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Dr. John Parsons joins the Global Markets Advisory Committee of the CFTC

John Parsons


CEEPR’s former Executive Director, Dr. John Parsons, was recently appointed to the Global Markets Advisory Committee of the Commodities Futures Trading Commission (CFTC). The CFTC is the US government agency responsible for supervising most derivatives trading in the US, including the energy and agriculture commodity derivatives markets. The committee provides input to the Commission on the interaction of regulations with the global nature of business and the derivatives marketplace. Members of the committee come from the various derivative exchanges and clearinghouses, dealers, brokers and other intermediaries, and end-users as well as public policy advocacy organizations. Over the last number of years, Dr. Parsons has been actively engaged in discussions about how derivatives reform impacts commercial end-users, including presentations at CEEPR Workshops and CEEPR publications.

(February 2014)


Study: Ethanol not a major factor in reducing gas prices


MIT economist finds that biofuels, contrary to claims, do not meaningfully affect what drivers pay at the pump.

by Peter Dizikes, MIT News Office

If you have stopped at a gas station recently, there is a good chance your auto has consumed fuel with ethanol blended into it. Yet the price of gasoline is not substantially affected by the volume of its ethanol content, according to a paper co-authored by an MIT economist. The study seeks to rebut the claim, broadly aired over the past couple of years, that widespread use of ethanol has reduced the wholesale cost of gasoline by $0.89 to $1.09 per gallon.

Whatever the benefits or drawbacks of ethanol, MIT’s Christopher Knittel says, price issues are not among them right now.

“The point of our paper is not to say that ethanol doesn’t have a place in the marketplace, but it’s more that the facts should drive this discussion,” says Knittel, the William Barton Rogers Professor of Energy and a professor of applied economics at the MIT Sloan School of Management.

The 10 percent solution?

The vast majority of ethanol sold in the United States is made from corn. It now constitutes 10 percent of U.S. gasoline, up from 3 percent in 2003. 

It is another matter, however, whether that increase in ethanol content produces serious savings at the pump, as some claim. Knittel and his co-author, economist Aaron Smith of the University of California at Davis, contest such an assertion in their paper, which is forthcoming in The Energy Journal, a peer-reviewed publication in the field. 

The claim that ethanol lowers prices derives from a previous study on the issue, which Knittel and Smith believe is problematic. That prior work involves what energy economists call the “crack ratio,” which is effectively the price of gasoline divided by the price of oil. 

The crack ratio is something energy analysts can use to understand the relative value of gasoline compared to oil: The higher the crack ratio, the more expensive gasoline is in relative terms. If ethanol were a notably cheap component of gasoline production, its increasing presence in the fuel mix might reveal itself in the form of a decreasing crack ratio. 

So while gasoline is made primarily from oil, there are other elements that figure into the cost of refining gasoline. Thus if oil prices double, Knittel points out, gasoline prices do not necessarily double. But in general, when oil prices — as the denominator of this fraction — go up, the crack ratio itself falls. 

The previous work evaluated time periods when oil prices rose, and the percentage of ethanol in gasoline also rose. 

But Knittel and Smith assert that the increased proportion of ethanol in gasoline merely correlated with the declining crack ratio, and did not contribute to it in any causal sense. Instead, they think that changing oil prices drove the change in the crack ratio, and that when those prices are accounted for, the apparent effect of ethanol “simply goes away,” as Knittel says. 

To further illustrate that the previous study was touting a correlation, not a causal relationship, Knittel and Smith conducted what are known in economics literature as “antitests” of that study’s model. By inserting unconnected dependent variables into the model, they found that the model also produced a strong correlation between ethanol content in gasoline and, for instance, U.S. employment figures — although the latter are clearly unrelated to the composition of gasoline. 

The previous work also claimed that if ethanol production came to an immediate halt, gasoline prices would rise by 41 to 92 percent. But Knittel does not think that estimate would bear out in such a scenario. 

“In the very short run, if ethanol vanished tomorrow, we would be scrambling to find fuel to cover that for a week, or less than a month,” Knittel says. “But certainly within a month, increases in imports would relax or reduce that price impact.”

Informing the debate

The differing assessments of ethanol’s impact have garnered notice among economists and energy policy analysts. Scott Irwin, an economist at the University of Illinois at Urbana-Champaign who has read the paper, calls it a “convincing and compelling” rebuttal to the idea that expanding ethanol content in gasoline drastically lowers prices. 

“The paper dispensed once and for all with that conclusion,” Irwin says. Still, he adds, there remains an open debate about the marginal effects of ethanol content in gasoline, and more empirical work on the subject would be useful. 

“A case can be made that it can be a positive few cents,” Irwin says, adding that “reasonable arguments can be made on either side of zero” regarding ethanol’s price impact. In either case, Irwin says, his view is that the effect is currently a small one.

Knittel has posted, on his MIT Sloan web page, a multipart exchange between himself and Dermot Hayes, an Iowa State University economist who is a co-author of the prior work. After an initial finding that ethanol reduced gasoline prices by $0.25 per gallon, Hayes and a co-author produced follow-up studies, examining about a decade after 2000, and arrived at the figures of $0.89 and $1.09 per gallon, which gained wider public traction.  

Knittel acknowledges that policy decisions about gasoline production are driven by a complex series of political factors, and says his study is not intended to directly convey any policy preferences on his part. Still, he suggests that even ethanol backers in policy debates have reason to keep examining its value.

