From the impacts of climate change and the human costs of air pollution to the benefits of electricity market deregulation, EPIC faculty research has shed new light on some of the most crucial topics in energy this year. Often times, these insights are best illustrated through data presented in easy-to-digest charts. So, we’ve put together ten of our favorites from 2017.
Check them out…
It’s a chart…but a whole lot more! That—along with the fact that air pollution kills more people than AIDS, malaria and tuberculosis combined—landed the Air Quality-Life Index (AQLI)TM as the top EPIC chart of 2017.
The AQLI translates particulate pollution, the deadliest form of air pollution, into its impact on lifespans. So, users can find their country on the map and see how much longer they could live if their government met either national or World Health Organization air quality standards. It complements the frequently used Air Quality Index (AQI), a metric that describes how polluted the air is, but draws no connection to the impact of that pollution on our health.
With an estimated 4.5 billion people around the world exposed to levels of particulates air pollution that are at least twice what the World Health Organization considers safe, the AQLI is a powerful tool to help people understand the consequences of pollution on their lives. In November, when India’s pollution reached record levels, the AQLI was widely used by the news media to put the pollution in relatable terms—demonstrating how, in just a few months, the AQLI has already become a part of the mainstream dialogue on pollution.
What’s next for the AQLI? Introduced in its beta form, EPIC looks forward to expanding the usability, value and public reach of the tool over the coming year. So, look for a significantly expanded version of the AQLI on a more robust and dynamic website to come in 2018. From there, who knows? Maybe someday the AQLI will replace the AQI altogether.
READ MORE: aqli.epic.uchicago.edu
2017 brought record rainfall and unprecedented flooding to Texas, the worst wildfire season in California’s history, and a line of catastrophic storms from which millions of Americans are still recovering. Indicative of the types of changes we’re expected to see more of under climate change, some are calling 2017 a “wake-up call” for what’s in store for our future.
If the world continues on its current path, EPIC’s Amir Jina, an assistant professor at the Harris School of Public Policy, and his colleagues at the Climate Impact Lab find climate change could bring costs to the United States on par with the Great Recession. Worse, these impacts will not dissipate over time and damages for poor regions will be many times larger. This could result in an unequal distribution of damages that surpasses the largest wealth transfer from the poor to the rich in the country’s history, with the poorest third of U.S. counties projected to sustain economic damages costing as much as 20 percent of their income. The researchers’ work finds that states in the South and lower Midwest, which tend to be poor and hot already, are projected to lose the most, with economic opportunity traveling northward and westward. Increasingly extreme heat will drive up violent crime, slow down workers, amp up air conditioning costs, and threaten people’s lives. In the Midwest, climate change could cause agricultural losses similar to the Dustbowl of the 1930s.
Through this work, the team was also able to create a new metric that can help the country manage climate change as it does other systematic economic risks: For each one degree Fahrenheit increase in global temperatures, the U.S. economy loses about 0.7 percent of Gross Domestic Product, with each degree of warming costing more than the last. This metric could be used in the same way the Federal Reserve uses interest rates to manage the risk of recession.
By: Amir Jina, Solomon Hsiang (UC Berkeley), Robert Kopp (Rutgers), James Rising (University of Chicago) and their co-authors
Hydraulic fracturing, or fracking, is perhaps the most important discovery to the energy system in the last half century. As a result of its discovery, U.S. production of oil and natural gas has increased dramatically. This has led to abruptly lower energy prices, stronger energy security and even lower carbon dioxide and air pollution emissions by displacing coal in electricity generation. That is certainly good news for our climate, and our health—with large reductions in air pollution dispersed around the country. Plus, natural gas’s cheap price tag has meant more money in the pockets of American families and businesses. But, our continued access to these benefits depends on local communities allowing fracking. Communities have reached very different conclusions about local benefits and costs with many places banning it and others embracing it.
A primary concern has been whether hydraulic fracturing causes local health problems. EPIC Director Michael Greenstone and his colleagues Janet Currie (Princeton University) and Katherine Meckel (UCLA) dug into data from more than 1.1 million births in Pennsylvania and found that infants born to mothers living up to about 2 miles from a hydraulic fracturing site suffer from poorer health. The largest impacts were to babies born within about a half mile of a site, with those babies being 25 percent more likely to be born at a low birth weight (i.e., less than 5.5 lbs)—leaving them with a greater risk of infant mortality, ADHD, asthma, lower test scores, lower schooling attainment, and lower earnings.
