From how often Americans are using their EVs to the impact of wildlife protections on labor markets and the role rich countries will play in driving energy use as climate change increases, 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. Here are ten of our favorites from 2021.
#1 – Policy Brings a Sharp Pollution Decline in China, While Pollution is on the Rise in South Asia
Global Trends in PM2.5 Concentrations, 1998-2019
Source: 2021 Annual Update, Air Quality Life Index, September 2021
Air pollution ranks among the most significant threats to human health globally. Yet, experience shows that public policy can have an impact. China is an important model of how policy can produce sharp reductions in pollution in short order. Since the country began its “war against pollution” in 2014, China has reduced its particulate pollution by 29 percent—making up three-quarters of the reductions in air pollution across the world—and adding 1.5 years onto the lives of its people. It is a hopeful example for other global regions, particularly South Asia, where pollution levels have increased by 35 percent since the turn of the century—making up 38 of the world’s increase in pollution. If South Asia implemented policies to reduce its pollution to the World Health Organization’s guideline, its residents could live close to 6 years longer.
#2 – Electricity Consumption Will Rise in Rich Countries Adapting to Climate Change While the Poor Struggle
As Temperatures Reach Extremes, Electricity Consumption Increases with Socioeconomic Status
Note: This figure shows the impact of a day at each temperature (compared to a day at 20°C) on per capita electricity consumption, for the richest 20% (high-income), next 20% (middle-income), and poorest 60% (low-income) of the present-day global income distribution.
Source: Estimating a Social Cost of Carbon for Global Energy Consumption, Nature, October 2021
The richest 40 percent of the world’s population drives increases in energy use on extreme hot days, a Climate Impact Lab study found. Using data from 146 countries over 40 years, the researchers studied the effects of behavioral adaptations like the adoption of air conditioning that populations in each region will undertake as they become more affluent and exposed to warmer climates. On hot days in wealthy locations, per-person electricity consumption soars, especially among the richest 20 percent. This reflects access to air conditioning, present in 90 percent of homes in the United States. For the poorest 60 percent, extreme heat results in virtually no increase in electricity consumption as costly technologies remain largely out of reach. This is the case, for example, in India where currently only 5 percent of homes have air conditioning.
#3 – Following States’ Lead to Improve Federal Oil and Gas Leasing Policies
Federal Leasing Policies vs. State Policies
Note: The average royalty rate in each state is the average of the lowest and highest royalties used in state auctions. Primary terms are identical for all auctions in each state except TX, which sometimes uses three years. The minimum reserve price is the lowest reserve observed in each state’s auctions. The highest reserve observed in NM is $1,875/acre, and the highest reserve observed in TX is $5,000/acre.
Source: Ensuring Americans Receive Fair Value for U.S. Oil and Gas Resources, U.S. Energy & Climate Roadmap, March 2021
The Department of Interior released in November a set of reforms to the federal oil and gas leasing process. The reforms reflect many of the recommendations made earlier this year by Booth School of Business’s Thom Covert and Harris Public Policy’s Ryan Kellogg. First, Covert and Kellogg said the federal government could set a royalty rate more in line with Texas, Louisiana, New Mexico and North Dakota, where the rate can exceed 20 percent. Second, the government could reduce the amount of time drillers can sit idle on federal lands. Right now, firms get 10 years to develop lands—double the amount of time given to drillers on state lands. These changes can be combined with reforms to the bidding process. Currently, firms only need to pay $2 per acre for the land they bid on. In Texas, minimum bids can be as much as $5,000 per acre.
#4 – The Strength of Climate Policy Starts With One Number
Current U.S. Social Cost of Carbon (SCC) is Behind Frontier Science
Note: Sector-specific “partial” SCCs come from the Interagency Working Group (IWG) 2013 implementation of the FUND model (grey) and recent scientific literature (yellow).
Source: Updating the United States Government’s Social Cost of Carbon, SSRN Working Paper, November 2021
The social cost of carbon (SCC), which converts a wide range of climate damages to a single monetary value, is essential for conducting regulatory cost-benefit analysis. In 2021, after a regulatory review of actions taken during the Trump administration, the Biden administration established an interim SCC of $51 per ton. But the latest research shows the number could be significantly higher. As the administration conducts a more comprehensive update, EPIC’s Michael Greenstone and UC Santa Barbara’s Tamma Carleton proposed several recommendations to guide their review. One would be to adjust the discount rate to reflect changes in global capital markets, bringing the social cost of carbon to $125 per ton.
#5 – Industry Exaggerates Job Losses of Species Protections
Total Employment Across NSO States vs. Non-NSO States
Note: NSO=Northern Spotted Owl. Industry predicted job losses are a graphical depiction of the 130,000 jobs industry predicted would be lost following the listing of the northern spotted owl but giving no timeline of when those job losses would occur.