“Making claims about the benefits of ethanol that are overblown is only going to set up policymakers for disappointment,” Knittel says.

(December 2013)


An experiment puts auditing under scrutiny


Unique study reduces pollution in India while calling conventional auditing markets into question.

by Peter Dizikes, MIT News Office

CAMBRIDGE, MA -- The structure of the auditing business appears problematic: Typically, major companies pay auditors to examine their books under the so-called “third-party” audit system. But when an auditing firm’s revenues come directly from its clients, the auditors have an incentive not to deliver bad news to them.

So: Does this arrangement affect the actual performance of auditors?

In an eye-opening experiment involving roughly 500 industrial plants in the state of Gujarat, in western India, changing the auditing system has indeed produced dramatically different outcomes — reducing pollution, and more generally calling into question the whole practice of letting firms pay the auditors who scrutinize them.

“There is a fundamental conflict of interest in the way auditing markets are set up around the world,” says MIT economist Michael Greenstone, one of the co-authors of the study, whose findings are published today in the Quarterly Journal of Economics. “We suggested some reforms to remove the conflict of interest, officials in Gujarat implemented them, and it produced notable results.”

The two-year experiment was conducted by MIT and Harvard University researchers along with the Gujarat Pollution Control Board (GPCB). It found that randomly assigning auditors to plants, paying auditors from central funds, double-checking their work, and rewarding the auditors for accuracy had large effects. Among other things, the project revealed that 59 percent of the plants were actually violating India’s laws on particulate emissions, but only 7 percent of the plants were cited for this offense when standard audits were used.

Across all types of pollutants, 29 percent of audits, using the standard practice, wrongly reported that emissions were below legal levels.

The study also produced real-world effects: The state used the information to enforce its pollution laws, and within six months, air and water pollution from the plants receiving the new form of audit were significantly lower than at plants assessed using the traditional method.

The co-authors of the paper are Greenstone, the 3M Professor of Environmental Economics at MIT; Esther Duflo, the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT; Rohini Pande, a professor of public policy at the Harvard Kennedy School; and Nicholas Ryan PhD ’12, now a visiting postdoc at Harvard.

The power of random assignment

The experiment involved 473 industrial plants in two parts of Gujarat, which has a large manufacturing industry. Since 1996 the GPCB has used the third-party audit system, in which auditors check air and water pollution levels three times annually, then submit a yearly report to the GPCB.

To conduct the study, 233 of the plants tried a new arrangement: Instead of auditors being hired by the companies running the power plants, the GPCB randomly assigned them to plants in this group. The auditors were paid fixed fees from a pool of money; 20 percent of their audits were randomly chosen for re-examination. Finally, the auditors received incentive payments for accurate reports.

In comparing the 233 plants using the new method with the 240 using the standard practice, the researchers uncovered that almost 75 percent of traditional audits reported particulate-matter emissions just below the legal limit; using the randomized method, only 19 percent of plants fell in that narrow band.

All told, across several different air- and water-pollution measures, inaccurate reports of plants complying with the law dropped by about 80 percent when the randomized method was employed.

The researchers emphasize that the experiment enabled the real-world follow-up to occur.

“The ultimate hope with the experiment was definitely to see pollution at the firm level drop,” Duflo says. The state’s enforcement was effective, as Pande explains, partly because “it becomes cheaper for some of the more egregious pollution violators to reduce pollution levels than to attempt to persuade auditors to falsify reports.”

According to Ryan, the Gujarat case also dispels myths about the difficulty of enforcing laws, since the experiment “shows the government has credibility and will.”

But how general is the finding?

In the paper, the authors broaden their critique of the audit system, referring to standard corporate financial reports and the global debt-rating system as other areas where auditors have skewed auditing incentives. Still, it is an open question how broadly the current study’s findings can be generalized.

“It would be a mistake to assume that quarterly financial reports for public companies in the U.S. are exactly the same as pollution reports in Gujarat, India,” Greenstone acknowledges. “But one thing I do know is that these markets were all set up with an obvious fundamental flaw — they all have the feature that the auditors are paid by the firms who have a stake in the outcome of the audit.”

Greenstone also says he hopes the current finding will spur related experiments, and gain notice among regulators and policymakers.

“No one has really had the political will to do something about this,” Greenstone says. “Now we have some evidence.”

The study was funded by the Center for Energy and Environmental Policy Research, the Harvard Environmental Economics Program, the International Growth Centre, the International Initiative for Impact Evaluation, the National Science Foundation and the Sustainability Science Program at Harvard.

A summary of the study by The Abdul Latif Jameel Poverty Action Lab (J-PAL), is available here:

Full report can he found here.

(October 2013)


Climate Change Policy: What do the Models Tell Us?


Clarifying a new paper on integrated assessment models.

Professor Robert Pindyck has a new working paper (CEEPR-WP-2013-007) that has attracted a good share of attention since it steps into the highly charged debate on the reliability of research related to climate change. But in this case, the focus is on what we learn from one class of economic model, the so-called integrated assessment models (IAM). These models have been used to arrive at a “social cost of carbon” (SCC). For example, in 2010 a U.S. Government Interagency Working Group recommended a $21/t CO2 as the social cost of carbon to be employed by US agencies in conducting cost-benefit analyses of proposed rules and regulations. This figure was recently updated to $33/t. Professor Pindyck’s paper calls attention to the wide, wide range of uncertainty surrounding key inputs to IAM models, and to the paucity of reliable empirical data for narrowing the reasonable range of input choices. The paper then suggests profitable directions for reorienting future research and analysis.