The risk of giving birth to an infant classified as low birth weight decreases the further the mother lives from a site, the study finds. Infants born to mothers living about a half to 2 miles from a site also experienced increases in the probability of low birth weight but the effect is smaller—about a half to a third of the effect within about a half mile. The results also open the door for future research to examine whether fracking is associated with health consequences at other ages.
In contrast, the study found no evidence of impacts on infant health among babies born to mothers living further than about 2 miles from a fracking site. These results suggest that hydraulic fracturing does have an impact on infant health, but only at a highly localized level. Out of the nearly 4 million babies born in the United States each year, back of the envelope calculations suggest that there are about 30,000 births within about a half mile of a fracking site and another 70,000 births about a half to 2 miles away.
Fears of the health consequences of fracking have already stoked bans in many places across the United States. In April, Maryland became the third state to ban fracking, following New York and Vermont. Several countries have also banned the practice, including France and Germany. As local and state policymakers decide whether to allow hydraulic fracturing in their communities, this study provides critical information to help them weigh the costs with the benefits—last year, another study by Greenstone and co-authors Janet Currie, Chris Knittel (MIT) and Alex Bartik (University of Illinois) found local economic benefits, with the average household in communities that allow fracking gaining about $1,900 per year.
By: Michael Greenstone, Janet Currie (Princeton) and Katherine Meckel (UCLA)
While India experienced record air pollution this November, China shut down tens of thousands of its factories and mandated the use of natural gas instead of coal in an unprecedented move to crack down on pollution. And, for good reason. A study by EPIC Director Michael Greenstone and his colleagues found that people who live just to the north of China’s Huai River live 3 years less than people who live just to the south of it. This loss in life expectancy appears to be due to particulates air pollution, which is 46 percent higher just to the north of the river. The differences in life expectancy and air pollution are due to a policy that provided free coal for winter heating to the north of the river. The elevated mortality is entirely due to an increase in cardiorespiratory deaths, further suggesting that air pollution is the cause of reduced life expectancies.
Using an innovative natural experiment formed from the Chinese policy, the researchers isolated the impact of sustained exposure to particulates air pollution from other factors that affect health. This allowed the study’s results to be generalized to quantify the number of years that air pollution reduces lifespans around the globe—not just in China. Specifically, Greenstone and colleagues at EPIC used the findings to develop a new pollution index, the Air Quality-Life Index (AQLI)TM. The index allows users to better understand the impact of air pollution on their lives by calculating how much longer they would live if pollution were brought into compliance with their national or global standards.
Meanwhile, the Chinese government pledged in August to cut northern air pollution by 15 percent in the winter months. As part of its efforts, China is switching its primary source of heating from coal-fired boilers to gas-fired or electric units, along with shutting down polluting plants.
By: Michael Greenstone, Avraham Ebenstein (Hebrew University of Jerusalem), Maoyong Fan (Ball State), Guojun He (Hong Kong University of Science and Technology), and Maigeng Zhou (Chinese Center for Disease Control and Prevention)
Energy efficiency is often considered low-hanging fruit for climate policy. Thought to reduce carbon emissions and save money at the same time—who could argue against it? And to date, market forces have identified plenty of attractive opportunities to reduce the amount of energy consumed per unit of GDP. That’s a big part of why energy demand growth has slowed in many developed markets. Yet major forecasters like the International Energy Agency (IEA) are counting on efficiency programs to play an even larger role in the future, accounting for a third or more of the needed reductions in global carbon emissions by 2040.
But will government and utility-backed programs deliver? A number of recent studies suggest that programs will need to be far more robustly designed, or they will likely fall short of their ambitious goals. In the latest such study, EPIC’s Fiona Burlig and colleagues at MIT, UC Berkeley, UC Davis and Northwestern analyzed a government program to increase building efficiency in K-12 schools in California. They found that while the energy efficiency upgrades lowered energy consumption at the average school by 3 percent, the schools saved only 24 percent of what was originally projected. According to the researchers, a school that invested $400,000 in upgrades, expecting that it would recoup its investment in the form of lower energy bills in 4 years, might never see the investment pay off.
