Fiona Paine & Olivia Zhao

Held in Cambridge, Massachusetts on November 19 and 20, the 2015 Fall Research Workshop brought together over 80 participants for a lively discussion of relevant issues in the broader energy and environmental policy arena. 

The first day started off with Mark Finley of BP, who outlined highlights from the latest installment of the BP Statistical Review of World Energy. He focused on the central themes that shaped the energy sector in 2014, notably the shale gas revolution, the rebalancing of the Chinese economy, and an increased focus on climate change and renewable energy. Next, Julien Daubanes of ETH Zurich took a more theoretical view, drawing on a recent MIT CEEPR Working Paper to argue that OPEC is practicing limit pricing, with significant effects on carbon and climate policy.

Ann Wolverton of the U.S. Environmental Protection Agency (EPA) described the work of the Interagency Working Group on Social Cost of Carbon, reviewing the models used to calculate the social cost of carbon as well as the underlying assumptions. Frances C. Moore of the University of California, Berkeley followed with a presentation relating growth impacts and the social cost of carbon. By using a new model that takes into account the effects of temperature change due to carbon emissions on growth, Moore calculated a substantially higher social cost of carbon due to a lower discount rate.

Following a lunch discussion of the recently unveiled MIT Plan for Action on Climate Change introduced by Henry D. Jacoby of the MIT Sloan School of Management, the first afternoon session provided insights into the strengths and limitations of climate models and scenarios. Robert Pindyck of the MIT Sloan School of Management drew on a recent MIT CEEPR Working Paper to argue that substantial uncertainties about key parameters undermine the value of integrated assessment models. Sergey Paltsev of the MIT Joint Program on the Science and Policy of Global Change countered, drawing on examples to suggest that integrated assessment models offer useful policy guidance despite the uncertainties. 

The final session of the first workshop day focused on electricity market design and the role of capacity payments. Carlos Batlle of the Institute for Research in Technology (IIT) at Comillas Pontifical University, Madrid, drew attention to the shortfalls in European electricity market integration as various EU Member States proceed to unilaterally implement non-market approaches. John Parsons of the MIT Sloan School of Management discussed the implications of recent proposals to increase natural gas pipeline capacity into New England. William Hogan of Harvard University concluded the first day with a dinner presentation on the implications of the EPA’s Clean Power Plan for U.S. utilities.

The second day opened with a presentation from Arthur van Benthem of the University of Pennsylvania, who demonstrated that emissions standards increase demand and prices of used cars, with an unintended effect of promoting emissions leakage. Similarly, Matthew Zaragoza-Watkins of MIT CEEPR identified a measurable, but limited impact of new standards in promoting pre-buying behavior, which can result in delayed capital turnover and increased emissions after implementation.

Lucas Davis of the University of California, Berkeley then examined how clean energy tax credits have been distributed across American households, finding that higher income families have disproportionately benefited from clean energy credits. Christopher Knittel of MIT CEEPR and the MIT Sloan School of Management closed the day by discussing recent work simulating the effect of greenhouse gas reduction policies on innovation, concluding that overly generous incentives can focus innovation in less productive areas.