Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages

In many countries, unreliable inputs, particularly those lacking storage, can significantly limit a firm's productivity. In the case of an increasing frequency of blackouts, a firm may change factor shares in a number of ways. It may decide to self generate electricity, to purchase intermediate goods that it used to produce directly, or to improve its technical efficiency. We examine how industrial firms responded to China's severe power shortages in the early 2000s. Fast-growing demand coupled with regulated electricity prices led to blackouts that varied in degree over location and time. Our data consist of annual observations from 1999 to 2004 for approximately 32,000 energy-intensive, enterprises from all industries. We estimate the losses in productivity due to factor-neutral and factor-biased effects of electricity scarcity. Our results suggest that enterprises re-optimize among factors in response to electricity scarcity by shifting from energy (both electric and non-electric sources) into materials---a shift from "make" to "buy." These effects are strongest for firms in textiles, timber, chemicals, and metals. Contrary to the literature, we do not find evidence of an increase in self generation. Finally, we find that these productivity changes, while costly to firms, led to small reductions in carbon emissions.

Technology Variation vs. R&D Uncertainty: What Matters Most for Energy Patent Success?

R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D—which could be important for capturing the range of costs associated with climate change mitigation policies—by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on returns to energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research efforts appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s.

Voluntary Corporate Environmental Initiatives and Shareholder Wealth

Researchers debate whether environmental investments reduce firm value or actually improve financial performance. We provide some compelling evidence on shareholder wealth effects of membership in voluntary environmental programs (VEPs). Companies announcing membership in EPA\u27s Climate Leaders, a program targeting reductions in greenhouse gas emissions, experience significantly negative abnormal stock returns. The price decline is larger in firms with poor corporate governance structures, and for high market-to-book (i.e., high growth) firms. However, firms joining Ceres, a program involving more general environmental commitments, have insignificant announcement returns, as do portfolios of industry rivals. Overall, corporate commitments to reduce greenhouse gas emissions appear to conflict with firm value maximization. This has important implications for policies that rely on voluntary initiatives to address climate change. Further, we find that firms facing climate-related shareholder resolutions or firms with weak corporate governance standards – giving managers the discretion to make such voluntary environmentally responsible investment decisions – are more likely to join Climate Leaders; decisions that may result in lower firm value

Water Quality Trading and Offset Initiatives in the U.S.: A Comprehensive Survey

This document summarizes water quality trading and offset initiatives in the United States, including state-wide policies and recent proposals. The following format was used to present information on each program. We attempted to have each program summary reviewed by at least one contact person for program accuracy. In the cases where this review occurred, we added the statement "Reviewed by.." at the end of the case summary

Technology variation vs. R&D uncertainty: What matters most for energy patent success?

R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D – which could be important for capturing the range of costs associated with climate change mitigation policies – by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on the outcomes of energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research activities appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s.National Science Foundation (U.S.) (Grant 0825915

Factors Influencing Energy Intensity in Four Chinese Industries

In this paper, we investigate the determinants of decline in energy intensity in four Chinese industries - pulp and paper, cement, iron and steel, and aluminum. This paper attempts to answer the following key question: For the purpose of promoting energy efficiency, do prices, technology, enterprise restructuring and other policy-related instruments affect various sectors uniformly so as to justify uniform industrial energy conservation policies, or do different industries respond significantly differently so as to require policies that are tailored to each sector separately? In this paper, we examine this question using data for China\u27s most energy-intensive large and medium-size enterprises over the period 1999-2004. Our results suggest that in all four industries rising energy costs are a significant contributor to the decline in energy intensity over our period of study. China\u27s industrial policies encouraging consolidations and scale economies also seem to have contributed to reductions in energy intensity in these four industries

Invisible water, visible impact: How unsustainable groundwater use challenges sustainability of Indian agriculture under climate change

India is one of the world’s largest food producers, making the sustainability of its agricultural system of global significance. Groundwater irrigation underpins India’s agriculture, currently boosting crop production by enough to feed 170 million people. Groundwater overexploitation has led to drastic declines in groundwater levels, threatening to push this vital resource out of reach for millions of small-scale farmers who are the backbone of India’s food security. Historically, losing access to groundwater has decreased agricultural production and increased poverty. We take a multidisciplinary approach to assess climate change challenges facing India’s agricultural system, and to assess the effectiveness of large-scale water infrastructure projects designed to meet these challenges. We find that even in areas that experience climate change induced precipitation increases, expansion of irrigated agriculture will require increasing amounts of unsustainable groundwater. The large proposed national river linking project has limited capacity to alleviate groundwater stress. Thus, without intervention, poverty and food insecurity in rural India is likely to worsen

Baseline projections for Latin America: base-year assumptions, key drivers and greenhouse emissions

This paper provides an overview of the base-year assumptions and baseline projections for the set of models participating in the LAMP and CLIMACAP projects. We present the range in baseline projections for Latin America, and identify key differences between model projections including how these projections compare to historic trends. We find relatively large differences across models in base year assumptions related to population, GDP, energy and CO2 emissions due to the use of different data sources, but also conclude that this does not influence the range of projections. We find that population and GDP projections across models span a broad range, comparable to the range represented by the set of Shared Socioeconomic Pathways (SSPs). Kaya-factor decomposition indicates that the set of baseline scenarios mirrors trends experienced over the past decades. Emissions in Latin America are projected to rise as a result of GDP and population growth and a minor shift in the energy mix toward fossil fuels. Most scenarios assume a somewhat higher GDP growth than historically observed and continued decline of population growth. Minor changes in energy intensity or energy mix are projected over the next few decades