Reflecting the highly charged nature of the U.S. political debate on climate change, Professor Pindyck’s paper has been seized on by opponents of action. In particular, certain blogs have cited his paper in support of their campaign against any action. Here is one example—link.

Interestingly, Professor Pindyck is an advocate of action on climate change, such as leveling a carbon tax. So his own view of the implications of his research are quite different than that of those who oppose any action. This post at the blog of the Natural Resources Defense Council includes more extensive comments by Professor Pindyck on the debate—link.

An alternative approach is to think about Professor Pindyck’s review as a guide for future research on the costs of climate change which is better focused to address the important uncertainties in a way that can better contribute to public discussion and analysis. CEEPR researcher Dr. John Parsons emphasizes this point in his blog post about Pindyck’s paper—link.

Read full paper here

Photo by: Daniel E. Lee

(September 2013)

Study estimates extent to which air pollution in China shortens human lives


New quasi-experimental research finds major impact of coal emissions on health.

A high level of air pollution, in the form of particulates produced by burning coal, significantly shortens the lives of people exposed to it, according to a unique new study of China co-authored by Michael Greenstone, the 3M Professor of Environmental Economics at MIT.

The research is based on long-term data compiled for the first time, and projects that the 500 million Chinese who live north of the Huai River are set to lose an aggregate 2.5 billion years of life expectancy due to the extensive use of coal to power boilers for heating throughout the region. Using a quasi-experimental method, the researchers found very different life-expectancy figures for an otherwise similar population south of the Huai River, where government policies were less supportive of coal-powered heating. 

“We can now say with more confidence that long-run exposure to pollution, especially particulates, has dramatic consequences for life expectancy,” says Greenstone, who conducted the research with colleagues in China and Israel.

The paper, published in the Proceedings of the National Academy of Sciences, also contains a generalized metric that can apply to any country’s environment: Every additional 100 micrograms of particulate matter per cubic meter in the atmosphere lowers life expectancy at birth by three years.

View full article.

(July 2013)

MIT and UC Berkeley launch energy-efficiency research project




The E2e Project aims to give decision-makers real-world evidence on the most cost-effective ways to reduce energy and emissions.

Energy efficiency promises to cut emissions, reduce dependence on foreign fuel, and mitigate climate change. As such, governments around the world are spending tens of billions of dollars to support energy-efficiency regulations, technologies and policies.

But are these programs realizing their potential? Researchers from the MIT Energy Initiative (MITEI) and University of California at Berkeley’s Haas School of Business have collaborated to find out.

The researchers’ energy-efficiency research project, dubbed “E2e,” is a new interdisciplinary effort that aims to evaluate and improve energy-efficiency policies and technologies. Its goal is to support and conduct rigorous and objective research, communicate the results and give decision-makers the real-world analysis they need to make smart choices.

The E2e Project is a joint initiative of the Energy Institute at Haas and MIT’s Center for Energy and Environmental Policy Research (CEEPR), an affiliate of MITEI — two recognized leaders in energy research.

The project’s name, E2e, captures its mission, the researchers say: to find the best way to go from using a large amount of energy (“E”) to a small amount of energy (“e”), by bringing together a range of experts — from engineers to economists — from MIT and UC Berkeley. This collaboration, the researchers say, uniquely positions the E2e Project to leverage cutting-edge scientific and economic insights on energy efficiency.

View full article.

(June 2013)

Climate Change Policy that Makes Economic Sense


Climate change policy can be complex, expensive to implement, and have unintended negative consequences on the environment. Focusing on the economics of transportation policy, Professor Christopher Knittel is working help create climate change policy that is more efficient and economically sustainable.

In this Faculty Forum Online broadcast, Knittel discussed his studies of consumer and company reactions to energy price fluctuations and the implications of this work for effective environmental policies. Watch the video then visit the Slice of MIT blog and continue the conversation in the comments.

Knittel, a William Barton Rogers Professor of Energy Economics and codirector of the Center for Energy and Environmental Policy Research, is a research associate at the National Bureau of Economic Research and an associate editor The American Economic Journal—Economic Policy, The Journal of Industrial Economics and Journal of Energy Markets.

MIT TechTV link

(April 2013)

The Economics of Keystone XL



Would the approval and construction of the Keystone XL pipeline from Alberta, Canada to the US Gulf Coast lead to increased emissions? In this Bloomberg opinion piece, CEEPR co-director Professor Christopher R. Knittel discusses the economics behind three key assumptions that would need to be valid in order for Keystone XL to produce more GHG emissions.

View full article.

(March 2013)

E2e Project to Provide Much-Needed Energy Efficiency Research

Christopher Knittel

In a column in USA Today, CEEPR co-Director Christopher Knittel writes that more research into energy efficiency is needed if Americans are to meet the energy efficiency goal set by President Obama in his State of the Union Address. In the speech, President Obama called on Americans to “cut in half the energy wasted by our homes and businesses over the next 20 years.” Knittel details how E2e, a new joint program between MIT’s CEEPR and U.C. Berkeley, will conduct rigorous analysis into this area to identify where consumers are systematically making mistakes, and how large those mistakes are, before much more government money is spent on promoting energy efficiency.