This isn’t the only study that came out this year that showed actual savings from energy efficiency investments are far less than projected. Another study, by EPIC’s Michael Greenstone and his colleague Hunt Allcott from NYU, looked at more than 100,000 households that participated in a large, federally-funded stimulus program in Wisconsin. They found the investments there saved only about 58 percent of what was promised, but that a handful of program reforms could lead to far better outcomes.
By: Fiona Burlig, Christopher Knittel (MIT), David Rapson (UC Davis), Mar Reguant (Northwestern), and Catherine Wolfram (UC Berkeley)
Real-time electricity pricing is widely viewed as an increasingly critical tool for grid operators, especially if grids around the world are to shift to more variable sources of generation like wind and solar power. A key advantage of charging customers based on supply and demand is that it encourages them to use power in ways that minimize system costs. Prices rise during peak times, incentivizing households to use less power, thereby easing pressure on the grid. Low prices overnight or during peak solar generating hours tell customers it might be a good time to run the dishwasher.
Despite these benefits, the number of households choosing to take up time-based pricing models has historically been quite low, and mandating this pricing can be politically difficult. To bridge this gap, governments and utilities often turn to incentives that prompt consumers to join time-based programs. But do these programs work? To answer this question, EPIC’s Koichiro Ito, an assistant professor at the Harris School of Public Policy, studied more than 2,000 households in Japan who could join a new time-based program that offered a low electricity rate during the morning and night, and a higher rate in the afternoon when electricity use was at its peak.
The good news? He discovered that those who were given information about the program and a $60 bonus for switching were 50 percent more likely to join the program (30 percent more likely if they were only given the information).
But, after joining the program, the customers who were the most likely to change their behaviors and conserve energy were those who were originally not given any information or incentives to join. These customers reduced their electricity use by 20 percent. Those who switched plans after being prodded with information were half as likely to adjust their behaviors in the end, and those given the $60 bonus were also less likely. Why? In prodding them to join, customers who would not have otherwise made the switch did so, filling the program with customers who were not fully motivated to change their behavior. Instead, those customers who switched based solely on interest were more naturally motivated to conserve energy.
By: Koichiro Ito
This year, the U.S. Department of Energy proposed a rule that would subsidize the ailing coal and nuclear industries, arguing that these sources of electricity are needed to ensure grid reliability as renewable fuels gain market share. Critics of the proposed rule say it is an unnecessary bailout of uncompetitive and dirty energy sources, and that renewables pose no threat to grid reliability. Critics also say it could “blow up the market” by depressing costs.
The possible threat to U.S. electricity markets comes as EPIC’s Steve Cicala, an assistant professor at the Harris School of Public Policy, finds the enormous cost-saving potential of these markets. After constructing a virtually complete hourly characterization of U.S. electric grid supply and demand and comparing the data in wholesale electricity markets to regulated command-and-control areas before and after markets were introduced, Cicala finds that using a market approach to buy and trade electricity saves about $3 billion a year. That’s due to the increased efficiencies and coordination the markets bring.
The study finds that power plant generators operating within markets are more likely to ensure their power plants are available to run when it is most economical. This means the lowest-cost plants are used 10 percent more often in market regions. This reduces “out of merit” costs—the costs incurred when the lowest-cost plant isn’t used—by nearly 20 percent. Further, power suppliers operating within markets are able to better identify low-cost generators across areas and better coordinate the dispatch of power, increasing trade by 10 percent. The savings from these transactions increases by 20 percent a year.
By: Steve Cicala
As this year’s hurricanes force some regions, such as Houston, Miami and Puerto Rico, Miami, to consider how they will prepare for the more intense storms that are expected under climate change, other areas of the country and economy will also need to consider how they will adapt to future changes. The agricultural sector is just one example.
In the U.S., if we keep growing crops where they are being grown today, yields from four major crops will drop by as much as 40 percent on average by the end of the century due to a warming climate, according to research by EPIC’s Amir Jina, an assistant professor at the Harris School of Public Policy, and his colleagues at the Climate Impact Lab. Specifically, areas in the northern U.S. and southern Canada are likely to become more important sources of grain production, while yields decline in the south and middle of the country due to higher summer temperatures. This shift will force many farmers to make difficult decisions about which crops to grow, but also whether to migrate to more suitable climates, dramatically shift their agricultural practices and investments, or stay put and stop growing crops altogether.
