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Lecture 3

In 1970, President Nixon Signs the Clean Air Act, Creating EPA
Why are we discussing this anti-pollution policy in a class on energy?
energy is the source of the pollution
energy policy is made because of environmental policy

Interesting NAS estimates of 2005 “unpriced consequences ” of energy use (externalities):
coal-fired power plants: $62 billion
gas-fired power plants: $749 million
transportation: $56 billion ($36 billion light-duty, $20 billion other)
electric vehicles (coal) worse than diesel worse than gasoline or corn ethanol

Numbers are computed from people dying - wage premiums for risky jobs

Is it sensible to estimate, ethical to use such $ values of (statistical) lives, sickness?
No. Smoking would be low numbers because people die sooner

Was the 1970 Clean Air Act Necessary? Sensible?

Why not just give property rights?
Coase Therom - clean it up anyway

Why can’t assignment of property rights work in general?
The lower cost of cleaning up is the best assignment of property rights

Why involve government?
Information about cleanup technologies
Does the studies of damages

Why not leave it to the states to decide whether/how to regulate?
Pollution crosses state lines
Electricity crosses state lines

Should EPA have been told to set the NAAQS using benefit/cost analysis ($/life)?
Protect human health with an adequate measure of safety

Now it is November, 1974

What has recently happened to put energy policy on the Washington agenda?

President Nixon is considering announcing “Project Independence,” an effort to make the US self-sufficient in energy by 1980

How important is energy independence, and why? Does it guarantee “energy security?

How much should the nation be willing to pay for it – in dollars per gallon of gasoline, say?

Would you advise Nixon to announce “Project Independence”? Why or why not? 5 It is 1975, Gerald Ford is the PostWatergate President

What has happened to oil prices lately?

President Ford is considering supporting either a motor fuels tax or regulation of average new car and light truck mileage – the CAFE program

Would you have advised him to support the tax, the CAFE program, or neither – and why?

How else might the US have reduced its use of petroleum?

It is late 1980, and President Carter is packing his bags

What has happened to oil prices since 1975?

Some of Carter’s advisors are advocating building a synthetic fuels industry that could turn enough US coal into motor fuel to eliminate the need to import oil.

What would you like to know to decide whether such an effort would be in the public interest?

Based on what you do know (and what Carter might have known in 1980), would you advise him to support this effort and establish the Synthetic Fuels Corporation?

It is 1986; Ronald Reagan is President
What has happened to oil prices since 1980?
How well has the Synthetic Fuels Corporation (SFC) performed?

Would you advise President Reagan to abolish the SFC? Why or why not?

What facts would you like to have had in order to be confident in your advice?

Suppose the SFC had built enough capacity to be able to eliminate the need for oil imports, but at twice the cost of conventional motor fuels.

What would you have advised then?

It is February 2012, and Barack Obama is President
What has happened to US dependence on imported oil since 1986? Overall? Recently?

What happened to CAFE standards from the mid-1980s until the late 2000s? Can you explain this pattern?

Case doesn’t mention 2007 law calling for major increases, proposed in 2008, finalized in 2009

What new environmental concern, not on the radar in the mid-1980s, is complicating energy policy decisions? 9 A Few (Preliminary) Words about Climate

Even though essentially all nations have signed the 1992 UN Framework Convention on Climate Change, which calls for stabilizing GHG concentrations “at a level that would prevent dangerous anthropogenic interference with the climate system” , little has been done to solve this hard problem:

Stabilizing concentrations would require serious actions by many nations, rich & poor, with very different energy systems, and there is no world government to make or enforce rules

This problem involves future generations, since emissions of the main anthropogenic GHG, CO2 (mainly from fossil fuels & land use change), have a half-life around a century; it is politically tough to get people to bear costs today for uncertain benefits in a century or more

Because CO2 is removed from the atmosphere slowly and current emission levels are raising its concentration, global emissions must be CUT drastically to stabilize its concentration

Since 1992, there have been 17 conferences of the parties to the UNFCC (COPs), most recently in Durban, South Africa
COP 3 in 1997 produced the Kyoto Protocol, calling for rich countries (only!) to make reductions in 2008-12
The EU & others ratified; the US did not, and President George W. Bush formally rejected the Protocol in 2001
Subsequent COPs have failed to produce a global agreement on emissions, and the US has been not likely to pass emissions-limiting legislation any time soon
Your COP, beginning 2/29, may be the last chance, since there is growing evidence that damages from climate change may be severe & contain nasty surprise

Back to 2012 & President Obama
Would you advise the President to favor or disfavor electricity generation from coal?

What are the issues?
What about production of synthetic motor fuels from coal?
What are the issues?
What about subsides for EVs and PHEVs?
What are the issues?
Are there any other policies you would advocate to solve “the energy problem”?
Is US coal part of the solution to the US energy problem – or part of the problem?