(March 2013)

Economics Doctoral Students

Current Economics Doctoral Students


MIT Economics doctoral students are researching a wide range of energy and environmental policy issues. Pictured above, from left to right, are Joseph Shapiro, Manasi Abhay Deshpande and Jennifer Peck.

Joseph Shapiro studies trade and the environment. His current research analyzes components of the EU Emissions Trading System, the Waxman-Markey Bill, and the global Kyoto Protocols, which regulate the CO2 emissions from transportation.

Manasi Abhay Deshpande studies the economic and health effects of environmental regulation and firm responses to regulation. She is currently working on a project on firm compliance and trading behavior in the U.S. Acid Rain Program. 

Jennifer Peck’s work focuses on the political economy of global oil markets and on the microeconomic development issues of resource-rich countries. A current line of her research explores the relationship between oil imports and domestic politics in the United States. Another evaluates the effectiveness of Saudi labor market policies in combating unemployment and encouraging the growth of the private sector.

(December 2012)

CFTC Roundtable on the Proposed Volcker Rule

John Parsons

Photo: Dr. John Parsons (right)


CEEPR Executive Director Dr. John Parsons’ research and engagement on risk management and the reform of derivatives markets sent him to the Commodity Futures Trading Commission’s (CFTC) Roundtable on the proposed Volcker Rule. The CFTC is one of several regulatory agencies tasked with implementing the section of the Dodd-Frank Act known as the Volcker Rule. How the rule is implemented may impact the liquidity of key financial markets. Video for the Roundtable is available here. The transcript is available on the CFTC website.

Dr. Parsons recently released a CEEPR Working Paper on the impact of the Dodd-Frank derivative reforms on the cost of hedging by non-financial corporations. Energy companies are among the most active users of commodity derivatives.

(June 2012)

Briefing on the BP Statistical Review of World Energy

Joseph GiljumBP Logo

Photo: Joseph Giljum


Date: Monday, June 18
Time: 10:30 a.m.–12:00 p.m.
Location: E19-319

For more than 60 years the BP Statistical Review of World Energy has published some of the most comprehensive analysis on global energy markets.

The review provides valuable data to industry professionals, media, government, shareholders and academics worldwide.

This presentation will review developments in energy markets in 2011 covering oil, gas, coal, and renewables and how those energy markets interacted with the global economy.

Joseph Giljum is an Economist at BP and analyzes short and long-term oil supply dynamics for the team’s oil market analysis, covers North American natural gas markets, and examines the US economy for the team’s macro outlooks. He is responsible for the oil market dimensions for the annual BP Statistical Review of World Energy and the BP 2030 Energy Outlook.

(June 2012)

Pushing Forward by Looking Back

Michael Greenstone

Michael Greenstone writes in the Washington Post that President Obama’s May 10 executive order mandating periodic examination of existing regulations is the most fundamental shift in regulatory policy in more than three decades. The new policy will ensure that regulations are delivering their promised benefits.

This column continues Greenstone’s work on cost-benefit analysis of regulatory actions. In November 2011, his testimony to the Senate Budget Committee Task Force on Government Performance, “Improving Regulatory Performance: Lessons from the United Kingdom” outlined reforms designed to produce regulations with benefits that exceed costs.

Michael Greenstone served as the Chief Economist on the Council of Economic Advisors, an agency within the Executive Office of the President, from 2009–2010. The Council offers the President objective economic advice on both domestic and international economic policy.


(May 2012)

Professor Christopher Knittel

Christopher Knittel

Knittel is the William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management, having joined MIT earlier this year. He is known for inventive, heavily empirical work largely focusing on energy and transportation, although he has studied electricity markets and corporate strategies as well.

Knittel’s research addresses a clutch of practical and linked questions: How much progress have automakers made on fuel efficiency? (More than you might think.) How do car owners respond when fuel prices rise? (They really do ditch their gas-guzzlers.) How large are the collateral health benefits of removing dirty vehicles from the nation’s fleet? (Very large.) 

All told, Knittel has produced concrete findings that he hopes will have an impact in the halls of Washington. “A lot of energy policies that we have are not the most efficient policies,” he says. “I want to inform policymakers what the true costs and benefits of certain policies are.”

View full article.

(March 2012)

Future of Electric Grid Report


On Monday, December 5th, members of the MIT study team presented the results of The Future of the Electric Grid: An MIT Interdisciplinary Study at the National Press Club, 529 14th Street NW, Washington, DC. The press conference at which the study was released was webcast and can be viewed here.

This two year, multi-disciplinary study identifies the main opportunities and challenges facing the development of the U.S. electric grid over the next two decades and recommends policy actions to facilitate its evolution into a “smart grid” that can help meet the nation’s electricity needs in the 21st century.

The study was co-chaired by Professor Richard Schmalensee, CEEPR's Director and Former John C Head III Dean of the MIT Sloan School of Management, and John G. Kassakian, Professor of Electrical Engineering and Computer Science and Former Director of the MIT Laboratory for Electromagnetic and Electronic Systems. Professor Henry D. Jacoby and Visiting Professor Ignacio Pérez Arriaga contributed to the economic analysis, as well as CEEPR research assistant Vivek Sakhrani.

View full report.

(December 2011)

CEEPR Ph.D Students

Anna Agarwal, Ph.D. candidate in CEE

     Anna Agarwal is a Ph.D. candidate in the department of Civil and Environmental Engineering, and is also pursuing a M.S. in the Technology and Policy Program. Her research focus is on risk management and the commercial structuring of the CCS (carbon capture and storage) value chain.

