Carbon Pricing, Clean Electricity Standards, and Clean Electricity Subsidies on the Path to Zero Emissions

Energy Institute Webinar

Thursday, July 28, 2022
9:30am-10:30am PDT

View Speaker Slides

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Authors:

Severin Borenstein
Professor of the Graduate School in the Economic
Analysis and Policy Group, Haas School of Business
Faculty Director, Energy Institute at Haas
University of California, Berkeley

Ryan Kellogg
Professor at the Harris School of Public Policy
Deputy Dean for Academic Programs
University of Chicago

Overview:

Severin Borenstein and Ryan Kellogg discuss their new paper on the relative impact that carbon pricing, clean electricity standards or zero-emission subsidies would have on emissions, consumer costs and government revenues on the path to a 100% greenhouse gas free electric grid.

Abstract:

Pricing carbon, setting intensity standards, and subsidizing clean energy are competing incentive-based approaches policymakers can use to address greenhouse gas emissions from electricity generation. The authors compare the market outcomes under each approach to reach similar expansions of clean electricity generation. While pricing emissions gives strong incentives to first eliminate generation with the highest social cost, a clean energy standard incentivizes earliest phaseout of the generation with the highest private cost. The authors show that whether these two incentives lead to different results depends on the correlation between private costs and emissions rates. They then estimate this correlation for US electricity generation and fuel prices as of 2019. The results indicate that the emissions difference between a carbon tax and clean energy standard that phase out fossil fuel generation over the same timeframe may actually be quite small, but depends on fossil fuel prices during the phaseout. The authors also discuss how each of these policy options is likely to impact electricity prices, quantity demanded, government revenue, and economic efficiency. Large pre-existing markups of retail electricity prices over marginal costs are likely to considerably weaken or even reverse the usual assumed efficiency advantage of carbon pricing policies over alternatives, including direct subsidization of clean electricity generation. | View Full Paper

Additional Information:

  • The authors’ presentation will be followed by Q&A.
  • For registration questions, please contact Cristina Bentley, cristina_bentley@berkeley.edu