Source: Labor Market Impacts of Land Protection: The Northern Spotted Owl, Journal of Environmental Economics and Management, June 2021
As the Biden administration laid out its plan this year to conserve 30 percent of the nation’s land and waters by 2030, the move conjured up the age-old tension between conservationists and industry, with industry setting up a hard choice between saving wildlife or jobs. The “poster species” behind the tension has, for more than three decades, been the northern spotted owl (NSO) that lives amidst the Pacific Northwest’s logging industry. After decades of logging led to a dwindling owl population, 40 percent of the logging forests were set aside as critical habitats in 1992. The logging industry claimed this would result in as many as 130,000 job losses. Harris Public Policy’s Eyal Frank discovered the protections led to only 32,000 timber workers losing their jobs—a 28 percent decline.
#6 – The Role of Taxes and Border Adjustments in Efficient Climate Policy
Emissions Reductions vs. Cost for Optimal Policy Compared to Traditional Policies
Source: Optimal Unilateral Carbon Policy, BFI Working Paper, November 2021
Can countries set ambitious climate policies without incentivizing industries to relocate? This question is at the crux of many of today’s policy debates, including discussions around carbon taxes, and has prompted the EU to announce this year that it is considering carbon border adjustments. New research from UChicago Law’s David Weisbach suggests a combination of the right taxes and border adjustments can allow countries to achieve this balance. By combining targeted taxes on fossil fuel extraction with border adjustments on fossil fuel trade at a lower rate than the extraction tax (red line), policymakers can achieve very close to the modeled “optimal policy” (gray line) that reduces the greatest emissions at the lowest cost. The “optimal policy” goes further by adding border adjustments to other imports and subsidies on exports.
#7 – Air Pollution is Devastating for Rich and Poor Alike
Indoor Pollution Levels at Low- and High-Income Households in Delhi
Source: Indoor Air Quality, Information, and Socioeconomic Status: Evidence from Delhi, AEA Papers and Proceedings, May 2021
It is a common belief that the world’s environmental burdens fall on the shoulders of the poor and not the rich. In Delhi, India, one of the world’s most polluted cities, the rich live far from city centers and largely work indoors. But is it really true that the rich are breathing clean air? AQLI Director Ken Lee, PhD student Harshil Sahai and EPIC Director Michael Greenstone decided to investigate. They measured the indoor air quality in thousands of Delhi homes and found that wintertime indoor air pollution levels were 46 times higher than the World Health Organization guideline. Surprisingly, pollution levels inside homes in Delhi’s richest neighborhoods were just 10 percent lower than those found in poorer neighborhoods. Simply put, very few in Delhi are breathing clean air even from the safety of their homes.
#8 – Current U.S. Policy is Piecemeal and Often Expensive
The Cost of Reducing Carbon for Various U.S. Policies
Source: Put a Price on It: The How and Why of Pricing Carbon, U.S. Energy & Climate Roadmap, March 2021
The Biden administration made climate change a priority this year. But the current approach to reducing carbon emissions relies on a range of piecemeal sector- and technology-specific policies that chip away at emissions in a way that makes them unnecessarily expensive. The chart shows estimates of the cost per ton abated for a range of proposed or implemented carbon reduction policies. The price society pays for a given unit of climate mitigation varies widely across programs and frequently far exceeds the social cost of carbon. The Biden administration set an interim social cost of carbon at $51 per ton. Adjusting to changes in global capital markets would bring the social cost of carbon to $125 per ton.
#9 – Electric Vehicle Owners Drive Less Than We Thought
Impacts of EV Adoption on Household Electricity Use
Source: Low Energy: Estimating Electric Vehicle Electricity Use, NBER Working Paper, February 2021
Powerbrokers around the world in 2021 announced their intention to “go all in” on electric vehicles (EVs), anointing EVs as the replacement technology for the traditional gas-powered car. But currently, they comprise less than one percent of the vehicle fleet. Are consumers ready to make the switch? Harris Public Policy’s Fiona Burlig and her colleagues combine nearly 12 billion hours of electricity meter measurements with EV registration records to estimate how much people are driving their EVs. When a household gets a new EV, electricity demand increases but only by 2.9 kilowatt-hours (kWh) per day—translating into about 6,700 miles of driving in battery electric vehicles per year, half as far as people on average drive their gas-powered cars.
#10 – Americans See Climate Change as More Important and Will Pay More to Fight It
Public Opinion on Climate Change and Policy
Rank of Climate Change as Very Important Support for a Carbon Fee
Source: EPIC/AP-NORC Public Opinion Poll: Where do Americans Stand on Climate and Energy Policy?, The AP-NORC Center for Public Affairs Research, October 2021
On the eve of COP26, EPIC and AP/NORC released the results of a public opinion poll finding that most Americans believe the pace of climate change is increasing, and 59 percent say climate change is very or extremely important to them—up 10 percentage-points from 2018. Most Americans support policies to confront climate change and are willing to pay more in their energy bills to combat it. When asked about their support for a nationwide fee on carbon emissions, the data indicate that Americans on average are willing to pay $40 a month for the fee, up from $27 a month when asked a similar question in 2018. For context, this is roughly equal to a carbon price of $30 per ton—double the $15 per ton carbon price that was floated in the Senate this year and more than the projected cost of the Waxman-Markey Bill that would have cost the average household about $15 per month.