   Her current work involves looking at questions such as who bears the different risks in different parts of the CCS value chain, and how alternate commercial structures such as contracts can be used to efficiently manage the various risks and the potential liabilities along the value chain. This research is a part of MITís Energy Conversion Project which is funded by BP.

   She is also interested in the energy policy challenges in developing countries, and is involved in a project with the MIT School of Engineering that focuses on rural electrification in India.

Devin Helfrich, Master's candidate in TPP
     Devin Helfrich is a first year Master's candidate in the Technology and Policy Program.

   He is currently working on a project funded by the Energy and Financial Markets Initiative at the US Energy Information Administration. The goal of the project is to map out how exposure to oil price risk is channeled through the economy, from resource owners to producers to investors. He is identifying contractual exposures, and financial structures such as royalty trusts, as well as hedges using futures contracts, swaps and other derivatives.

(October 2011)

Future of Natural Gas Report

natural gas study

    MIT has completed a multi-year study on the Future of Natural Gas. This report updates an interim report released in June 2010.

    The interdisciplinary study examined the scale of U.S. natural gas resources and the potential of this fuel to reduce greenhouse gas emissions. The study’s economic analysis of the effects of a national policy calling for a 50 percent reduction in greenhouse gas emissions shows that such a policy would result in widespread substitution of natural gas for coal in electricity generation. However, in order to achieve even greater reductions in carbon emissions — which may be mandated in coming decades — natural gas will in turn need to make way for other low- or zero-carbon sources of energy. It is in this sense that natural gas may be seen as a “bridge” rather than as the ultimate long-term solution itself.

    The study was co-chaired by Professor Ernest J. Moniz, Director of the MIT Energy Initiative (MITEI), Professor Henry D. Jacoby of the Sloan School of Management, and Dr. Tony Meggs, Visiting Engineer of the MIT Energy Initiative. Numerous CEEPR and Joint Program researchers were involved in the economic analysis including Dr. John Parsons, Professor Ignacio Pérez-Arriaga, Dr. John Reilly, Dr. Sergey Paltsev, and Dr. Mort Webster.

View full report.

(September 2011)

Future of the Nuclear Fuel Cycle Report Release


  MIT has completed a 3-year study on the Future of the Nuclear Fuel Cycle. The study addresses two overarching questions: (1) What are the long-term desirable fuel cycle options and (2) What are the implications for near-term policy choices?

   The press conference at which the study was released was webcast and can be viewed here. A summary of the report’s conclusions had been released earlier in September in a press conference held at the Center for Strategic and International Studies which can be viewed here

    The study is interdiscliplinary with contributions by a number of faculty. CEEPR’s Executive Director, Dr. John Parsons of the Sloan School of Management, contributed to the economic analysis, as did CEEPR student research assistants Guillaume De Roo and Yangbo Du. The study was co-chaired by Professor Ernest J. Moniz, Director of the MIT Energy Initiative (MITEI), and Professor Mujid Kazimi, Director of the MIT Center for Advanced Nuclear Energy Systems. Dr. Charles Forsberg, served as Executive Director.

View full report.

(April 2011)

IAP Lecture Series Power Systems Economics: Theories and Reality

jean-pierre hansen


Dr. Jean-Pierre Hansen will teach the IAP course “Power Systems Economics: Theories and Reality.” Dr. Hansen is a former CEO at the Belgian electricity company, Electrabel, and currently a member of the Executive Committee of its parent energy company, GDF SUEZ where he is Chairman of the Energy Policy and Market Risk Committees. The series of four lectures will be held from January 24 to 27. Program details are as follows:

Mon Jan 24, 02:30-04:00pm, E52-175
Did you say “Market”?… (How) Does it (really) work for electricity
Tue Jan 25, 02:30-04:00pm, E52-175

Ricardo’s nuclear power plants: why should a manager know the Theory of Rent?
Wed Jan 26, 02:30-04:00pm, E52-175

Market Power: how can it be measured – proved?
Thu Jan 27, 02:30-04:00pm, E52-175

From C. Adams to Averch-Johnson… and many others: the myth of perfect regulation.

(January 2011)

CEEPR Workshop in Tokyo



    CEEPR and MIT’s Joint Program, together with Japan’s Institute of Energy Economics (IEEJ) co-hosted a Workshop on energy and climate change policy in Tokyo on September 30-October 1, 2010. The Workshop took place in the Keidanren Kaikan. The workshop, CEEPR's first in Asia, had close to one hundred participants from China, Russia, Hong Kong, Korea, Thailand, Malaysia, Indonesia, and of course Europe, the US and Japan. It was initiated by CEEPR to demonstrate its interest in making better connections with Asia where much of the economic growth is expected in the coming years.

    The workshop showcased MIT institute-wide studies (Future of Natural Gas, Nuclear Fuel Cycle and Future of the Electric Grid), as well as output from research and analysis of the MIT Joint Program on the Science and Policy of Global Change. IEEJ took on the responsibility of inviting speakers for 5 of the 6 sessions, which added to the diversity of perspectives presented to the participants.

    Dr. Tsutomu Toichi who was the counterpart of Loren Cox (CEEPR's Associate Director for Program Development) in arranging this workshop has had a long relationship with MIT, including as a visiting scholar three decades ago. Loren found Dr. Toichi to be "a wise adviser in all matters logistic, cultural and intellectual," and looks forward to working with him again on such a workshop in the future.

