New Research From Shawhan, Williams, Wang, Muehlenbachs

WASHINGTON—Resources for the Future (RFF) recently posted several new research efforts. Authors and subjects are: RFF Visiting Fellow Daniel Shawhan on optimal pricing of electricity; RFF Senior Fellow Roberton C. Williams III on environmental taxation; RFF Fellow Zhongmin Wang and Cheng Xu of George Washington University on using Green Party donations to measure community environmentalism; and RFF Visiting Fellow Lucija Muehlenbachs and Catherine Hausman of the University of Michigan on methane emissions from natural gas distribution.

Optimal Pricing of Electricity in a World with Affordable Distributed Energy
RFF Visiting Fellow Daniel Shawhan

• This policy brief describes optimal pricing of electric energy. It emphasizes how policymakers, regulators, and utilities can respond to the twin developments of decreasingly expensive distributed energy technologies (solar panels, energy storage, responsive load, efficiency, and more) and better understand environmental externalities.

Environmental Taxation
RFF Senior Fellow Roberton C. Williams III

• This paper examines potential environmental tax policy reforms. It focuses primarily on a carbon tax, but also more briefly considers a range of other possible changes. These include revising or eliminating various energy and environmental tax credits and deductions (many of which might become unnecessary in the presence of a carbon tax), as well as changes to energy taxes that have substantial environmental implications (such as the federal gasoline tax). The paper draws on recent theoretical and empirical research to evaluate the effects of such reforms on tax revenue, pollution emissions, economic efficiency, and income distribution.

Using Donations to the Green Party to Measure Community Environmentalism
RFF Fellow Zhongmin Wang and Cheng Xu of George Washington University

• This paper presents empirical evidence that measures of community environmentalism based on donations to the Green Party are predictive of the demand for green products and policies at the zip code and county levels in the United States. The primary measure of community environmentalism in the existing literature is the share of Green Party registered voters, which is publicly available for California only. Measures based on donations to the Green Party are similar in spirit to shares of Green Party registered voters, but the data are publicly available for all areas in the United States.

Price Regulation and Environmental Externalities: Evidence from Methane Leaks
RFF Visiting Fellow Lucija Muehlenbachs and Catherine Hausman of the University of Michigan

• Price regulations are widely used to reduce inefficiencies from natural monopolies, but they can introduce other inefficiencies, including the failure to cost-minimize. This paper examines a previously unstudied distortion in the natural gas distribution sector that allows firms to pass the cost of lost gas on to their customers. The paper finds that firms abate leaks below what is theoretically optimal for a private firm; expenditure on abatement is below the cost of lost gas. Additionally, natural gas is both explosive and a greenhouse gas. Thus the safety and climate impacts of leaked methane exacerbate the inefficiencies created by imperfect price regulation.