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NewApproachesonEnergyandtheEnvironment
New Approaches on Energy and the Environment
Chapter 1 Taking the Lead on Climate Change - New Approaches on Energy and the Environment
Chapter 23 Bureau of Environmental Statistics - New Approaches on Energy and the Environment
Chapter 24 Treading Carefully With Environmental Information - New Approaches on Energy and the Environment
Chapter 22 Combatting Ignorance About US Water Quality - New Approaches on Energy and the Environment
Chapter 7 Making Electricity Markets Competitive - New Approaches on Energy and the Environment
Chapter 3 Carbon Tax to Reduce the Deficit - New Approaches on Energy and the Environment
Chapter 8 Cleaning Up Power Plant Emissions - New Approaches on Energy and the Environment
Chapter 25 Better Evaluation of Life Saving Environmental Regulations - New Approaches on Energy and the Environment
Chapter 4 Slaking Our Thirst for Oil - New Approaches on Energy and the Environment
Chapter 5 Stimulating Renewable Energy - New Approaches on Energy and the Environment
Chapter 6 Rewarding Automakers for Fuel Economy - New Approaches on Energy and the Environment
Chapter 4 Pay As You Drive Car Insurance - New Approaches on Energy and the Environment
Chapter 10 State Innovation for Environmental Improvements- New Approaches on Energy and the Environment
11 Pay as You Slow: Road Pricing to Reduce Traffic Congestion
Chapter 21 Zoning the Oceans - New Approaches on Energy and the Environment
18 Streamlining Forest Service Planning
13 A New Approach to Air Quality Management
Chapter 16 Modernizing the Food Safety System - New Approaches on Energy and the Environment
Chapter 15 A Broader View of Brownfield Revitalization - New Approaches on Energy and the Environment
Chapter 2 Stimulating Technology to Slow Climate Change - New Approaches on Energy and the Environment
Chapter 12 Focus on Particulates More Than Smog- New Approaches on Energy and the Environment
Chapter 13 New Approach to Air Quality Management - New Approaches on Energy and the Environment
Chapter 14 Redirecting Superfund Dollars - New Approaches on Energy and the Environment
Chapter 17 Performance Standards for Food Safety - New Approaches on Energy and the Environment
Chapter 19 Smarter Budgeting for Space Missions - New Approaches on Energy and the Environment
Chapter 20 Taking the Lead on Climate Change - New Approaches on Energy and the Environment
Siren Song
True Warnings False Alarms
Common Waters Diverging Streams
Choosing Environmental Policy
Battling Resistance to Antibiotics and Pesticides
Painting the White House Green
Northern Landscapes
Archive Painting-the-White-House-Green
The Bioengineered Forest
Collaborative Environmental Management
The Equitable Forest
Superfund's Future
Environmental Protection and the Social Responsibility of Firms
Determining the Economic Value of Water: Concepts and Methods
Toward Safer Food
Scarcity and Growth Revisited
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The Forest Ranger: A Study in Administrative Behavior - Herbert Kaufman
Adaptive-Governance-and-Water-Conflict
Arizona Water Policy: Management Innovations in an Urbanizing, Arid Region - RFF Press
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China's Forests: Global Lessons from Market Reforms
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Choosing Safety: A Guide to using Probabilistic Risk Assessment and Decision Analysis in Complex, High Consequence Systems
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Making Electricity
Markets Competitive:
How Fast and by Whom?
Timothy J. Brennan

Chapter 7 in New Approaches on Energy and the Environment: Policy Adivce for the President



Expanding competition in historically regulated markets has been a stunning (and largely bipartisan) policy success story over the last 25 years. But thus far, electricity has not been as amenable to similar initiatives. Moreover, recent events, such as the California crisis of 2000-01 and the Northeast blackout in August 2003, have led many to voice concerns about our electricity systems.

 

We hope that the following provides a useful short guide to help balance the claims these different interests express.

In our view, the need to control costs, ensure reliability, and prevent market power in this crucial sector implies that although competition may be politically and economically appealing, presidential leadership should be applied cautiously with regard to opening electricity markets. Successful competition in wholesale electricity markets will require continued regulation and oversight by the Federal Energy Regulatory Commission (FERC).

Link to Chapter 7, Making Electricity Markets Competitive
Download this Policy Recommendation

Despite resistance from state regulators and incumbent utilities, this regulation will quite likely require new legislation to require utilities to join regional transmission organizations (RTOs). These RTOs should be empowered not only to coordinate the interstate and international transmission of electricity across the grid, but also to establish enforceable reliability standards. To ensure effective competition, RTO operations must be fully independent from any generation owner; mandatory divestiture of transmission from generation may be the best means to this end.

On the other hand, states should continue to exercise authority over "retail competition," that is, the extent to which households and businesses can choose their own electricity supplier. Local economies bear the costs and reap the benefits of opening retail electricity markets, and each state can learn from others what works and what does not. Moreover, the benefits of extending deregulation beyond large industrial and commercial users to household customers may not be worth the trouble.



Related Policy Recommendations:

Chapter 8. Cleaning Up Power Plant Emissions Link to Video
Dallas Burtraw and Karen L. Palmer

Chapter 12. Focus on Particulates More Than Smog
Alan J. Krupnick

Chapter 13. A New Approach to Air Quality Management 
Alan J. Krupnick and Jhih-Shyang Shih



Timothy J. Brennan, professor of public policy and economics at the University of Maryland Baltimore County, is a coauthor of Alternating Currents: Electricity Markets and Public Policy and a former senior industrial organization and regulation economist for the Council of Economic Advisers.



All Policy Recommendations in New Approaches on Energy and the Environment are available for complimentary download from each chapter's webpage. (Copyright © 2004 by Resources for the Future.) Use of these chapters is for personal use only. Contents may not be duplicated or retransmitted by print, electronic, or other means without written permission of the publisher. To purchase a printed copy of the book, click on the button below.

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