Catherine Hausman

Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis

The authors identifies a new set of stylized facts on the 2008-2009 trade collapse that they hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, they decompose the fall in international trade into product entry and exit, price changes, and quantity changes for imports by Brazil, the European Union, Indonesia, and the United States. When the authors aggregate across all products, most of the countries analyzed experienced a decline in new products, a rise in product exit, and falls in quantity for product lines that continued to be traded. The evidence suggests that the intensive rather than extensive margin mattered the most, consistent with studies of other countries and previous recessionary periods. On average, quantities declined and prices fell. However, these average effects mask enormous differences across different products. Price declines were driven primarily by commodities. Within manufacturing, while most quantity changes were negative, in most cases price changes moved in the opposite direction. Consequently, within manufacturing, there is some evidence consistent with the hypothesis that supply side frictions played a role. For the United States, price increases were most significant in sectors which are typically credit constrained.

Welfare and Distributional Implications of Shale Gas

Technological innovations in horizontal drilling and hydraulic fracturing have enabled tremendous amounts of natural gas to be extracted profitably from underground shale formations that were long thought to be uneconomical. In this paper, we provide the first estimates of broad-scale welfare and distributional implications of this supply boom. We provide new estimates of supply and demand elasticities, which we use to estimate the drop in natural gas prices that is attributable to the supply expansion. We find large, positive welfare impacts for four broad sectors of gas consumption (residential, commercial, industrial, and electric power) and a negative impact for producers, with variation across regions. We then examine the evidence for a gas-led “manufacturing renaissance” and for pass-through to prices of products such as retail natural gas, retail electricity, and commodity chemicals. We conclude with a discussion of environmental externalities from unconventional natural gas, including limitations of the current regulatory environment. Overall, we find that between 2007 and 2013 the shale gas revolution led to an increase in welfare for natural gas consumers and producers of

Climate change is projected to have severe impacts on the frequency and intensity of peak electricity demand across the United States

48 billion per year, but more data are needed on the extent and valuation of the environmental impacts of shale gas production.

Price Regulation and Environmental Externalities: Evidence from Methane Leaks

Significance The existing empirical literature on the impacts of climate change on the electricity sector has focused on changing electricity consumption patterns. In this paper, we show that incorporating impacts on the frequency and intensity of peak load consumption during hot days implies sizable required investments in peak generating capacity (or major advances in storage technology or the structure of electricity prices), which results in substantially larger impacts than those from just changes in overall consumption. It has been suggested that climate change impacts on the electric sector will account for the majority of global economic damages by the end of the current century and beyond [Rose S, et al. (2014) Understanding the Social Cost of Carbon: A Technical Assessment]. The empirical literature has shown significant increases in climate-driven impacts on overall consumption, yet has not focused on the cost implications of the increased intensity and frequency of extreme events driving peak demand, which is the highest load observed in a period. We use comprehensive, high-frequency data at the level of load balancing authorities to parameterize the relationship between average or peak electricity demand and temperature for a major economy. Using statistical models, we analyze multiyear data from 166 load balancing authorities in the United States. We couple the estimated temperature response functions for total daily consumption and daily peak load with 18 downscaled global climate models (GCMs) to simulate climate change-driven impacts on both outcomes. We show moderate and heterogeneous changes in consumption, with an average increase of 2.8% by end of century. The results of our peak load simulations, however, suggest significant increases in the intensity and frequency of peak events throughout the United States, assuming today’s technology and electricity market fundamentals. As the electricity grid is built to endure maximum load, our findings have significant implications for the construction of costly peak generating capacity, suggesting additional peak capacity costs of up to 180 billion dollars by the end of the century under business-as-usual.

Biofuels and Land Use Change: Sugarcane and Soybean Acreage Response in Brazil

We estimate expenditures by US natural gas distribution firms to reduce natural gas leaks. Reducing leaks averts commodity losses (valued at around

Market Impacts of a Nuclear Power Plant Closure

5/Mcf [thousand cubic feet]), but also climate damages (

Corporate Incentives and Nuclear Safety

27/Mcf) because the primary component of natural gas is methane, a potent greenhouse gas. In addition to this private/social wedge, incentives to abate are weakened by this industry’s status as a regulated natural monopoly: current price regulations allow many distribution firms to pass the cost of any leaked gas on to their customers. Our estimates imply that too little is spent repairing leaks—we estimate expenditures substantially below

The Value of Transmission in Electricity Markets: Evidence from a Nuclear Power Plant Closure

5/Mcf, that is, less than the commodity value of the leaked gas. In contrast, expenditures on accelerated pipeline replacement are in general higher than the combination of gas costs and climate benefits (we estimate expenditures ranging from

Shock Value: Bill Smoothing and Energy Price Pass-Through

48/Mcf to

Comment: Market deregulation and nuclear safety

211/Mcf). We conclude by relating these findings to regulatory-induced incentives in the industry.