(October 2010)

Dr. Hu       On August 3, 2010, Dr. Zhaoguang Hu, Vice President and Chief Energy Specialist at the State Grid Energy Research Institute and head of the Power Supply and Demand Research Laboratory, presented a seminar titled “Low carbon electricity = Integrate Resource Strategic Planning (IRSP) + Smart Grid”. The event was sponsored by the Center for Energy and Environmental Policy Research, MITEI, and the Future of the Electric Grid Study. Dr. Hu described the operation of the IRSP model and its interaction with Smart Grid innovations targeted to capturing energy efficiencies on the Chinese system.
Published Paper

(August 2010)


Symposium in honor of Henry D. Jacoby Co-Founder and Co-Director of the Joint Program on the Science and Policy of Global Change

henry jacoby

   Please join MIT's Joint Program on the Science and Policy of Global Change on  JUNE 24 at an Afternoon Symposium to honor and pay tribute to Program Co-Founder and
Co-Director, Professor Henry D. "Jake" Jacoby. The afternoon will consist of a series of guest lectures on the topic:

   "Perspectives on Energy and Climate Policy Research"

Thursday, June 24, 2010
1:00-5:30 p.m.
Wong Auditorium E51 - Tang Center

Massachusetts Institute of Technology

(April 2010)


Just published: Pricing Carbon — the European Union’s Emissions Trading Scheme

Principal authors Frank J. Convery, Denny Ellerman, and
Christian de Perthuis (L. to R.) at the release of their book,
Pricing Carbon, in Paris.

   The first attempt by any group of nations to establish a hard limit on greenhouse gas emissions – was a success, according to a new book, Pricing Carbon, coauthored by MIT CEEPR researcher Denny Ellerman and his coauthors Frank J. Convery of the University College Dublin, and Christian de Perthuis of the Université de Paris IX (Paris-Dauphine) with contributions by Emilie Alberola, Barbara K. Buchner, Anaïs Delbosc, Cate Hight, Jan Keppler, and Felix Chr. Matthes. Pricing Carbon provides the first detailed description and analysis of the EU ETS, focusing on the first ‘trial’ period of the scheme (2005–7).
  The publication is the result of several years of research co-sponsored by CEEPR together with several other institutions, including MIT’s Joint Program on the Science and Policy of Global Change. The Doris Duke Charitable Foundation provided an important grant that supported CEEPR’s work on the project. Many of the individual pieces of research that inform the final book have appeared as CEEPR Working Papers.
  The final release of the book on February 10 was an occasion for a day long conference at the Université de Paris IX (Paris-Dauphine).

(April 2010)

iap class
Dan Chavas leads the class on "Intro to Climate Science: Introduction to Climate Modeling." Photo by S. Ganguly

     January is Independent Activities Period (IAP) at MIT. Students at MIT’s Joint Program on the Science & Policy of Global Change regularly sponsor a series of classes on topics related to climate change. This year’s series includes:
Intro to Climate Science: Paleoclimate
Intro to Climate Science: Introduction to Climate Modeling
Climate Change 101: Introduction to Climate Change Economics & Policy
Climate Change 102: Recent Developments in US Climate Policy Legislation
Climate Change 103: Issues in Climate Policy – Technological Change & Biofuels

iap class
Professor Andres Ramos during an IAP session.
     A team of MIT faculty and visitors from the Institute for Research in Technology (IIT) at Comillas University in Madrid are using the Independent Activities Period (IAP) at MIT to teach a short course on Electric Power System Modeling for a Low-Carbon Economy. The 8-session course presents power systems analysis techniques and explores how to incorporate the massive deployment of renewable generation, the anticipated surge in active demand response and the development of smart grids. Pictured above is one of the first classes, featuring Professor Andres Ramos of IIT.

   In the Spring Term, Professor Ignacio Perez-Arriaga, who has been visiting MIT from IIT, will repeat his popular course, ESD 934, Engineering, Economics and Regulation of the Electric Power System. This course addresses the intersection of the power engineering with economics, regulatory and environmental perspectives.

(January 2010)

econ students
From left: Mar Reguant, Tatyana Deryugina, Nicholas Ryan and Joseph Shapiro
     MIT Economics Ph.D. students are researching a wide range of energy and environmental policy issues. Pictured above, from left to right, are Mar Reguant, Tatyana Deryugina, Nicholas Ryan and Joseph Shapiro.
   Mar is working on the design of wholesale electricity markets, focusing on dynamic auction rules as well as the impact of cap-and-trade schemes on the behavior of firms in terms of production and investment decisions.
   Tatyana is exploring how individuals trade off private financial incentives against social benefits when they make energy purchases or decisions about energy use such as the purchase of appliances.
   Nicholas is working on a randomized evaluation of different means to control local industrial pollution in India. He is also beginning a project on the efficacy of the Kyoto Protocol's Clean Development Mechanism in achieving certified reductions in carbon dioxide emissions.
  Joseph is studying policy instruments to regulate local pollutants and the economic choices involved in the design of markets for water pollution in the US

