Current Research: Energy and Environmental Economics and Policy
Energy policy is increasingly being shaped by debates on environmental issues,
and energy policy decisions can have major environmental impacts. Energy Laboratory
research on Energy and Environmental Economics and Policy spans a wide variety
of topics and is coordinated by the Center
for Energy and Environmental Policy Research (CEEPR).
Since the founding of CEEPR in the 1970s, the general areas of research have
included the organization and functioning of energy markets, the regulation
and taxation of energy industries, the macroeconomic effects of energy price
changes, the assessment and management of energy technology, and the application
of options pricing theory to energy investment. The specific areas of research
have changed as faculty interests and dominant policy interests have changed.
As a result, energy-related environmental issues have recently become a main
focus of the center's research agenda. Research on global warming has developed
into a separate Joint Program
on the Science and Policy of Global Change, which is described under the
Global Climate Change heading.
A. Denny Ellerman
In addition to the global change research and continuing work by individual researchers in the above areas, the center's research agenda focuses mainly on the following four topics.
Emissions trading
As the cost of environmental compliance has grown, attention has increasingly been directed to the use of market-based incentives, particularly tradable permits, as a supplement or even substitute for more conventional command-and-control methods. CEEPR is now engaged in a two-year evaluation of the first large-scale public policy experiment involving the use of tradable permits to control emissions--an approach mandated by the "acid rain" title of the Clean Air Act Amendments of 1990.
Supply-side productivity
Past studies on how technological change and productivity improvement affect the demand for energy have greatly improved our understanding of the role of energy in economic growth. In the energy supply industries, productivity improvements have been great enough to negate the price rises expected as a result of resource depletion. The center's research in this area focuses on the measurement, documentation, and explanation of productivity changes in the coal, oil, and gas industries.
Restructuring the electric utility industry
The center's interest in the regulatory structure of the electric utility industry began with research in the early 1980s that led to publication of Markets for Power. Ongoing research involving collaboration with experts in power systems control and operation focuses on the pricing of transmission and ancillary services.
Options applications for energy and environmental decisions
Beginning in the mid-1980s, CEEPR researchers pioneered the development of new analytical methods that are derived from the theory of financial options and are designed for use in project evaluation and other decisionmaking processes under uncertain conditions. The work is now being extended to consider options-related environmental criteria such as irreversibility and biodiversity.
Selected Participants
- M.A. Adelman, Economics: industrial organization; international petroleum
and gas markets; natural resource economics.
- Ernst R. Berndt,
Sloan School of Management: energy demand and productivity; technological
change and innovation.
- Richard
S. Eckaus, Economics: development economics; energy-economy interactions;
economics of global climate change for less-developed countries.
- A. Denny Ellerman, Center for
Energy and Environmental Policy Research and Sloan School of Management: energy
markets; productivity change in energy supply; emissions trading.
- Kent
F. Hansen, Nuclear Engineering: nuclear technology performance and policy;
risk assessment; system dynamics for nuclear operations.
- Jerry A.
Hausman, Economics: econometrics; energy demand; energy policy.
- Marija D. Ilic, Laboratory for Electromagnetic and Electronic Systems: power systems control and operation under competition; system stability and voltage control.
- Henry D. Jacoby,
Sloan School of Management: integrated assessment of global change; oil and
natural gas markets; project evaluation and risk assessment; energy policy.
- Paul L.
Joskow, Economics: industrial organization; electric utility industry
structure and regulation; energy policy.
- Gordon M. Kaufman,
Sloan School of Management: decision analysis; modeling of oil and gas exploration
productivity.
- Michael
Kremer, Economics: renewable resource economics.
- Richard
K. Lester, Nuclear Engineering: nuclear technology performance and policy.
- Robert S. Pindyck,
Sloan School of Management: econometrics and managerial economics; project
evaluation; resource economics; energy policy.
- James Poterba,
Economics: taxation of energy and environmental resources.
- Nancy L. Rose,
Sloan School of Management: industrial organization and regulation; electric
utility performance.
- Julio J. Rotemberg,
Sloan School of Management: international economics; security market valuation
of energy companies.
- Richard Schmalensee,
Dean of the Sloan School of Management: industrial organization, regulation,
and managerial economics; environmental policy; electric utility industry
structure and regulation.
- Robert M.
Solow, Economics: economic theory; environmental and resource economics
and policy.
- Thomas M. Stoker,
Sloan School of Management: energy and environmental economics and policy;
semi-parametric methods.
- Jefferson
W. Tester, Energy Laboratory and Chemical Engineering: energy technology
evaluation.
- David C. White, Energy Laboratory and Electrical Engineering and Computer Science: energy technology evaluation; technology development for the 21st century; international gas trade.
The MIT Center for Energy and Environmental
Policy Research (CEEPR) is organized as a joint center of the Energy Laboratory,
the Department of Economics, and
the Sloan School of Management. The CEEPR
is organized to conduct research on energy and environmental economics, management,
and policy and to contribute to the policymaking process, both international and
domestic, through publications and conferences. The center's research programs
are supported by corporations, foundations, governments, and noncorporate groups.
These "associates" receive center publications and participate in conferences
to discuss the center's research as well as current energy and environmental policy
issues. Recent workshops have addressed a wide range of topics including greenhouse
gas stabilization policy, pricing of electric power transmission, the economics
of nuclear power, the potential for energy conservation, and evolution of energy
demand. The center's research is performed by faculty and students from the Sloan
School of Management, the Department of Economics, and several other MIT departments.
Professor Richard Schmalensee is director of the CEEPR, Dr. Denny Ellerman is
executive director, and Mrs. Joan Bubluski is program administrator.
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