Migration and crop-switching will become necessary ways of adapting to climate change, but so will increased irrigation. To make good use of scarce water resources in a climate-stressed future, it will be critical to ensure that water flows to the highest-value applications. EPIC’s executive director Sam Ori writes about a study by University of Chicago researcher Oliver Browne that found clarifying property rights can lead to the improvement or development of water markets, with the aim of increasing agricultural productivity.
By: Sam Ori
Federal regulators recently announced a review of efficiency standards for new cars and light trucks sold in the United States between 2012 and 2025. The standards, which aim to reduce greenhouse gas emissions by doubling the efficiency of new vehicles sold in 2025 compared to those sold in 2010, were originally projected to save nearly 12 billion barrels of oil over the lifetime of vehicles sold in this period. But five years into the program, a significant gap has emerged between the actual, combined efficiency of vehicles sold and what was expected when the policy was written. Based on data from the Department of Transportation, actual fuel efficiency trailed original government projections by 1.4 miles per gallon in model year 2016, and the gap could widen to as much as 4 miles per gallon in model year 2017.
Why the divergence between expectations and reality? Oil prices have changed dramatically and Americans’ buying habits have shifted. When regulators made their initial projections, government forecasts suggested that oil prices would keep rising with time, averaging close to $100 per barrel through 2025. These forecasts didn’t anticipate the U.S. shale revolution or the global oil price crash that began in 2014. Regulators had expected that consumer preferences and high fuel prices would drive Americans toward smaller cars and away from pick-ups and SUVs. The opposite has happened.
Fuel economy standards are proving to be both expensive and inefficient. In response, EPIC’s Sam Ori and Michael Greenstone, in collaboration with Cass Sunstein from Harvard University, came up with a solution that introduces a more market-based approach. The new proposal offers an opportunity to achieve more cost-effective and certain fuel savings by removing considerations of vehicle type and size, refocusing on expected lifetime vehicle emissions, and establishing a robust cap-and-trade program.
By: Sam Ori, Michael Greenstone, and Cass Sunstein (Harvard)
After three years of planning, nearly $4 billion in capital investment and a year of legal disputes and protests, the Dakota Access Pipeline began transporting crude oil this year. The move came just after President Trump issued the permits for the even-more-contested Keystone XL pipeline. And, it was followed by pipeline investors’ worst fear: a 210,000 gallon pipeline leak. The protests, struggle for approval, and then the leak, highlight the challenges pipelines face. But EPIC’s Thomas Covert and Ryan Kellogg point out another threat: the railroad industry. Although pipelines have historically been safer and more economically efficient than railroads, railroad crude oil shipments can ramp up and down—and ship anywhere—much more flexibly than pipelines could ever hope to achieve. This flexibility is a key advantage in the new U.S. oil production landscape.
Covert, an assistant professor at the Booth School of Business, dug further into the historical trend. From mid-2011 to mid-2012, pipeline bottlenecks caused large differences in prices across locations in the United States. Being able to ship to whatever location had the highest price was worth about $1.80 a barrel, so during a time when the best “local” oil prices averaged $96 per barrel and break even costs averaged $90 per barrel, option value increased per barrel margins by thirty percent. At the same time, the value of flexibility to refiners was worth more than $5 per barrel. For both producers and refiners, the value of this flexibility eventually dissipated in 2014, when several Midwestern pipeline expansion projects went into service, eliminating the previously large price differences across locations.
With these price differences gone, rail’s flexibility was no longer needed. But, with a long history of volatile prices, rail’s flexibility will likely return as a source of value for the oil industry in the years to come. That could hurt pipeline investments. Covert and Kellogg, a professor at the Harris School of Public Policy, evaluated how much larger the recently-constructed Dakota Access Pipeline would have been had crude-by-rail been more costly and less flexible. They find that a $1 per barrel increase in the cost of rail would have caused the pipeline’s capacity to be 29,000 to 74,000 barrels per day more than its actual 470,000 barrels per day capacity. Additionally, the ability of crude-by-rail shipments to reach multiple destinations also affects investment incentives. Without this advantage, the capacity of the Dakota Access Pipeline would have been 26,000 to 64,000 barrels per day larger.
By Thom Covert