(October 2009)

ceepr students
From left: Guillaume de Roo, Kyriakos Pierrakis, Stephan Feilhauer, David Ramberg and Vivek Sakhrani. Photo by S. Ganguly, 2009.
     Student participation in CEEPR research is integral to MIT’s educational mission. This year five Masters students worked as Research Assistants on CEEPR projects. From left to right in the photo above, they are:
   Guillaume de Roo is a second year Masters candidate in the Technology and Policy Program and Nuclear Engineering. Guillaume is a participant in MIT’s Nuclear Fuel Cycle study analyzing the economics of advanced fuel cycles.
   Kyriakos Pierrakakis is a second year Masters candidate in the Technology and Policy Program. Kyriakos is a participant in MIT’s Energy Conversion Project which is a research partnership funded by BP. Kyriakos is studying the strategic and policy frameworks for the evolution of a carbon capture and sequestration industry.
   Stephan Feilhauer is a second year Masters candidate in the Technology and Policy Program. Stephan has been studying environmental markets, especially carbon trading. He was a participant in a project funded by the Doris Duke Charitable Foundation to analyze design issues for a U.S. cap-and-trade system, including the evaluation of the performance of the European Union’s Emissions Trading System.
   David Ramberg is a first year Masters candidate in the Technology and Policy Program. David is a participant in MIT’s Energy Conversion Project which is a research partnership funded by BP. David is studying the evolving price relationships across various hydrocarbon markets in the North America.
   Vivek Sakhrani is a first year Masters candidate in the Technology and Policy Program. Vivek is researching the value of long-term contracts for wholesale electricity supply and how regulatory restrictions on the use of contracts biases the technology mix of generation capacity.

(June 2009)


MITEI Celebrates 70th Birthday of Professor John Deutch

  On Thursday, April 16, MITEI celebrated the 70th birthday of Institute Professor John Deutch by holding a symposium in recognition of his significant contributions over the last 40 years in the field of chemistry and physics, his role in national security and energy policy, as well as his years of governance at MIT. Professor Deutch has played an important role in promoting the interdisciplinary study of energy and environmental policy at MIT. He played a leadership role in both the Future of Nuclear Power and the Future of Coal studies, in which CEEPR also participated.
   Professor Deutch has been a member of the MIT faculty since 1970. He has served as Chairman of the Department of Chemistry, Dean of Science and Provost. He has published over 140 technical publications in physical chemistry, as well as numerous publications on technology, energy, international security, and public policy issues.
   He has also held significant government and academic posts throughout his career. He was Director of Central Intelligence from May 1995 until December 1996. In this position, he was the head of all foreign intelligence agencies of the United States and directed the Central Intelligence Agency. From March 1994 to May 1995, he served as the Deputy Secretary of Defense, and for a year before that he served as Under Secretary of Defense for Acquisitions and Technology. Between 1977 and 1980, Professor Deutch worked in several positions at the U.S. Department of Energy.
   In addition he has served on many commissions during several presidential administrations: the President's Nuclear Safety Oversight Committee (1980-81); the President's Commission on Strategic Forces (1983); the White House Science Council (1985-89); the President's Committee of Advisors on Science and Technology (1997-2001), the President's Intelligence Advisory Board (1990-93); the President' Commission on Aviation Safety and Security (1996); the Commission on Reducing and Protecting Government Secrecy (1996); and as Chairman of the Commission to Assess the Organization of the Federal Government to Combat the Proliferation of Weapons of Mass Destruction (1998-99).
   Professor Deutch has received fellowships and honors from the American Academy of Arts and Sciences (1978) and Alfred P. Sloan Foundation (Research Fellow 1967-69), and John Simon Guggenheim Foundation (Memorial Fellow 1974-1975). Public Service Medals have been awarded him (?? He has been awarded Public Service Medals) from the Department of Energy (1980), the Department of State (1980), the Department of Defense (1994 and 1995), the Department of the Army (1995), the Department of the Navy (1995), the Department of the Air Force (1995), the Coast Guard (1995), the Central Intelligence Distinguished Intelligence Medal (1996), and the Intelligence Community Distinguished Intelligence Medal (1996). He received the Greater Boston Federal Executive Board's Speaker Thomas P. O'Neill Award for exemplary public service in 2002, the Aspen Strategy Group Leadership Award in 2004, and he was elected to the American Philosophical Society in 2007. He is a member of the National Petroleum Council.
    Professor John Deutch earned a B.A. in history and economics from Amherst College, and both the B.S. in chemical engineering and Ph.D. in physical chemistry from M.I.T. He holds honorary degrees from Amherst College, University of Lowell, and Northeastern University. He serves as director for the following publicly held companies: Cheniere Energy, Citigroup, and Raytheon. He is a trustee of the Center for American Progress, Resources for the Future, the Urban Institute (life), and the Museum of Fine Arts, Boston.

(April 2009)

CEEPR is pleased to be hosting two prominent scholars in the field of electricity systems and markets. Professor Ignacio Perez-Arriaga (left) and Professor Yong-Hua Song (right).
  Professor Perez-Arriaga
Professor Perez-Arriaga is Director of the BP Chair on Sustainable Development and Professor of Electrical Engineering at Comillas University in Madrid, Spain. He was the Founder and Director of IIT, the Institute for Technological Research for 11 years, and has been Vice-Rector for Research. For five years he served as Commissioner at the Spanish Electricity Regulatory Commission. He is life member of the Spanish Royal Academy of Engineering, a Fellow of the Institute of Electrical and Electronic Engineers (IEEE), a member of the European Energy Institute, a high-level think tank providing academic input into both European Community and national decision making on energy issues, and the Director of the Training Program for European Energy Regulators at the Florence School of Regulation within the European University in Florence. He is the author of the White Paper on the Spanish electricity sector, which was delivered to the Spanish Government in July 2005. Professor Perez-Arriaga received the Electrical Engineer degree from Comillas University and the M.S. and Ph.D. degrees in electrical engineering from MIT.
This Spring, Professor Perez-Arriaga will be teaching ESD.934 Engineering, Economics and Regulation of the Electric Power Sector.

