies and fight climate change. In 2014, Ecuador launched a clean cooking program to improve environmental conditions for its population and reduce the large financial burden spent on liquid petroleum gas subsidies. In this paper, we analyze the economic and environmental impacts of this program. We use official macro-data (2015–2021) instead of surveys, which is not common in the studies about these programs. We find that this program saved 978,470 kton of CO2 and reduced Ecuadorian liquid petroleum gas consumption by 3,845,808 barrels, improving the national balance of trade by 151 million USD. However, the rate of return of the subsidies spent in this program was below one, coming in at only 0.72463. We also determine that the subsidized electricity was indeed generated with hydropower. Based on our results, we provide several regulatory recommendations. Households need efficient economic incentives to switch from one energy source to another, and the replaced fuel cannot remain subsidized. Otherwise, the participation predictions made by the implementing institutions might be too optimistic and result in the unnecessary allocation of economic resources to reinforcing grids and commissioning new electricity-generation plants. Finally, the generation technology used to replace subsidized electricity must be renewable to avoid problematic trade-offs.

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