Professor Song
Professor Yong-Hua Song is Professor of Electrical Engineering at the University of Liverpool where he was a Pro-Vice Chancellor from January 2007 to August 2008. He has also served as Executive President of Xi’an Jiaotong-Liverpool University in Suzhou, China. In 2002 he was awarded a DSc for his significant contributions to energy and power system research by Brunel University, which he joined in 1997 as Royal Academy of Engineering/British Energy/BNFL/Siemens Research Professor of Power Systems. He previously held posts at the Universities of Bristol and Bath as well as the Liverpool John Moores University. Professor Song is a Fellow of the Royal Academy of Engineering, UK, The Institution of Engineering and Technology, UK, the Institute of Electrical and Electronic Engineers (IEEE), USA, and the International Eurasian Academy of Sciences. He received his BEng, MSc and PhD degrees in China at Sichuan University and the China Electric Power Research Institute.
During his visit to CEEPR, Professor Song will be studying the relationship between the coal industry and the electricity generation industry in China, and the forms of contracting and vertical ownership employed.

(January 2009)


Richard Schmalensee to be new Director of CEEPR

     Richard Schmalensee takes over as CEEPR Director as of September 2008. Most recently, Professor Schmalensee served as the John C Head III Dean of MIT’s Sloan School of Management from 1998 through 2007. After a one year sabbatical, he is returning to MIT as the Howard W. Johnson Professor of Economics and Management. He had a previous stint as the Director of CEEPR from 1991 to 1999.
    Professor Schmalensee has played a leading role in shaping national policy in the fields of energy and the environment, among other areas. He was a Member of the President's Council of Economic Advisers from 1989 through 1991 when the Acid Rain Program started the first major environmental market, the SO2 market. In 1983 he co-authored the path breaking book, Markets for Power, which helped pioneer the restructuring of electricity markets, and in 2000 he was co-author of Markets for Clean Air, a comprehensive study of the SO2 program. He currently serves on the National Commission on Energy Policy. He has been a long-time contributor to MIT’s work on climate change through his participation in the Joint Program on the Science and Policy of Global Change.
   Professor Schmalensee is the author or co-author of 11 books and over 110 articles in professional journals and books, and he is co-editor of volumes I and II of the Handbook of Industrial Organization. His research has centered on industrial organization economics and its application to managerial and public policy issues, with particular emphasis on antitrust, regulatory, and environmental policies. He is a member of the International Academy of Management and a fellow of the Econometric Society and the American Academy of Arts and Sciences. He is a Director of the International Securities Exchange and the International Data Group.

(September 2008)


CEEPR Hosts Workshop in Washington D.C.

From left: Christian de Perthuis (Mission Climat, Paris), Richard Baron (IEA, Paris), Julia Reinaud (IEA, Paris), Felix Matthes (Oeko-Institute, Berlin), Barbara Buchner (IEA, Paris), Ambassador Pierre Vimont (French Embassy to the US), Philip Sharp (President of RFF), Henry Jacoby (MIT), Denny Ellerman (MIT), Frank Convery (University College, Dublin). Photo by: F. Goldstein 2008.
  In January 2008, CEEPR hosted a workshop in Washington DC on the European CO2 Emissions Trading Scheme (EU ETS) as part of a project funded by the Doris Duke Charitable Foundation. The workshop reported results of a multi-national transatlantic research partnership including CEEPR that is conducting an ex post evaluation of the EU ETS. About twenty researchers from Europe, primarily from France, Ireland and Germany, presented results and conducted briefings for Congressional staff on Capitol Hill at the conclusion of the workshop. A high point of the workshop was a dinner, graciously hosted by the French Ambassador to the United States, Pierre Vimont, at his residence to welcome European and MIT workshop participants to Washington and to indicate the high interest of all in this research on the world’s first large-scale CO2 cap-and-trade program.

(February 2008)


Professor Joskow heads to the Sloan Foundation


Long time CEEPR Director, Professor Paul Joskow, has resigned his position in order to become President of the Alfred P. Sloan Foundation. The Sloan Foundation is a philanthropic nonprofit institution, established in 1934, funding programs in science, technology, education and important national issues. CEEPR said farewell to Paul’s formal involvement at a festive dinner at our December research Workshop. Paul’s contributions to research and public policy have been great, and we look forward to his future contributions from this new vantage point.

(December 2007)


BP Funds Energy Conversion Research

CEEPR is collaborating with professors in a number of engineering disciplines on a research program that will explore the conversion of low-value carbon feedstocks such as petcoke and coal to high-value products such as electricity, liquid fuels and chemicals while minimizing carbon dioxide emissions. The program is being funded by BP as a part of its commitment to the MIT Energy Initiative. CEEPR’s work is targeted to the analysis of the economic institutions and policies necessary for the successful development of a carbon sequestration industry, as well as an analysis of the integration of heavier feedstocks into the North American fuels market.

(September 2007)